The entire month of April is Financial Literacy Month, but this week is also Money Smart Week. If personal finance is not something you usually give a lot of thought, now is a great time to build off tax season (and possibly a refund!) and to extend the spirit of spring cleaning to your bank accounts. There are many resources available to help you take control of your finances and make your money work for you. Of course, this is a place to exercise your information literacy skills, and to consult a certified professional where appropriate, but we have compiled a new Financial Literacy LibGuide to help you get started.
There is plenty of research and authorities on the topic (many of whom disagree with one another), and I cannot hope to reproduce their expertise here, so instead I’d like to share three things that I wish somebody had told me when I was in college.
Your student loans are real money with real consequences, BUT you have options:
In college, I vaguely understood that taking out student loans was a serious obligation, but it was hard to really conceptualize that amount of money or to realistically imagine future me paying them back. I was fairly judicious about my borrowing, seeking out scholarships and choosing to go to an in-state public school and live at home for my graduate degree, but I did not explore my options as fully as I could have.
Even once I graduated and began paying back my loans, I still suffered from short-sightedness. The 10 or 25 year standard repayment plans may as well have been infinite for how futuristic the end dates seemed. I did a cursory examination of my options, picked something that I could manage on my entry-level wages, set up automatic withdrawals, and then pretty much ignored it for a couple years. At that point, I realized that I had barely made any progress. If I wanted to be able to see the end in sight and save myself thousands in interest, I’d have to be a bit more aggressive with my payments. I also realized that I technically qualified for the Public Service Loan Forgiveness program…but I had wasted several years signed up for an ineligible payment program.
Student loans are a reality for many, but a little bit of knowledge can help you navigate the experience more smoothly. Learn about your options for paying for college including places to find scholarships. Estimate your future repayments now, rather than when they come due. Understand the many payment options available for Federal loans and what help is available if you can’t afford your payment. Learn how much paying even just a few dollars extra each month can save you in the long run.
You CAN retire someday:
Growing up, I remember hearing a lot of worries about retirement. Social security reductions and the increasing rarity of pensions were in the news, and many adults made it seem like a comfortable retirement was an increasingly unachievable dream. Later on as a humanities major, it seemed like a foregone conclusion that I would simply have to work for the rest of my life. This is thoroughly untrue.
It is entirely possible to save and plan for retirement, even on a modest salary. If you’re in your teens or early 20s, the distant future can seem irrelevant and even more impossible to imagine, but the key is that the earlier you start, the easier it is, and the less money you have to set aside. One common but compelling example that showcases the power of compounding compares the savings of two individuals who begin to save at different times:
The first began saving at 25 while the second began at 35. Each saved the same amount, except that the first stopped after just 10 years, while the second continued for 30 years. At the same age in the future, 65, the first person’s $12,000 initial investment is worth over $200,000. The second individual has invested three times as much ($36,000) and yet still comes out behind by $50,000. Time is your greatest weapon for long-term savings. So if you’re perhaps even younger than 25, try not to let your eyes glaze over when the HR person on your first job starts spouting acronyms. Even if you’re further along on your path, that doesn’t mean it’s too late. Today will always be a better time to start than tomorrow.
You can afford anything, but not everything:
Balancing your different goals like student loan payments, retirement savings, and everyday living is challenging. Budgeting often can seem like a kind of punishment, inflexible rules that you are doomed to break. With the right approach, however, budgets can actually be incredibly empowering. It’s a way to align your spending with your values and to treat your money as a tool to get what you want, rather than an elusive necessary evil that you never seem to have quite enough of. Just as with time, in many cases saying that you don’t have money for something is really just another way of saying that it’s not a top priority. Sometimes, like with a new top or a second drink, that’s a perfectly valid statement. When it becomes tricky is with things that you do value—like education, debt-repayment, travel, or anything else—but can be easy to lose sight of day-to-day.
The necessary first step is to know where your money is going now. This can be as simple as looking over past bank and credit card statements to get a general sense or tracking your spending using pen and paper or an online tool. Next, think about your goals and compare your priorities to what you actually use your money for and adjust as necessary. This will likely involve some difficult decisions—from trade-offs and frugality to finding additional sources of income—but there is satisfaction to be had in feeling in control of your finances and making real progress to your goals.
For additional information, find these resources and more on the Touro Library’s Financial Literacy guide.