IDK Wednesday: Credit Cards

Who should you get a credit card with? Should you get a Flier Miles Rewards card? A student card? How high should my initial limit be?
If you have these or any other questions–let me know! (FYI, for those who have had questions but were afraid to ask, these questions go straight to me–no one else sees them!)

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Free Money

Remember in “The Flintstones” when Wilma and Betty would go shopping they’d say “CHARGE IT!” and that horn-heavy warsong would play in the background?

I’ve heard from more than one friend that credit cards are “basically free money, right?” No, they’re definitely not free money. You’re paying to use that line of credit–and if you’re not doing it wisely, you’re paying a lot when you could be paying nothing.

Credit cards were invented because some fancy-schmancy Manhattan businessmen forgot to bring enough cash to pay for their power-lunch on 5th. One of the guys thought–‘Wouldn’t it be cool if I had a card that acted like money so that if I didn’t have enough cash they could just… charge it?’ And thus, the Diner’s Club was born–the first card that pretended to be money if you didn’t have enough on you. Fast forward almost 50 years later and credit card debt is cited as among the top reasons for people declaring bankruptcy, foreclosure, forbearance and divorce (believe it or not).

What the heck happened? How did we go from using cards to cover lunch to using cards to cover… everything?

The Fresno Drop. In 1958, Bank of America mailed 60,000 all-purpose charge cards to the people of Fresno, California. By 1960, the number of cards was 400,000 throughout America. By 1968, Bank of America had made over $400 million off the cards (how did they do that, you ask? Interest.). The industry wasn’t fully formed; meaning, there wasn’t a system of background checks to make sure the person applying for a card could actually afford to repay (what we think of now as a credit check), there wasn’t a fraud department, no collections department, there were no limits. Everyone was approved for credit. People bought things they couldn’t afford, and when they couldn’t pay their credit card payments, debt collectors came and repossessed anything the debtors had that could pay for the purchases they bought and the interest that the purchase accrued. (Nancy Trejos)

It seems that we forgot this little mishap in American history because basically the same thing happened in the late 1990s and early 2000s. People were approved for credit–in the forms of cards and mortgages– but they couldn’t actually pay for the huge purchases they were making. The industries were also doing terrible things–like suddenly and without notice changing the interest rates. Bankruptcy and foreclosure ran rampant. And thus, the Second Depression was born. Obama did some important stuff for the regulation of credit cards and mortgages, so fortunately we’re slowly but surely coming out of the Depression. But for some reason, it seems that our mentality about credit cards hasn’t changed much– this is evident to me when my extremely intelligent friends remark that credit cards are “free money.”

Just recently a close friend told me someone in their workplace said that it was a bad idea to pay off your entire credit card balance every month. This, unfortunately, is so wrong it’s not even funny. This is a myth that for some reason is still propagated– “use it or lose it.” People still think that if you have a credit card, but you pay it off, the creditors are going to think you’re not using the card. That if you don’t have a balance, they won’t know you’re using it. That’s simply not how it works.

The truth is that you should pay off your balance entirely every month if you can because doing otherwise means you pay unnecessary interest and you “carry a balance,” which the creditors actually think is bad. Creditors want to see that you make purchases that you can pay off almost immediately. In fact, every time you don’t carry a balance, your credit history improves. The opposite is true if you don’t pay off the balance every month. Because then the creditors think, “Oh. This person is buying stuff they can’t actually pay for.”

Credit cards are not free money. There’s this little thing called interest. APR. Annual percent rate. Companies try to get you to apply for the card by offering intro rates (that, thanks to the Prez are kept the same for six months)– 0% APR for Six Months! But after that first six months, it’ll skyrocket to a new rate. How high the new rate is depends on the economy and your credit history. People with no history or bad history might pay somewhere around 25%. OUCH. The total annual interest is charged per day, so every day you have a balance, you’re getting charged daily in interest. And your card charges you interest on that interest if you don’t pay it off.

Say you buy $100 worth of shoes. But you don’t pay it off when the due date comes; instead, you pay the $10 minimum. Well, if your interest rate is 18%, now you’re new balance is $91.33. Why? Because 100-10= 90. 90 x .0.0004931 = 0.044379 x 30 = $1.33. Wondering where that 0.0004931 came from? That’s your annual interest rate per day. And if you carry that $90 balance for 30 days, you’re paying 0.044379 of a cent per day. You now owe more than what you paid for those Nikes–all because you didn’t pay the balance off completely. And the creditors notice that you bought something you couldn’t pay for, even after a month.

