High school graduates turn the tassel and take a giant step into adulthood. Whether the next stop is college or a career, money, and how to make it and spend it, is at the top of life’s new lessons.
College Graduates Make More Money
If you’re undecided about continuing your education beyond high school, one financial fact may sway you. College graduates earn more money in the course of their lifetimes than high school graduates. U.S. Census data reports that a high school graduate will earn an average of $770,000 in a lifetime, while someone with a bachelor’s degree will earn an average of $1.42 million.
No One Has It All
We live in a consumer-driven society with a dizzying array of “stuff” to buy. But no one can afford everything. It’s a financial truth that responsible spenders think carefully about what they purchase.
Avoid Credit Card Debt
Using a credit card seems like an easy enough way to accumulate more of what you want. Credit cards are fine when used responsibly, which means paying the entire balance by the due date each month. Credit cards can come with sky-high interest rates that compound rapidly.
Someone with a $5,000 balance with a 16% APR who makes a $125 payment each month would need 4.8 years and $2,000 in interest to pay off the balance.
Buy a Used Car
A shiny new car with that incredible smell is a tempting purchase to make. But as soon as a new car buyer drives off the lot depreciation begins. A used car that is a year old will often sell for 20 to 30 percent less than the brand new model. And certified pre-owned vehicles usually come with warranties.
Create a Budget
A budget allows you to plan for expenses and gives you a snapshot of spending. It also forces you to take a realistic look at income versus expenses. A budget should account for necessary expenses such as rent or a mortgage, car payment and utilities. It’s also the place to decide how much to spend on clothing, eating out at restaurants or new technology gadgets.. A budget should also allow for a percentage of money that will be saved.
Being able to view a budget by category gives you a clear picture of what is coming in and what is going out.
Watch Your Bank Accounts
One way to keep tabs on a budget is to stay current on bank account transactions. While it is tempting to stuff ATM receipts and direct deposit slips into a drawer and forget about them, keeping track of bank account transactions is key to keeping control of your finances.
If you opt to pay bills by having the money automatically drafted from an account it is necessary to stay on top of account balances and current and pending transactions. Banks make a lot of money in overdraft fees that are often the result of inattentiveness to posting dates and balances.
Set Financial Goals
A smart spender who is in control of his or her bank accounts is ready to set financial goals. They may be goals to save money for investments or set aside the funds to put a down payment on a house or take an exotic vacation.
No matter what the goals are, incorporating them into a financial plan gives you something to work toward and makes you accountable for the results.