Part 1: Highschoolers with money, kids, and a career
Picture this: You’re given a randomly assigned life situation (like single, married, or married with kids) and a career with a corresponding budget (for ex: a nurse aide making 28k). You then walk into a room that contains 12 stations and begin making decisions regarding how you’re going to spend your moolah (in regards to housing, clothing, utilities, transportation, groceries, recreation, etc). Also, you’re like 14 years old with zero “real world” experience and are touring the room with 53 other high school freshmen. Get the picture?
I drove to Chelsea High School on a Friday morning (two weeks ago) to volunteer for the Keeping It Real program (a financial literacy program slash reality fair that aims to help kids learn how to manage their not-so-distant future finances). After parking my dingy, blue ’99 Neon and asking an adult on the premises which door I should use to enter the school, I signed in at the front office and then curiously roamed the school’s narrow hallways in pursuit of the library (where the event would be taking place), passing seemingly endless columns and rows of metal, blue lockers and striding across shiny, polished and stained concrete floors.
After locating the library, I entered it quietly, scanning my eyes across the room and watching as a small number of adults bustled about, setting calculators, pencils, erasers, and handouts onto black folding tables. I recognized my co-worker, Jess, at the other end of the room and immediately headed her way. I smiled and greeted her and then asked which station she’d chosen. “We haven’t selected stations yet,” she answered, helping another volunteer position chairs along either side of one of the folding tables.
“Sweeeeeeeet,” I murmured to myself, proceeding to circle around the room and considering station titles: Housing, Transportation, Insurance, Utilities, Groceries, Clothing, Education, Finance, Fun Stuff, That’s Life, and Second Job.
Second Job — that one stuck out. I’d once (during a rough patch) worked three jobs, so I certainly understood both the benefits and the downsides of working a second or third (and even fourth) job.
Dibs, I thought inwardly, setting my backpack down beside the table and placing my water bottle on top of it.
About ten minutes later, the event coordinator motioned for everyone to draw themselves into a huddle as he gave a quick rundown of how the event would play out.
“We’ll have different groups of students coming in at various intervals throughout the morning,” he explained, “and the first two groups are going to be our largest; 54 in the first, 53 in the second.” He raised his eyebrows impressively and then adjusted his glasses. “As students approach your station, review their options with them, and while you definitely want to remain mostly neutral and unbiased – letting them make their own decisions and come to their own conclusions – you may want to softly advise them and give them some pointers on what would best suit them, based on their randomly assigned life situation and career.”
Makes sense, I agreed inwardly.
He concluded the overview with an enthusiastic clap of his hands and, right on cue, a steady stream of students began flooding into the room. The coordinator beckoned them to form a pool in the middle of the room, and then he projected his voice as he announced their instructions: “Please visit each station. Log expenses in the debit column of your worksheet and income/additional revenue in the credit column. Keep a running total of your balance and make smart decisions. Good luck!”
I watched the students break away from the circle and begin navigating the room. The Housing and Transportation stations tended to, with each group, receive immediate attention; stations whose attendants inquired: “Do you want to room and ride economically or in-style? Would you like to rent a 2-bedroom, 2-bath loft downtown, or purchase a single-family home in the suburbs? Are you going to ride a BMW to work or a used car that you found on Craigslist?” So many options.
I was in close proximity to the Clothing station (where Jess was working), so I tuned in to the brief synopsis she gave to each new group of students that approached her:
“You can choose to wear trendy, designer apparel, or you can opt to shop clearance racks and thrift stores for your clothes.. whatever your personal preference is!”
I overheard a few of the kids critically assessing the two options:
Kid 1: But what if I just want to wear this hoodie all of the time?
Jess: You can’t wear that hoodie all of the time.
Kid 2: Do I actually have to wear clothes?
Jess: …it depends. What kind of job do you have?
I smiled at each of the kids that approached my station. “Hey there! Want a second job? Need one?”
“Yes; badly. I’m totally broke,” a lot of them would say, gesturing sadly towards their financial worksheet.
“No problem. Let’s see what you’ve got going on.” I’d look over their worksheet with them, taking their primary job into account, and then we’d go over their options together (using a laminated, second-job guide) and figure out what type of secondary job would best suit their lifestyle.
“Now, you’re already working full-time as a veterinary assistant,” I pointed out to one kid, “so it would probably be a little impossible for you to balance holding down THAT job with traveling around for the military,” I paused, allowing time for the sensibility of the statement to sink in.
She nodded in agreement.