The interest rate is the price of borrowing money. If you have a credit card or are thinking of getting one, you need to have this basic principle in your mind every time your hand touches the card. While credit cards are a very important element to your financial portfolio– it’s very difficult to build credit history without having one– you need to use it very wisely, otherwise you’ll find yourself owing a lot of money. The second principle you need to have in mind when using a credit card is: can I afford this and when? Credit cards are not to be used to buy things you want that you don’t or won’t have the money for soon.  Credit cards are for emergencies, traveling (because most cards don’t charge for international use and they’re safer to use abroad), and for budgeted purchases, such as gas, groceries, bills–things you were going to pay for with money you plan on having anyways. If you only use your card for those purposes, the chances of you getting into credit card debt are slimmer. If you want to use your card for drinks, clothing, entertainment and other non-necessity purchases, you need to budget for that or pay in cash.

Now, to those of you that don’t have a credit card because you think they’re unnecessary or you’re afraid of getting into debt–you’re only hurting yourself. When you want to rent or buy a car, rent an apartment or buy a house, or even get a job, — you’re going to need good credit history. You should very seriously consider applying for a credit card in order to start building healthy credit history. It’s not scary. If you need help or have questions, IDK Wednesday is there for you.

Credit Cards 101

  • Apply for a credit card that has no annual fee. Annual fees are for people who can afford it.
  • One application per year. Hard credit checks stay on your credit history for two years. You don’t want too many checks on your history at any given time because it makes you look like a risky borrower. Keep it at two.
  • Know what the intro rate is, know when it changes, and know what your new APR is when it changes.
  • Know your cycle– when is the due date? When do you get charged interest? You can find this online or you can call.
  • Know your limit. Creditors think it’s best (and your credit history improves) if you either pay off your balance completely each month or you keep your carrying balance at or below 30%. If you absolutely can’t pay off your credit card balance, pay it down to 30% of the total limit. In fact, you’ll stay safest if you pretend the 30% cap is your limit, as opposed to the actual limit. So, if your total card limit is $500, your 30% cap is $150–so either don’t spend over $150 or pay your balance down to there if you must carry a balance, or pay off your bill completely.
  • Know your rewards. Do you get flyer miles? Cashback for purchases at certain places or for certain things? Knowing what your card is giving you for using it can be helpful, but don’t let it dictate your spending.
  • Know what you’re using your card for and stick to it. Is it for emergencies only? Is it for gas? For groceries? For bills? For one bill, like your Netflix account? The one thing you should NOT use your card for is unexpected, impulsive purchases like clothing, or video games, or movie tickets. Know why? Because if it’s unexpected, it’s unbudgeted, and if it’s unbudgeted, you don’t have the money for it. Two caveats: if you have the money for it in savings, then the purchase is up to your discretion. If you know you absolutely, positively, 100% without a doubt will have the extra money come next paycheck, then the purchase is up to your discretion. But just remember– unexpected costs cost the most. You need to have diligence with your credit card because it’s attached to a report about you that depicts what kind of purchases you’re allowed to make in the future. Don’t rob yourself.
  • Pay if off. If you have a balance on it, pay it all of. If you can’t pay it all off at once, you need to develop a plan to pay it off. I’ll be writing a post about paying down debt, but until then, pay the minimum and a half. So if your minimum is $10, pay $15.
  • Negotiate. Call up the company and ask for a lower rate. Or a higher limit. Or for no annual fee, if there is one. Threatening to stop using the card (not closing it) might get you want you want.
  • Don’t close it! Closing an account is a negative hit on your credit history. The longer you have an account open, the better your score gets. If the card sucks–high interest, annual fee, etc– call to negotiate. If nothing comes of that, pay off the card and then stop using it. Don’t carry it in your wallet. Just leave it there to collect years, but not money. If you’re comfortable, you can assign one small task to the card–like Netflix– and leave it at that. Just remember to pay off the balance before the due date, so there’s no interest.
  • Don’t go crazy. You only need one to three credit cards, max. Any more and you run the risk of losing track of them. Having more can also trick you in to spending more, which is how many people fall into credit card debt. You only need 10-25% of your annual income in credit. In other words, you can have and use a $25,000 limit if you could afford to pay off $25,000 plus its interest in a year. If you do have a limit that high–now or ever–and you couldn’t actually afford to pay off $25,000 in a year, only spend 30% at the most.

