I always think it’s unfortunate that we have students go through learning microeconomics, macroeconomics, statistics, accounting, finance… and they can’t write their own budget. I see new graduates that have no idea how to handle their own money. Then you ask what their major is and they say “uhhh, economics…” and I have to shake my head.
To remedy that, this week will take a look at personal finance!
There are several aspects to managing your personal finances. The first and most important is budgeting. You ABSOLUTELY HAVE TO keep track of how much income you have coming in, and where your spending is going. I’m 100% convinced there is simply no way to be successful without it. There are several great tools for this. First go through this budgeting primer from the St. Louis Federal Reserve bank:
I absolutely LOVE my mint.com account. This is a FREE service that links all your banking, checking, credit, savings, and loan accounts into one place. It tracks your spending for you, itemizes expenses, and lets you set savings and spending goals. You’ll want it on your computer, tablet, and phone. LOVE it. Couldn’t get by without it. https://www.mint.com/
After we talk budgeting, then it’s time to talk SAVING. I know, this is a bad word to some people. Savings is WAY less fun than SPENDING! But the fact is, saving today is just preparing to spend MORE later. And saving lets you spend less on the things you want over the long run. (Interest payments, etc.) Just consider – Even if you have a very high income and you’re bringing home a $2,000 paycheck – then you spend all of it on bills and expenses. Your paycheck is just going to enrich someone else! Who are you really working for, then, if you aren’t building wealth?? The Dallas Fed has a great primer on building wealth here: http://www.dallasfed.org/microsites/cd/wealth/students.html
Next, you need to start considering major spending decisions NOW. Things like buying a home or investing in starting a business don’t happen automatically. They take years of work and planning toward a goal. I like this site: http://majorfinancialdecisions.org/
Finally, there is investing to grow your savings. The VERY BEST ADVICE I EVER GOT was to visit a financial planner early in my 20’s. Because I did this – if I never invest another dime in my Roth IRA – I could expect to retire with $1.6 million when I am 65. I opened my IRA at 20. I very strongly recommend you do the same. I’m even going to give you extra credit to do so. Really. First, so you know what you are talking about, start with this from the St. Louis Fed:
This one I include just because Pinterest is funny to me:
I LOVE Cameron Huddleston’s writing on finance and saving. And I’m not just saying that because her husband is an economics professor at WKU. http://www.gobankingrates.com/author/cameronhuddleston/ Follow her on Twitter if you want to get smarter.