| || |
Misunderstanding or screwing up your credit
Many kids that come through my class, or young adults I meet, say they wish someone would have taught them
about credit. First, always pay off your credit cards! The only thing you should ever pay interest on is a
house, car or business loan. In addition to wasting money on interest bad credit
can keep you from getting a job or will force you to pay more in
interest. Second, your credit score is your life. With good credit will come better deals and discounts. With bad credit will come higher interest rates and possibly the inability to purchase a home or get/keep a job.
Not Saving Enough
It seems simple but most people in this country have no money…..because they spend it all. Case in point:
In my previous life as a financial planner I had a gentleman and his wife in their mid 40’s come into my office. They were looking for “college planning” advice as they put it. So I began to ask them the standard questions about income level, current savings, etc. Well it turns out that they made 120k a year and had no real savings to speak of.
He had maybe 30k in his 401k and a few thousand in a savings account as well as credit card debt of 12k. But wait…there’s more! I asked how old their son was and they told me 16! A Junior in High School! It was at that moment that
I let them know it was pretty much too late to “plan” for their sons college. Time is not only your worst enemy in life, it can also be your best friend.
If you make 30k a year….don’t spend it all. In fact, you should save as much as you can. Save until it hurts and then save some more.
Spending All of Your Money
Ok, so before you scream out that I am redundant, let me explain. If you are constantly buying stuff, going out to eat, hitting the clubs….you are spending way too much money. It is an affliction of the young that they have very short term memories along with tunnel vision. That is, if it does not effect them right now, they do not worry about it. Early on, my sister was famous for balancing her checkbook by her ATM receipt. Not only do you spend all the money you have this way, you actually spend money you do not have. Overdraft fees and late fees on credit cards eat away at
money that could be used to get ahead in life.
The best advice I was ever told about buying a car was this: “Never buy a car when you need one”. If you think about it, it makes sense. Is it a good time to buy? What are the discounts? Will you get taken advantage of?
This is true with any purchase. I wanted to buy a laptop computer and researched them. I decided I “needed” a particular model that would cost 800-1000 dollars. I decided to wait, (I am an extreme case as I waited 2 years),
and as a result of waiting and buying during the Thanksgiving holiday, I ended up buying a computer that originally cost 599 for 349. The salesperson walked me through what I needed and convinced me that I did not need extra bells and such. If you refer to my previous post on the Time Value of Money you will see how much money was actually saved.
Not Keeping a Rigid Budget
If you ask the average person where they spend their money, they most likely cannot tell you. See my recent poll on this topic for more information. With the internet nowadays keeping a budget is easier than you think. Services like Mint.com and others allow you to keep a detailed budget for free. This also helps you to set and reach goals.