A line of credit means that you are guaranteed X amount of money by the bank because you’ll have the money plus extra to pay for borrowing that money from the bank in a short time, you just don’t have it now. Something tells me that if you’re reading this blog, you’re not going to have $5,000 on your next payday. Remember how credit cards came to be? The fancy-schmancy Manhattan businessmen who couldn’t cover lunch? The point is: they had the money to pay for the lunch, just not in cash at that particular moment. They could afford the lunch.

So the rule is: if you can’t pay the balance in full or down to 30% by the due date, don’t use your credit card. You can’t afford it. Literally and figuratively.

 

 

 

 

PS: I know you’re all impatient to read the posts about paying off debt, living within your means and budgeting… but remember what we talked about in my post introducing you to Ignorance, Denial and Indulgence? And how you have to understand these three concepts in order to make a plan? We’re 1/3 of the way there. The next post will be about Denial. It’s about to get real up in YWM.

IDK Wednesday: Savings Accounts

At least he found some change.

Got questions about savings accounts? Let hear ’em!

For a Rainy Day

So, you know that saying? “I’m saving it for a rainy day.”

That’s great and all, but are you saving for that surprise car part breaking down? For that unexpected visit to the veterinarian? For getting laid off? For getting sick?

No?

Listen, I know–firsthand–how hard it is to save when you’re making very little and paying very much. I know that oftentimes, there’s so little left to put away that you figure, “Why bother?” And that sometimes, the little you manage to save disappears at the first sign of trouble. And I know right now it seems like, “What do I have to save for? I don’t need money put away for anything. I’m fine. I’ll save later.”

That is dangerous. You NEED to have money put away that you never touch except for emergencies. Let’s delve into learning about savings accounts. Remember ignorance? Get ready to say bye-by to it when it comes to savings.

Here’s the thing– you need an emergency savings account. No if, ands, or buts. One that earns you interest. If you’ve already got some money socked away (awesome!) in your checking account (not awesome!) then you can shop around and get a savings account with a higher interest rate to reward a high minimum deposit. Having money in your checking account that you “use as savings” is silly. Savings accounts have higher interest rates than interest checking accounts and don’t come with checks or a card (usually) which makes spending the money harder. It’s important to separate your money, so that it can do its intended job for you. Transfer the socked-up money to savings and pat yourself on the back. And keep socking away.

If, on the other hand, you have absolutely nothing saved, you still need to open a checking account. Why, you ask? Have you ever seen that chick-flick called Under the Tuscan Sun? It’s okay if you admit it, you’re alone reading a blog. Well, in the movie, a sexy silver fox tells our depressed divorcee heroine an anecdote about Italians building a train track in the Alps to prepare for a train to cross there, even though there was no train built yet that could actually make the journey. They were preparing for the future, with hopeful determination, so to speak.

An improbable place for a train, but nonetheless–they did it. You can do the same with your money.

That’s what we’re doing with opening a savings account without having any money to deposit into it. Preparing for the future. Because having an empty piggy bank calls for change rattling around in it.

On Bankrate.com, the best savings accounts that don’t require a high minimum deposit are Barclay’s and Ally. Find a savings account with a high interest rate (so your money can have moneybabies) and open an account today if you don’t already have one. Put in at least $1. Call it hopeful determination.

Now, here are some good rules to apply to savings accounts:

1. Make money appear there magically. How you ask? Automatic savings. Whenever you get your paycheck deposited, you can arrange for your checking account to automatically deduct whatever amount you decide you need to save a month and apply it to your savings account. So you never actually see that money. You never get a chance to spend it. But it’s there, gently reassuring you with its presence and availability and portfolio-building whilst you sleep. Like a plush blanket.