“So,” I continued, “more realistically, what we’re looking at are these categories: pizza delivery, waiting tables, or ‘other sales’.. ‘other sales’ is going to encompass any other type of secondary job; anything from working part-time at Urban Outfitters or Publix to landscaping or playing gigs on the weekends.” I’d adjust my example slightly based off of the apparent (or assumed) interests of the kid standing in front of me, often throwing out names of well-known sports stores, clothing outlets and grocery chains.
Many students chose pizza delivery. “Fun choice,” I’d compliment them. “You’ll get tips and, probably, free pizza.”
“YESSSSSSSS!” a goth dude bellowed enthusiastically, thrusting two fists into the air.
And while many of the kids chose pizza delivery, most of them selected waiting tables. “With that position, you’ll enjoy a lot of flexibility with your schedule,” I’d offer. “And remember that you can tell your employer that you can only work on certain days, at certain times, and that you only want a certain number of hours. Also,” I’d throw in excitedly, “choose a restaurant that you like, like Chipotle, because you’ll PROBABLY get a discount on the food there.” They would smile and nod along happily, apparently feeling very good about their decision.
“I’m choosing Applebees,” I heard one girl whisper to another.
Some kids would walk by my station hesitantly, taking in the name: second-job (probably thinking “thatttttt sounds boring”). I’d invite them to stop by and discuss their options, and then they’d comment that they didn’t think they really “needed” a second job.
“I’ve still got $187 left for the month, so..” one shared proudly.
“That’s goooooood,” I agreed with him, “but let’s say your tire blows out on the way home from your first and only job one evening. Now, you’re broke.”
He lowered his head dramatically. “Okay; I do need a second job.” Smart kid.
We discussed that a second job can be used to help supplement your income (as in, you may want to use that additional revenue to help pay the bills), but that, more often than this, the “ideal” purpose of taking on a second job is to help you save more money. “And save for what?” I questioned them (and then immediately answered).”For things like emergencies, and retirement, AS WELL AS for fun stuff.. like vacations, cars, dining out with friends, attending concerts, binging on burritos.. whatever you want.” It didn’t take long for this to make sense to the kids. The simple logic behind “why you should save money” really seemed to make an impression on them. They were able to see the necessity of – and even the freedom associated with – saving, and it made me feel very proud of them.
It was a good time. I enjoyed observing the students and talking with them. Many of them, I noticed, traveled around the room in small packs, and it was always very easy to spot the leader of the pack. Usually, it was the loudest kid; the one who appeared to be the most confident, well-groomed, and poised. Once a student had completed their worksheet, they’d either continue to float around the room or would settle down onto one of the couches in the central part of the room. I conducted a secret, half-assed social experiment on two groups of students, and by that I mean this: twice, when things slowed down, I looked over, randomly, at a group of kids (who were settled down onto couches) and took a quick count of the number of students on their phones.
Group 1: 8/8 students were on their phones. Every single one!
Group 2: 4/6 students were on their phones.. aka, 2/3 kids (the 5th, who I’m not counting, did REFERENCE her phone every few seconds but was still seemingly able to carry on a conversation with her phone-less companion).
It’s just interesting. I never carried a cell phone on me when I was in school. There’s nothing wrong with it, per se.. it’s just interesting.
I appreciate that Chelsea High School is making a concerted effort to equip students with practical knowledge that will help them manage their finances thoughtfully and responsibly as adults. And with that being said, I’d also like to offer a few brief tips that I think adults (and possibly even kids) may find interesting.
First, some background on this:
I’ve had 5 friends approach me just in the last few months, asking for help with their finances (with questions like: how can I save more/ pay off this loan faster/ establish my credit/ restore my credit/ reduce my expenses + increase my income?). I work in the financial world, so it (financial management) is a topic that I’m pretty passionate about. I helped develop a super simple “personal financial management” training program at work last year, and I’m going to share a few tidbits of that program, as well as some of my personal opinions and experiences, with you all.
Part 2: Jace’s take on Personal Financial Management.
What is personal financial management? Simply put, it’s managing your money, your debt, and your credit, and hopefully, it’s doing all of that well.
Up next, what is personal financial management composed of? There are three main categories: saving, spending, and borrowing.
Saving: Not fun, but super important.
From childhood onward, the idea is impressed upon all of us that it’s important to save your money. But why?
- For emergencies. Examples: breaking your arms and legs due to an unfortunate skateboarding mishap and missing work for 3 months; having your front tire blow out on the way home from a music gig; unexpectedly owing on your taxes. 3/3 of those happened to me, personally. Well.. 2/3. I haven’t killed myself because of skateboarding. YET!
