Learning About Finance 101: 15 Lessons Every Student Needs to Know 1

People say that money makes the world go ‘round and with good reason. But that also makes finances one of the most troublesome topics out there. A “rule of thumb” is that you learn about finances as you go, meaning that you learn by growing up and making mistakes that you might regret making in the first place. That’s why nobody really bothers to give you heads up. However, the sooner you learn about finances the better. Therefore, here are a few lessons every 20-year-old needs to know about finances.

Create a budget plan

Having a budget plan is the essential basic when learning about finance. It gives you insight on how much money you actually own, which you later break down on how much you have to spend and where. That way, you’ll be able to spend your budget accordingly and cover all the essentials, maybe even have a little saved up at the end of the month.

Try to cut costs

Every 20-something is careless, especially when it comes to finances. If you try to cut costs as much as possible, you will be able to save that money for something more important. Ask yourself, do you really have to buy frivolous things just to stay trendy or can you spend that money more wisely and buy things that you actually do need?

Avoid debt

Debt is one of the worst enemies of your financial plans. Young adults that get their hands on credit cards don’t really care where they swipe them and or why, as long as they pay the monthly minimum, everything will be fine. It won’t, actually. What you may not know is that the longer it takes to pay off your debt the more money you’ll waste on interest rates that feed the banks. If you can’t avoid debt altogether, then at least try to regulate your spending and pay it off as soon as you can.

Credit score

A lot of adults don’t know much about the personal credit score, but that doesn’t mean you shouldn’t be either. A credit score determines your creditworthiness. That means that lenders take your credit score into consideration when you’re looking for a loan. A bad credit score results in loans being denied or being charged extra-high interest rates by the lenders.

Read your credit report

Learning about finance means that you’re aware of your financial status. You could be paying your bills on time, making sure there’s no outstanding debt on your credit cards and still have a bad credit score because of a simple mistake in your credit report. That’s why you need read it regularly, because that way, you can spot if there is in fact a mistake or if someone else is using your social security number making you a victim of an identity theft.

Personal insurance

Insurance is one of the key elements in finance. Everything you have built up until now or everything you’re trying to build could be compromised by a simple accident. Investing in personal insurance is always a good way to protect yourself, as well as your assets in case something goes terribly wrong. That’s why you should always consider insurance as part of your financial planning.

Insurance bonds

Understanding surety bonds is also one of the important financial elements. You may ask what is a surety bond? Simply put, it’s an insurance bond that guarantees that all agreed upon obligations will be met. For example, if you’re in the construction business and you promise to build a house under certain standards in the agreed-upon amount of time; if you fail to deliver on your promise, then claims can be made against you.

This is important to know because if you’re planning on starting your own business then you may be obligated to obtain a surety bond by the government. On the other hand, you need to know about bonds if you procure services from such companies and make sure you can recover your losses if they fail to deliver as promised.

Retirement plans

Here’s the kicker: you need to start saving now if you want to have enough money to spend when you’re old and retired. The irony may bring tears to your eyes, but the reality is what it is. Nevertheless, understanding retirement plans is essential when you’re learning about finance, because social security won’t be enough to secure a good retirement and you’ll need either an individual retirement account (IRA) or an employer sponsored plan 401(k) to get you settled.

Investments

If you save enough money, you might consider investing it in some way to turn a profit. Understanding how and where to invest is important if you want to have stable finances. For instance, you may choose to invest in the stock market and buy a few shares of some company. Each year you will be paid dividends on the company’s shares you own which you can allocate to your savings account or reinvest them on same terms to grow your profits, which is called a compound interest or compounding.

Understanding the risk

It’s important to know that each investment is a risk. How risky will your investments be depends on you, but you’re always at risk of losing all of your assets. For example, a bank goes bankrupt and you lose your savings, a company goes bankrupt and you lose your shares and so on and so forth.

Liquidity

Another important aspect of investments is understanding liquidity. Liquidity is how fast you can turn your asset into money. How liquid are your assets depends on what you’ve invested in. Therefore, if you invested in a piece of real estate, such as a house, it will take time before you liquefy a property into cash. Only cash, gold and stocks are liquid on their own.

Inflation

Money loses value over time, because as the population grows, more money is printed and it essentially loses value. Just remember that your parents bought a house when they were young, for a significantly smaller price than you’d have to pay for the same house today. What you have now, may be worth less tomorrow.

Have an emergency fund

Emergency funds are essential to have outside your regular finance plan. You never know if something may go bad and being prepared just in case, puts you one step ahead of the danger. Emergency funds come in handy if you’re between jobs or if you need to access the money right away.

Understand taxes

Taxes are those pesky fees you simply have to pay unless you want to get stuck in a perpetual cycle of debt for the rest of your life. Education doesn’t teach us about taxation in most cases, but don’t let that stop you from learning about it as soon as possible. After all, it’s sometimes about 40% of your overall income that goes to taxes and that’s not an amount you can neglect.

Always have a long term plan

This may be the most important lesson you need to learn. Having a long term plan for the future will give you an opportunity to prepare accordingly. As a 20-year-old, you may not think that planning is relevant at your age. However, it’s never too early to formulate a plan. Planning for college, family, buying a car or a property will give you time to prepare, so you won’t have to improvise once you’ve made a decision.

Finance can be a dull and difficult topic but, be that as it may, it’s still very important and you can’t really avoid it. It’s better to learn early on, than it’s to find yourself in a difficult position with no knowledge on how to sort it out.


Emma Miller is a marketer and a writer from Sydney. Her focus is digital marketing, social media, start-ups and latest trends. She’s a contributor at Bizzmark blog and a mother of two.


All views and opinions of guest authors are theirs alone and are not representative of the views of Petersons.com or its parent company Nelnet.