2. DON’T TOUCH IT. Who took the cookies from the cookie jar? YOU. ONLY YOU. ALWAYS YOU. I know how tempting it is to transfer money from your savings to your checking whenever you’re running low between paydays–it’s yours, after all. You earned it. You need it. Need it for what, may I ask? Oh, a dress? So this isn’t an emergency? You just want something because you saw it? You better check yourself before you wreck yourself. Financially. If you keep taking cookies from the cookie jar, pretty soon, you won’t have any cookies to satisfy your chocolate craving. Or the mechanic’s bill. If you want, you can connect your savings to your checking so that if you overdraft, your savings will automatically cover it, avoiding any fees. But remember– you’ll be robbing yourself if you do it often. Vicious cycle? Yes, indeed. Make a list of things you would use your precious emergency savings for. Here’s my list: accidents of the body, vehicle, house or pet; living expenses if I have absolutely no other income; flights for emergencies, such as funerals or family illness; copays for ER/Urgent Care/Wellness doctors visits; unexpected/unbudgeted bills. Notice that there’s nothing fun on that list.

3. There’s some discrepancy amongst experts about the magic number you need to have in your savings account, so I’m gonna go with a compromise between some of my favorites and say 3 for us youngins. You need at least three months of your cost of living in your emergency savings account. All of your bills, food, miscellaneous costs–you need to be able to pay for three months worth of living  just using your savings. Know why? That three months gives you enormous independence. You could get fired or laid off or quit your job and you could survive without worrying for three months while you get a new job. Secure in your job? You’ll be able to pay for emergencies. You’ll be able to cover unexpected extra costs without having a panic attack. (If you’ve got a little more money to work with, I suggest bumping up to 6 months.) Now, this of course means you need to know what your monthly cost of living is… but that’s a couple posts from now. Now, I’m not gonna lie. It’s gonna take a while to accumulate that much and that is completely okay! All you need to do is start saving; once you do– you’re actively taking steps to be financially stable.

4. Once you’ve reached the initial 3 months of cost of living goal, you can and should keep saving for your emergency savings (you can decrease how much you put in monthly, if that helps or you can bump up to 6 or even…. 9!), but you can also start thinking about short term and long term savings plans. If you want to put money aside to buy something expensive in the near future, that’s called a short term savings goal– it’s much different than your long term and emergency savings. Short term savings goals are to buy a new laptop, to get you out of credit card debt, to buy a new wardrobe, to take a vacation; things you want to do in a year–keeping this relatively small amount of money in your checking account isn’t going to hurt. The important thing is to keep it separate from your emergency savings. Long term saving goals are for a future house, wedding, child, etc–things more than a year away–perhaps save up a certain large amount, say $5,000 or so and then think about depositing it into a certificate of deposit… but that comes with a few obstacles. You might want to make separate accounts for short term savings goals and long term saving goals. I know it’s rough, but you NEED to separate spending and saving in your mind. Saving money to plan to spend it is NOT what saving for emergencies is for. This short or long term savings–and the interest that it makes– you can use to buy stock, a new iPad, pay for a trip to Paris, pay off student loans early, use as a down payment for a house, or pay for a wedding, but you always need to have your emergency savings that can cover your living expense for at least three months hanging out, only getting fatter. And every year you need to reevaluate your savings to make sure it’s keeping up with inflation, your salary and your costs.

Suze Orman calls savings accounts “the cornerstone of financial security.” And for good reason– it gives you a liquid asset that helps fund your other assets and experiences while keeping you safe from the unknown. What’s not to love about savings? Now, how do we get to that awesome point of financial security?

We have to face denial. Usually people say they don’t have enough left over to save. But saving should be the first thing that’s done with your money. Even before paying rent. There’s a premise in the financial world that is so simple that it’s mind-blowing when you put it into action: when you have less, you spend less. When you have more, you spend more. If you never see the money you move to your savings account, it’s like it’s not there to spend. You’ll have to budget wisely, stick to the budget, and make a small sacrifice or two, depending on how much you’re saving.

When we get to the first post about budgeting (which I think will be the one after next Monday’s) we’re going to talk a bit about budgeting. And denial. But I want to leave you with this thought: could you spend $1 a day for a month? Say, for a candy bar or a cheap cup of coffee? A momentary indulgence. Now imagine– instead of spending it, save it. In a year, that’s $365.  It may not sound like a lot, but which would you rather have? Nothing, but lots of coffee or candy (that enters and exits your body in a day)… or $365 to use if you suddenly need it?

