Money Musings 💭 if I only knew this at 🎓
If I only knew then what I know now... sigh.
There are so many things I wish I knew about money when I graduated from college. Anyone else?
In honor of the many college graduations taking place across the globe, I’m going to share the top 7 things I wish I knew.
1. Start saving as soon as possible.
If you wait to start saving until you have “extra money” laying around at the end of the month, you’ll never save anything. You can start small but don’t wait to start. Make your life easy by making it automatic. Eventually you’ll want to build a rainy day fund with at least a few months of expenses.
2. If you have a company 401(k) plan, use it.
There are some major tax benefits. If your company offers matching, that’s even more incentive. You can increase your contributions by 1% over time. If you don’t have a company 401(k), you can still save for retirement with an IRA.
3. Get renters insurance.
It’s not expensive and it typically covers everything in your apartment, even if it’s stolen outside of your apartment. Don’t forget to put your roommates on the policy. Still so sorry Ashley! Ashley was my roomie and still bestie who was not included on the policy and couldn’t make a claim when she needed it.
4. Credit cards are not free money.
Most credit cards come with a very steep interest rate. While they are an important lifeline for many, know that carrying a balance will cost you - usually at a compounding rate of 15-25%. Think of it like paying at least 15-25% more for the things you bought.
5. Budgeting is an act of self-love.
Call them budgets, spending plans, or happiness allocations (my fave term). Planning out your income and expenses by month is a hugely eye-opening and liberating process. I used to think it would be restricting and would limit my fun, but it’s actually the opposite. You can build in your fun - guilt free. Here’s a template to help you get started.
6. It doesn’t hurt your credit score when you check it. (Only when others like banks and loan companies make a “hard inquiry” into it).
You might not need your credit score for anything right now but it takes time to build it. Check your three credit reports for errors (annualcreditreport.com) and then check your credit score at MyFico or Credit Karma to get tips on increasing your score.
7. If you are going to be a high earner right out of college, watch out for financial advisors selling you whole-life or any kind of permanent insurance.
It doesn’t make sense for 99% of people.
What’s the #1 thing you wish you knew? Hit reply and let me know. I’ll compile a list of yours and share them here as well!
If you know a recent grad, please forward this along! How amazing would it be to start your post-grad life with the nuggets you wish you knew?
MONEY MOVE OF THE WEEK
THE MOST COMMON DEBT PAY DOWN MISTAKE.
When it comes to paying down debt, the most common mistake I see might surprise you.
The tendency to put too much money toward debt each month.
Why? If we put more than we can afford toward our debt then there’s not enough money left for expenses and bills so things end up going back on credit cards.
I get it, it feels so good to pay it down – but it then becomes unclear whether you are making progress, because your debt balances are going down and then up again each month. ↕️
It can start to feel like a futile pay down/build up hamster wheel where you are taking one step forward and two steps back. I don’t want that for you.
If you are not sure how much you can put toward your debt each month, a great place to start is with your spending plan. If the numbers still don’t make sense, and you want more clarity the cash tracker can be life-changing.
It does exactly what the name suggests: it helps you map out or track your cash. Start with the amount that will hit your bank account the next time you receive a paycheck or income.
Then, list out all the places that money needs to go (including your bills, debt payments, and everyday expenses) over the next week or two weeks. You can download it here!
YOU GOTTA SEE THIS
DEFINE 529 PLAN.
A 529 plan is a tax-advantaged plan designed to help families save for their child's education. It can be used to pay for Kindergarten all the way through graduate school, with some limitations. Anyone can open one, but they’re typically opened by parents or other relatives.
Choosing to save for your child’s college expenses is a personal decision and it’s important to prioritize your own retirement first. 🏫
How are they tax-advantaged? A lot like a 401(k) or IRA, you put money in (and invest it) and it grows tax-free (no capital gains tax!). When you take the money out to use it for qualified education expenses, you get to use the money tax-free.
Depending on the state you live in and your income, some contributions to your 529 plan may be tax deductions.
Some important things to know:
You can open one in most states, even if it’s not your own. If your state offers tax deductions for contributions, you’ll want to open a 529 plan in it.
You can change the beneficiary. If you contribute to a 529 plan before your child is born, you can put it in your name and change it later. If your child ends up not using the funds, you can transfer them to another child or to someone else. More options are coming in 2024!
You can make automatic ➡️ contributions so you can set it and forget it.
If you use the money for expenses that don’t qualify, you will get hit with a 10% penalty and pay taxes on the capital gains in the account.
Watch out for fees. The plans can be free to open and you should be able to find low-fee funds.
When applying for financial aid, 529 plans are counted as parental assets.
Next week in part #2 I’ll share some exciting 529 plan news!
MY TRAVEL JOURNEY
MONEY GOALS FOR OUR TRIP.
As you’ll see from the money savvy travel series that kicks off next week, the more conscious and intentional we are about planning BEFORE a trip, the better.
When we decided to pursue this annual travel goal, I didn’t expect it to have a large impact on our finances. I know, I know. You might be thinking… “There’s no way a month-long trip won’t have a big impact.”
But hear me out.
First, the flights. We save all of our credit card points for international travel. Using points for international flights typically has a high cost / benefit ratio. So my hope is that if we save our points each year for our big summer trip, then the flight cost can be pretty minimal.
Mind you, there are 5 of us traveling so 5x anything is still significant.
Then, the accommodations. We are open to a home exchange so will most likely rent out our place. This might change in the future depending on how this year goes 🙈 but for now, and because we live in a high cost of living area, we are hoping that the additional cost of our accommodations will be minimal.
And finally, the cost of everyday life. While we do plan to spend more while away than we do at home, I think it will be less of an increase than most would expect. 💸 I’ll want to splurge on some experiences and we will be out and about more than we are at home but we do spend a lot of time in NYC so I don’t expect it to be much more.
Okay, that’s the plan. I promise to report back on this hypothesis after the trip.
your weekly money wins
Here are all the amazing money moves you made this week 👏👏👏
Ari B: Investing 10% of my earnings
Sara W: Just canceled a $100+ worth of subscriptions. Sad to see some go but needed at the moment
Mikayla S: Bought a condo at 25! Wouldn't be possible without clear goals and reasonable budget!
Kat R: Sold a bunch of stuff around the house. Used $ to make a Roth contribution!
DPP: Poll working Election Day - $200 to debt and good citizenry
Diane T: Paid $2K on my HELOC
Steph M: Increased my weekly automatic savings transfer!
Steward: Made extra $$$
Kelly J: Opened the Chase Sapphire Preferred Card for the 80K travel points I'll use for Dec.
McKenzie: Opened up a HYSA!
Kara M: I signed up to see a Dr. out of insurance and I had the money saved. No stress. Very exciting!
Mami: Opened my 401k finally and was able to budget where my kid's camps weren't a burden :)
MF: Consolidated my investment accounts to just target funds and index funds and created a plan to pay wedding deposits off my credit card in three months