Expensive Education: How Does Bankruptcy Impact Your Student Loans? Reply

Many people with high levels of student debt consider filing for bankruptcy, only to be told that student loans are nondischargeable. While it is true that discharging student loan balances and bankruptcy can be difficult, it is not impossible, in the bankruptcy process may still offer some benefits to the borrower.

Getting Student Loan Debt Discharged

Most types of debt can be discharged in consumer bankruptcy. There are, however, some exceptions, including child support and court judgments resulting from an accident caused by drunk driving. There are also types of debts that are harder to discharge: There are special rules about discharging tax debt, and the same is also true for student loans.

Convincing a court to discharge her student loan debt requires proving that paying this debt would result in “undue hardship.” This means that you’ll have to show that paying your student loans will make it impossible for you to afford basic living expenses. In addition, you also have to show that it is unlikely that your financial situation is going to change and that you have already made a good-faith effort at loan repayment.

While most people cannot meet these qualifications, the courts have demonstrated a willingness to consider a range of circumstances when determining whether student debt is an undue burden. A bankruptcy attorney can assist you in determining whether your circumstances meet the criteria required for discharge.

Bankruptcy Benefits Without a Discharge

If you are unable to prove undue hardship, you may still be able to benefit from bankruptcy. The automatic stay on collection activity will be in effect for the duration of your bankruptcy proceedings, giving you a breather from collection calls, bank levies, and payroll garnishment. The other benefits depend on the type of bankruptcy you file for.

In a Chapter 7 bankruptcy, your other debts are discharged. Since you won’t be making payments on them anymore, you’ll have more cash available to apply toward your student loan balances. If you’ve filed for Chapter 13, your loans will become a part of your debt plan, which may mean that you’ll pay less on them during the repayment process.

Final Word

Student loan debt may be discouraging, but there are often options, including bankruptcy, which can make repayment more manageable. Student loan lenders and servicers are often willing to work with you to come up with a repayment plan that you can afford. In addition, bankruptcy remains an option even if your circumstances.


Lizzie Weakley is a freelance writer from Columbus, Ohio. She went to college at The Ohio State University where she studied communications. In her free time, she enjoys the outdoors and long walks in the park with her 3-year-old husky Snowball. Connect with her on Google+and (@LizzieWeakley).


All views and opinions of guest authors are theirs alone and are not representative of the views of Petersons.com or its parent company Nelnet.

Your “After College” Survival Guide: How to Survive as a Fresh College Graduate Reply

Saving for educationBeth Bowman graduated college bubbling with excitement. She had accrued over $25,000 in student debts, but it didn’t matter because she felt she was pursuing a degree that will help her land her dream job of being a cultural consultant for a non-governmental organization. Now out of college, she was excited about her prospects.

However, Bowman soon realized the hard way that we don’t live in a perfect world. After sending about 500 job applications — to which she got no response — she now manages at a job as a policy administration specialist, a job that does not require a college degree.

Bowman’s story isn’t an isolated example.

Statistics from Pew Research Center show that it is becoming increasingly harder for college graduates to find good jobs: a whopping 44 percent of college graduates work at jobs that don’t require a college degree, and 20 percent of college graduates work in low-wage jobs that pay below $25,000. That obviously doesn’t justify today’s average student debt of $37,172.

Here are some survival tips to help you cope as a fresh college graduate:

  1. Make Preparations before Graduating College: Considering the difficulties in getting quality jobs faced by college graduates today, it is best to start making preparations before graduating college. Research shows that employers still value job experience — and having experience as a paid intern makes things even better.

The good news is that you don’t have to be out of college to get relevant job experience. You can still intern while in college; look for relevant organizations that have internship organizations for you while you’re still in college, and slowly build up your work experience. By the time you graduate, you don’t have to be disadvantaged due to lack of work experience.

  1. Get Creative About Job Applications: As a fresh graduate, don’t assume that you can get hired by applying to advertised jobs. Some sources show that up to 80 percent of jobs are unadvertised.

Instead:

  • Regularly reach out to family and friends to inquire about unadvertised job openings they know of.
  • Avoid having your life story on your cover letter. Research shows that recruiters spend less than 10 seconds going through it. Keep your cover letter short and simple.
  • Don’t ignore the internet in your job search. Apparently, 80 percent of recruiters have hired people through LinkedIn. Create and polish your LinkedIn profile.
  • Don’t just wait while you try to get hired. Take advantage of technology to accelerate your prospect of getting hired: you can start a blog or create a simple website. Case studies abound of people who got hired through their blog/website, and many said employers were wowed more by their blogs than by their degree.
  1. Pursue Side Jobs and Alternate Career Options: Many college graduates wait for years, sending hundreds of job applications, without getting their dream job and spending all that time doing nothing. This eventually leads to depression.

Get creative about other ways to earn while looking for your dream job. You can easily find side jobs that will help you sustain yourself while pursuing desirable job opportunities; income from these side jobs reduce pressure on you and help cater to some of your day to day responsibilities.


About John Stevens

John Stevens is an entrepreneur and founder of HostingFacts.com, an online portal that reviews web hosts. He is a regular contributor to Standford’s blog, Business Insider, Entrepreneur.com and other major publications. Follow him on Twitter @hostingfactsj.


All views and opinions of guest authors are theirs alone and are not representative of the views of Petersons.com or its parent company Nelnet.

Debt Versus Education: What You Need To Consider Reply

Education savingsGail Marksjarvis of the Chicago Tribune wrote this article (which is now unfortunately closed off to most viewers on the Chicago Tribune website), stating that students should consider debt when they decide what college to attend. In the past, we’ve argued that college shouldn’t be all about the bottom line, how much money you can make versus how much money you spend. That said, though? Gail Marksjarvis is right — you should consider debt when you decide what school to go to.

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