IDK WEDNESDAY (1st Edition)

Hey, there, readers!
So in between my post on Monday and what may be a special “fun” post on Fridays, I’ve decided to use Wednesdays as a forum for question and answers.
I’ve gotten a question on comments from a friend, a conversation with a friend, a phone call from a good friend, which equals three.

And that means either: only three people read the post and are actually accepting the challenge that I presented….

OR

The rest of you are doing it easy-peasy and don’t have any questions.

Now, if it’s the second than I’m okay with that. But if it’s the first let me give you some encouragement–

CHECK UP YOUR CHECKING ACCOUNT. I’VE LOST $384 OVER THREE YEARS BECAUSE OF FEES ON MY ACCOUNT. You know how much money I’ve lost in the last year because of fees on my account, because of changes I made? $0. ZERO DOLLARS.

Yeah. For reals.

SO, if you have any questions, now is the time to ask!If you’re being apathetic– STOP. No question will go unanswered. No question is silly. Just fill out the form below if you need help or have a question.

An Introduction to Ignorance, Denial and Indulgence with a Lesson in Checking Accounts

1. Ignorance.

2. Denial.

3. Indulgence.

Now, I know that you came to my blog today so that I could reveal all my awesome secrets of how to make money have little moneybabies, but that comes later. Sorry, kids. Instead, I’m going to start with the very basics of financial freedom. Now, before you start commenting with all the vitriol of Youtube trolls, let me ask you this: do you pay fees for your checking account? Do you know how to avoid paying  interest on your credit card? Do you have personal checks? Do you have a savings account that is accruing interest?

If you said yes to all these things, email me. Perhaps I’ll have you as a guest poster!
However, if you said no to ANY of them, do not pass go, do NOT collect $200. Ouch.

Those three things I listed at the top of this post? Those are the three things you have to tackle if you want to make your own Plan. Trust me. If you try to make a plan before you’ve gotten a handle on these three things, you’ll backslide back into the habits of ignorance, denial and indulgence. That’s not good. These next few paragraphs are going to contain some tough love. Fair warning.

Ignorance. If you don’t have personal checks, you’re ignorant about personal finance. If you don’t know what the APR on your credit card is (or don’t know what APR stands for) you’re ignorant about personal finance. If you don’t know what how your credit score is calculated, then you’re ignorant about personal finance.

Denial. If you don’t know how much money is in your bank account every day, you’re in denial. If you hand your debit card over for purchases and you’re unable to remember how much you just spent after you walk away, you’re in denial.  If you think moving your money from a savings account you’ve had since you were 18 to your daily checking account every week isn’t going to hurt anyone, you’re in denial.

Indulgence.  If you pay for the most expensive Netflix choice, you’re indulgent. If you get your nails done every two months, you’re indulgent. If you pick up Starbuck’s every morning on your way to work, you’re indulgent.

Ignorance is robbing you–literally– of your money. Simple as that. Denial? Refusing to check what the weather will be today  means you’ll get soaked when it storms. Indulgence is sneaky– it can hinder you from financial success, but it does it with a smile.

I know it seems hard to take on all three of these things at once, so just know: I’m not asking you to do that. Gotta walk before you climb, right? So let’s handle them “bird by bird” as a friend of mine says.

Also, notice I never used the words, “conquer,” “beat,” or “overcome.” That’s because you won’t. No one is perfect. I certainly still give in to the three things because, well, it’s easy. We can’t always be knowledgeable about every single thing about money. There are going to be some days where we didn’t check to see how much money we spent that day. And saying no to every single indulgence would make for a boring, sad life. So if I’m not asking you to conquer the three things all at once, what am I asking you to do? I will control my money, so money doesn’t control me. Control it. The word control comes with the idea of wrestling something difficult into submission. Sometimes the beast wins, sometimes you win. It’s about balance. We don’t want the three things to control you anymore, right?

So, onwards to the first lesson in helping to quelsh your ignorance about money.

Checking accounts: lesson one.

Riddle me this:

Should my checking accounts have monthly maintenance fees? Should it accrue interest? Should I have checks for this account? Do I have to keep a minimum amount in it? What are the penalties for over-drafting?

