New Grad? Kids still in College? Control that debt!
You’d probably agree that too much debt is not a good thing. When you are young, carrying too much debt can create a precedent one spends many years, or a lifetime trying to pay off. Debt can be a dark cloud hanging over your life, particularly with high interest rates charged by credit companies. Much of the interest we pay on debt is not tax deductible either. Too much debt can keep a person from saving money, especially with today’s low interest rates on savings. Our society wants immediate gratification, so starting a monthly investment program with even $50/month can be challenging.
What sort of debt am I talking about? Common debt for those 18-25 includes: Student loans, credit card debt, loans from parents, personal loans, and car loans. If you are working while in school or college, lifestyle can take up much of what you earn. Once graduated, spending more can become easier as the paycheck is coming in on a regular basis and studies aren’t taking up so much of your free time.
Rarely has a student had experience with real world expenses while in school. Parents can carry their students on their health insurance and often lend quite a bit of support to their college students. This can be a service as well as a disservice to the student. Baby boomer parents are known to hover. That is, they want to protect their children from the realities of the world as it is; they only want their kids to get positive reinforcement and feedback. This sets the young person up for unhappiness when reality sets in!
We encourage students to sign up with Mint.com as a way to track their income and expenses. It’s free and will create a budget based on the expenditures you input or download. Practice helps educate you on where your money is going.
Another great tool is a book. The title is Get It Together, The real-world money guide for graduates. Authors Shannon Prosser and Hallie Hawkins published their work in 2011 with Log Cabin Books (www.logcabinbooks.com) and it contains terrific information for graduates as well as those just starting out in a career or independent lifestyle. You can read excerpts and order at www.nowgetittogether.com. They discuss your vision, cash flow, debt, benefits, housing, keeping what you earn and investing. Legal lessons are also covered.
I encourage you to get the book for yourself or buy a couple and gift them to young people you know. No, I don’t receive any referral fees from recommending the book; in fact they don’t know I’m recommending it to you. I’ve just found it to be a great resource and tool for students and young adults just starting out.
Make a plan to control your debt and save some money. These things are both great Financial Strategies For Life!