- For retirement. You’re going to get old and tired one day. When this happens, you want to be able to settle down, relax, and live comfortably. Right? Well.. relying on social security alone (btw, DON’T) isn’t a bright idea. You can plan and prepare for a comfortable retirement by opening up an IRA or a 401k (check with your employer on the latter; if you want to start out small and can only commit to one, I’d recommend going with the 401k because, chances are, your employer is going to match a certain percentage of your contributions; that’s FREE MONEY, dude).
- For fun. Whether you like purchasing objects (cars, furniture, music gear, garden gnomes) or paying for experiences (concerts, vacations, facials), the possibilities are endless. And many of them cost money.
And because there are different takes ON saving, it’s important to keep your different saving endeavors separate from each other. My financial institution gives me the ability to open multiple savings accounts and assign customized titles to them (like “roadtrip” and “burrito fund”). Do what works for you.. just make sure that your SERIOUS saving endeavors (emergencies and retirement) and FUN saving endeavors are kept separate from each other. Don’t dip into your “I just lost my job” fund to purchase a new bass guitar. Unwise.
So; we agree that it’s important to save, right? But how can you make that lofty and noble idea of saving money a reality?
- Payroll deduction/direct deposit
- Automatic transfers
- Piggy (or bunny) banks
Some people prefer saving “set” amounts (ex, $50 each paycheck). I’m more of the mindset of saving a percentage of each paycheck.. that way, the amount you’re stowing away is relevant to how much you’re bringing home that particular week or month (since it may fluctuate). Financial experts typically recommend that you save 10% of each paycheck; for every $100, that’s ten bucks. For every thousand, it would be $100. Pretty feasible, right? Make it a point to save your money.. not an afterthought. If you don’t deliberately set out to save money, it’s not going to happen.
Spending: The Fun Part.
The single most important aspect of this category is actually threefold:
- Be aware of how much you have in your account. Don’t overspend. Use a check register (if you’re pen-and-paper/old-school), or check into your mobile app frequently.. however you prefer keeping up with your account. And when you are reviewing your account, don’t look at your balance — look at your AVAILABLE balance. This number should take any pending, PIN-based debit card transactions into account. Keeping this number in mind, you’ll still need to consider that there may be electronic withdrawals you’ve pre-authorized and checks that you’ve written that HAVEN’T cleared your account yet, so what’s showing – at this very moment – as your “available balance” may require some tweaking on your part. Not good with adding and subtracting mentally? Use the calculator on your phone.
- Be aware of how much you’re spending. Some financial institutions and apps offer money-tracking and budgeting/saving tools. Check around. Find an app that categorizes your spending, or print off your statement, use a highlighter, and do it yourself. You may be surprised by how much money you’re spending on clothes, household trinkets, or dining out. I realized last month, when I casually glanced through my Visa Credit Card’s e-statement, that I spend an astounding number of dollars on burritos. And do I regret it? Nope. I wouldn’t take back even one of those damn rittos. ❤
- Spend wisely. You’re shopping, surveying the clearance racks at Von Maur, and find a Free People-brand (YOUR FAVORITE!) t-shirt that you just adore. It’s usually $127 but is on sale for only $78.
Guess what? $78 is, generally speaking, still WAY TOO FREAKING MUCH for a t-shirt. Don’t be a sucker for sales and clearance racks. I’ve found that, when I find a household item, clothing item, or grocery store product that I like, I pause before dropping it into my cart or shopping basket. I ask myself: will I love wearing this? If it’s something edible, I ask: is this healthy? Or not really healthy but so delicious that I just don’t even care? If I’m not head-over-heels for the clothing, fully persuaded on the tiramisu, or just feel like spending those dollars on that item isn’t a great idea, I put it back. The more you do it, the easier it gets. Be critical and selective and downright picky about what you choose to spend your money on.
Pro tip: If you feel like you’re disciplined enough to handle it, make it a habit to put your gas, groceries, utility bills and miscellaneous expenses on a credit card. Why?
- Many credit card companies “reward” you for using their card (via points or cash rebates). You can typically redeem your rewards for merchandise, travel discounts, or cold-hard cash.
- By using your credit card versus your debit card, you are NIXING the chance of overdrawing your checking account with a plastic card transaction. My general policy is to put everything on the credit card and then transfer the payoff amount once monthly. This way, I earn points, don’t pay interest, and never overdraw my checking account.
- If you’re using your credit card to make purchases and then making timely monthly payments (while allowing at least a small balance to carry over to the next month), it will actually report positively on your credit. Score, score, and SCORE.