Ding ding ding! Time’s up! The answers to these questions should be: No. Yes. Yes. No. I control the penalties.

If your answers don’t match up with the correct answers, you need to make some changes.

  • Change your existing account to a free checking account (meaning, it costs you nothing to have it; no monthly maintenance fees, few or low-cost service fees for things you might not ever even use, no high minimum deposit, no ADB clauses etc.) and/or open a free checking account that gives you interest (meaning, your money will make money just by chilling out in this account). If you’re a student still, the Big Banks (Chase, Bank of America, Wells Fargo, etc) have free checking accounts for students. If you’re not a student any longer, you can try going in to the nearest location of the bank of your choice and telling them you plan on attending graduate school and that you want the free student checking account. They’ll probably believe you and give it to you (I know this from experience, and I don’t even plan on going to graduate school any time soon, but my Chase account is free until I’m 25). Or, you can get a free interest checking account at Ally.com, an online banking firm which I use and LOVE. The only inconvenient thing about it is that there is not a way to deposit cash. Right now what I do is deposit cash in my Chase account and transfer it (for freeee) to my Ally account. Where it hangs out and gets money. Because divas get money, right Beyoncé? If you don’t have a personal checking account of your own, you need to get one today. Right now. It’s not hard. Sign up online– it will take 10 minutes. You need $1 and your personal info. Usually free checking accounts don’t have a high minimum deposit amount you need in the account to have it open– this is what you want. Speaking of which– if you do have a minimum on your existing account, say of $500, that you’re not allowed to touch (not allowed to touch your own money?! Ridic.), do you know what it’s used for? Check out the glossary.
  • Get checks for your existing account or for your new account. Why? You’re going to find out that there are some things you can’t pay for in cash or with your card, and you’ll be tempted to get a money order because you don’t have checks to pay for things. But money orders charge a user-fee of about $2. That’s $24 a year you’re wasting on ignorance. Also, if you’re paying rent or utilities to someone in your house and you “round-up” your $39 electricity bill to $40 because the ATM only gives even bills, you’re losing money if you don’t get your change back. It may not seem like much, and “you don’t care, it’s just a dollar,” but in a year, it’ll be $12-24 you’ve WASTED. If you had a check, you could write the exact amount owed and not lose any money ever. I don’t care if your bank sucks and charges you for a book of checks. Put on your big girl panties or big boy undies and get one book of checks. Hopefully some of you already have good accounts that give you free or discounted checkbooks. And if you open a new free checking account they usually come for free as long as you choose the option to have them. Which you should.
  • Find out what happens to you if you overdraft. Chase gives you until midnight of the day you overdrafted before they charge you the $34 overdraft fee. Ally charges you $3 per overdraft. ING’s Electric Orange banking gives you the option to borrow money from them instead of overdrafting and charges you pennies on the dollar for interest, for up to 30 days. Almost every bank will give you the option of linking your checking with your savings so that any amount you overdraft is moved from savings to cover the expense. You can also choose to do this with your credit card, if your checking and credit card are from the same institution. Or you can do the smart, cautious thing– you can opt-out of overdraft. If you swipe your card for a $15 purchase at Central Market and you only have $14.99 in your checking account, your card is denied. (Which can be embarrassing, but if you weren’t in denial about how much is in your checking each day, you wouldn’t have been buying $15 worth of stuff you couldn’t pay for.) Bottom line: overdrafting is EXPENSIVE. The fees stack up daily, making the $1.99 purchase you overdrafted cost you -$1.99 for the overdraft, -$34 for the overdraft fee and -$15 for each day your account is overdrafted. Make sure you protect yourself from these insanely costly fees, even if you’ve never overdrafted before and never plan to, by knowing how to avoid the fees and choosing which way works best for you.

All right. So those are your assignments for the week: a checking account check up. We’re going to stop being ignorant about our money! Next week, we’ll continue with conquering ignorance in other areas of your financial life, like savings or credit.

One last thing:

It may seem hard, or boring, or annoying, or tedious, or whatever negative connotation you have… to do these things– you can comment, email me, FB chat me, tweet me at @kgraves23 to get help along the way. I want each of my readers to start setting up their financial accounts in a way they can control and in a smart way. If you need help, let me know! And if it seems like a silly way to spend an evening, just do what I do–

Do it with wine and Beyoncé.

