3 Things About Money I Wish I Knew When I Graduated College

Y'all.  I had no idea about money in college or after.  And I'm still trying to figure it out.  Here are 3 things I wish I knew right when I graduated:

1. What in the world "APR" means on credit cards.

Embarrassingly, I only recently realized how much interest adds up on a credit card bill due to that pesky APR number.  Credit card promos and deals seem awesome with the claim "0% APR for 18 months!!" or "Earn $100 cash back after you spend $500!"  And that is awesome.  But 0 % interest actually ends in 18 months after you've added on purchases past $500 and becomes 24.678% which for me meant easily an extra $40 a month in interest.  This adds up to $480 a year.  For one credit card.  So add in a few other credit cards and imagine the extra wasted money owed in interest.  My money wasted on interest every month.

Credit cards can be helpful and great if you use them wisely and sparingly.  Later I'll run down some of the helpful points adopted from financial gurus like Dave Ramsey and Suze Orman, who have differing opinions on the matter (Dave says absolutely not and Suze says they're fine).  Credit cards saved me in situations when I moved twice in less than 3 months because of a flaky roommate situation and when I quit a toxic job before a second job offer officially came through. However, there is a time to take a break or say goodbye altogether.  Currently all of my credit cards except ONE emergency credit card (see below for "emergency") are in an envelope in a box in the top of my closet, not to be touched for at least 6 months or longer.

2. Set a budget and stick to it.

The word "budget" makes me feel icky.  So I avoided the idea of a budget for literally 8 years of my adult life until December when I realized I was not where I wanted to be or needed to be financially.  I plan to chronicle many of my attempts at different budgeting strategies until I found the perfect fit, but right now let me just share this: The 80/20 budget.  Basically 80% of each paycheck is dedicated to bills and a portion of savings over the course of the month and 20% is what you have left to spend, save, and use for extra savings or increasing debt payments..  For me, 80% of one paycheck does not quite cover rent so I divvy up between paychecks and move money for rent and other big bills straight to savings.  I also schedule almost all of my payments on payday so the temptation to spend money before it is used for the necessities is reduced.  My grocery and eating out/fun money comes out in cash and goes in envelopes; when it's gone, it's gone, and no more spending!  For the most part I did this successfully in February and hope that March is overall a better run.

3. SAVE.  And don't touch your savings unless it is an actual emergency.

Buying new jeans is not an emergency.  Going to Disneyland is not an emergency (and also, Disneyland tickets should NOT be charged on a credit card.  Personal experience).  Going wine tasting is not an emergency.  Buying half of Pier 1 is not an emergency (also a personal experience).

Define emergency for yourself.  For me, emergency might mean an unexpected doctor's visit and medicine that is going to cost me $50 outside of my budget for the month.  Or my car dealership charging over $100 to tell me no one is sure what is wrong with my car exactly (TRUE STORY).  It does not mean a last minute event or dinner or happy hour.  It means that if I have used my allotted cash or budget for eating out with friends, I say no to meeting up.  It means I throw together dinner with the two eggs, some rice, and shredded cheese left in the house instead of spending $10 on fast food.

The basic rule of thumb for saving is 10% of your income.  For most people this seems daunting (okay, for me at least it seems daunting) or not feasible because of bills.  Trust me, if you really pay attention to your spending habits for a month, you will see places you can trim and move to savings until you establish a regular practice.  Set a recurring transfer to your checking account every paycheck even if you just start with $10 every paycheck.   Use apps like Clarity, Mint, and Acorns (a really easy way to start investing; you can withdraw your investments at any time! Click here to try it with my referral link!) to both track your money and set up separate savings accounts for specific events like a trip, fancy dinner, or a special purchase.  I personally use Clarity and Acorns and my boyfriend recommends Mint.

Try cutting out one thing for the next month: no Starbucks, no margarita with your dinner, no fast food, whatever, and see if you can move that money to savings instead.

If multiple electronic accounts are not the way for you, try using your planner or Bullet Journal (more posts to come on this!) to make saving fun and a challenge.  I started this challenges in February:





 It sets me up to save over $1000 in 52 weeks.  Do extra and get closer to your goal!  Another recommendation from both of my financial gurus is to have a basic emergency fund of $1000.  Currently that is my short term goal; more on its challenges, set backs, and my money focus shifts coming soon.

 

 

Let me know what works for you, what you like, and what you recommend!