If you decide to opt in to that #creditcardrewardslife, here are two cautionary tips:
- Don’t eff up your credit card’s balance-to-limit ratio. Utilizing more than 30-40% of your card’s credit limit will report negatively on your credit. Example: If your credit card has a limit of $1000, don’t carry a balance of more than $400 on the card. Don’t do it!
- Don’t use the card to make cash advances! The interest rate is going to spike a little and your credit card company may even charge a fee for you doing the cash advance. Better to withdraw straight from your savings or checking account (at a branch or ATM and, preferably, an ATM without a surcharge).
Borrowing: Bittersweet. Like dark chocolate.
We’ve all heard the saying: You have to have credit to get credit. Right? Right. And for me, establishing credit was
a bitch one of the most frustrating experiences ever.
“Oh, it’s easy to do!” my friends assured me. “Just go to the mall and ask JCPenney to give you a credit card.”
So I did. And JCPenny said: “Ha, no.” K, what they actually said was: “It looks like you haven’t established any credit yet, so we won’t be able to approve your application at this time.. but as soon as you HAVE established credit, we’ll be happy to help to you.”
Fan-freaking-tastic, I thought to myself. And how the hell am I supposed to achieve this, exactly?
Eventually, a co-worker presented me with what was, for me, the perfect solution: a share-secured credit card. I cuss, on occasion, in this blog, so I’m not going to link to my financial institution’s website, but if you’re interested in applying for a secured credit card yourself, just hit me up and I’ll give you all of the details.
Once you HAVE established credit, maintaining and improving your credit is key. Do this by:
- Maintaining a decent and modest credit utilization ratio. Remember: Keep that credit card balance in check. Don’t let your balance owed exceed 40% of your total credit limit.
- Keeping your longest trade-lines open (aka, even if you aren’t using it, try to keep your oldest credit card account open. It makes you look stable). Bonus tip: monitor your credit card statement – as well as any other kind of financial statement – carefully and closely and regularly. If any fraudulent activity occurs, it’s likely that you’ll have a narrow time-frame to dispute the activity. Be vigilant.
- Making your payments on time. Not late. Ever. If you are going through a rough patch and think you might need to make your payment AFTER the scheduled due date, contact the financial institution, utility service/phone provider or credit card company and ask them if you can make payment arrangements. This can (possibly) spare you NOT ONLY from being assessed a late fee or having your service suspended/terminated, but it will also help protect your credit from plummeting due to negative reporting.
Even if you don’t plan on intentionally “getting yourself into debt” by taking out an installment loan or using a credit card, keep in mind that circumstances and situations may arise that you didn’t plan on and that you’d hate to NOT be prepared for. If you own your current car outright and it gets totaled and you DON’T have enough money to purchase a new one, you may be in a position where you HAVE to take out a car loan in the future.. and it’s likely that, if you EVER want to purchase a home, you won’t have the full amount of money available to do so on-hand. So, if you think you may need to borrow in the future, make it a point to establish your credit NOW so that, when you DO put in your application, you’ll have a better chance of getting the answer you’re hoping for. With a good credit score a solid credit history under your belt, lenders will see you as a responsible, trustworthy borrower and they’ll love the hell out of you.
My final tip relates to the station that I managed at the school: seeking out supplemental income.
If you’re working a full-time job and you’ve reduced your expenses but you STILL aren’t making enough to make ends meet and save money, you may need to simply increase the amount of money you’re bringing in. Consider taking out a part-time job.
- You can choose a place you like and, hopefully, receive a discount for working there.
- With the extra money, you’ll experience less stress (related to your finances) and enjoy more purchasing-power.
- You’ll be better prepared for emergencies and can enjoy “splurging” on vacations, objects, and burritos without guilt or negative repercussions (like bouncing a check at the bank, having your debit card declined in front of a group of friends at “the” Olive Garden, or having your water service turned off because you didn’t pay the bill because you were BROKE after downing 6 beers and rocking out to Steely Dan at the BJCC last week).
- The more time you spend working, the less time you’ll spend relaxing. Monitor your stress levels, and schedule time to have fun — whatever your idea of fun is (planting yourself on the couch and watching Netflix, skateboarding at the park, painting in the garage, going out for dinner on a weeknight.. anything goes).
The nice thing about personal financial management is that it’s never too late to start (or improve). I hope that the kids that came through the program a few weeks ago never have to experience an NSF fee, having their AC turned off, or being denied for a loan application.. and I hope that you don’t EITHER. But sometimes, that sh*t just happens to us. Learn from it, take control of your situation, and work with what you’ve got.
And once you’ve helped yourself become financially fit and free, be sure to pass the word along.
Flinging dollars at rittos erry’day,