“Fun Before Future”

At work, I shyly told one of my sweet co-workers (who is also a graduate, living with a partner here in San Antonio) that I had started a personal finance blog for people our age. She remarked how awesome she thought that was and that she should start reading it. We commiserated on the pitfalls of being young without money. And we talked about how depressing it is to not have money to do things we really want– like shop, or see movies, or eat out, etc– and that life can become a monotonous routine of:

Get up. Go to work. Go home. Go to bed. Repeat.

And that is really depressing.

After I nervously published my first post, I got an overwhelming (and unexpected) positive response! So many of my friends are struggling with finance, even after years of post-graduation under their skinny, brown leather belts. The comments I read on my Facebook made me equal parts excited and terrified. Excited because I am now even more inspired to master personal finance–not just for myself now, but to help others. Terrified because, well, what if I can’t help?

Fast forward to later that same night. One of my sweet roomies and I were commiserating about being young without money. About being depressed (and not in an exaggerated term. I’m talking post-graduate depression. First world problem? Definitely. But a problem none-the-less.) because the things we wanted to do: take art classes, go to yoga classes, buy new wardrobes– seem impossible simply because of the lack of funds. We knew that things we had to do came first: pay rent, buy groceries, pay utilities, buy gas. Not to mention unexpected, unfun stuff. Like fixing a car part, taking your puppy to the vet, etc, etc. And it felt like we were just getting up, going to work, going to bed to pay for those practical things. Falling into the soulless, monotonous routine that in college we’d lambast and swear we’d never fall in to.

Then I woke up today. Payday. Yes.

And was immediately depressed. One of my two paychecks will go to pay rent; and then I will only have $53.13 left of it.

WHY, GOD, WHY?! How am I supposed to live? How am I supposed to eat? How am I supposed to pay for the things people want me to pay for to continue to have those things?! I’ll have to use ALL of my other paycheck to pay for those things! I’ll have pocket change left! I’ll never get to do any of the things I actually want to do because I’m always just a little bit behind!

After showering in self-pity and literally showering, I got dressed for work and had enough time to spare to eat a tangerine. I decided to eat it while sitting on my beautiful front porch, watching the sunlight shower my neighborhood.

Something that my co-worker said yesterday resurfaced as I peeled the mini-orange. “I always plan to have fun before I plan for my future.” And my response to her was: “Why not try to do both at the same time, as best you can?”

My great-grandpa used to say to me when I was very little: “Work and then play. After you’ve done your chores for the day, you can spend the rest of the time playing and not have to worry about anything.” A lesson instilled young and still installed today.

So the old generation was telling me: work hard, then you can play. And my generation was telling me: take advantage of today; don’t worry about your 60s. Being a person of moderation, I wanted both. I want to have fun in my 20s and I want to be secure in my 60s.

How do I make that happen?

Budgeting. Prioritizing. Saving. I reminded myself of The Plan. I am resolute. I will control my money, so money doesn’t control me. I finished my tangerine and realized that I had enjoyed a beautiful morning. For free. Well, I mean, the tangerine cost a little money. The porch is included in rent. And the water bill was paid. And my shampoo and soaps were bought with my money. And I had to turn on the light–electricity bill. Meaning, I was sitting on my porch, that I pay rent for, eating a tangerine I owned, wearing clothes I bought, I was cleaned with my water, shampoo and electric-dryer dried towel. (Beyonce’s Independent plays in my head as I write this. “I BOUGHT IT”.) Even if right now it feels like I’m not doing some of the things I want because I can’t pay to access them, I’m still supporting myself.

Life is good. My tangerine was delicious. It was a gorgeous sunrise. I remembered something important that I hadn’t applied this morning: perspective.

I left for work smiling because I know how I’m going to achieve having fun in my 20s without breaking the bank and how to do the same when I’m 62. I’ll tell you my Plan on Monday, after I enjoy a fun-filled (and fee-free) weekend.

Tennesee Williams

There are a lot of things I love about Tenesee Williams. His name.  Cat on a Hot Tin Roof. And his quotations. One of which this blog is centered around and which I agree with:

“You can be young without money, but you can’t be old without it.”

I’m young. And, for all intents and purposes, I am without money. I have recently graduated from a private university (read: student loan debt) and I am living in a house with five — one, two, three, four, five—  other people. Fortunately, the city I live in has a low cost of living, so my rent is considerably cheap. I get no help financially from mommy and daddy, I have two part time jobs totaling 47.5 hours of work a week, making a combined total of about $900 a paycheck, which means I make about $1,800 in gross income a month.

But if you’ve ever had a real (meaning, not a university job or your weekly babysitting gig) paycheck, then you know the government likes to take a nice little chunk out of each paycheck for things you don’t use right now. Like social security benefits.  So my monthly net income is a bit below $1,800. Pretty good, right? Well, if I’m smart about it. For a year that’s $21,600. And since the current poverty threshold for 48 out of 50 US States for a household of one is $11,170, I’m making $10,430 more than the poverty line in net income alone. So I should be good, right? Except…

Wait, wait– I’m getting ahead of myself. This initial post is to explain what the blog is about.

This blog is about money. Or rather, not having any. And being young. Which means it will cover topics such as:

-How to make a budget.

-How to save money.

-How to invest money.

-How to not lose money.

-How to plan for retirement.

-How to repay student loans.

-How to make a shopping list for groceries that sticks to your budget.

-How to fill out a W4 for your new job.

-How to file your taxes independently (and for free).

-How to pay rent.

-How to buy insurance (health and auto).

-And more.

I promise to research thoroughly before I post. I promise to make posts understandable and approachable. I promise to answer questions. And, most importantly, I promise to be brutally honest. That means you should know some things about me right from the beginning:

1. I do not work at Meryl Lynch. This means that what I know and will post about is stuff that I have read about online, in articles, in books. Or have personally experienced. Or talked about to people that work at Meryl Lynch. What I’m trying to say is: I’m not an expert. And therefore anything I say on here as advice, while it will be cited, should be read critically and cynically. And if you feel you know more than me, comment. That way I can revise.

2. I am not rich. I have a lot of student loan debt. A little bit of credit card debt. Bills scare me sometimes. I have had to pay them late before.  I don’t come from money. I don’t get an allowance from my parents. I don’t have a trust fund.  I have overdrafted my bank account before. I have borrowed money from friends. I don’t have a lot of money in my savings account.

Now, all of this may make you ask, “Then what the hell can you tell me about successful personal finance? You sound pretty bad at it.”

And my answer is this: all the stuff I just listed has made me inspired and dedicated to change it. I am committed to becoming financially free. I dream of putting all my bills on autopay because I have enough in my accounts to pay them, live, and have money leftover. I imagine what it’s like to take an extended vacation in Italy because I have enough money to take off work and pay to go abroad and live there with no worries. I want to feel the comfort of knowing that someday, I’ll be 68 and not working because I started a retirement account when I was 22.

Because of my present obstacles, I am am so fired up about overcoming them that I devour information about finances, analyze, synthesize and apply the outcome to my financial life. Why do I do this? Because I know–from past and present experiences– that while money doesn’t buy happiness, it makes happiness a whole lot easier to achieve. It gives you freedom to do what you want: buy expensive shoes, buy concert tickets,  pay for school, pay car payments, buy an engagement ring, buy a house, pay for food, have a baby, pay off student loans, fix broken pipes, cover visits to the doctor, buy mom a birthday present, go on vacation, pay for insurance… we live in a world that, unfortunately, does revolve around the concept of earning and spending. Unless you want to be an anarchist and move to a third world country (which is totally fine, too) you must accept the bleak fact that one of those sayings about money– that it makes the world go around– is in some respect true. So I have decided that I will control my money, so money doesn’t control me. This idea makes me happy. It is one of my mantras. Some of those problems I mentioned earlier I’ve already begun to address, so I feel like I can help my peers address them to, in their own lives. And if nothing else, I’ve had lots of experience going through these difficulties, so I can at least offer some sympathy and encouragement.

And I know that there are people out there like me– with very little money, with lots of things to pay for, with lots of things they need or want. So I’ve started this blog for us.

Here’s to financial freedom. To being young without money, so we can be old with it.  Cheers.