As you go further on your journey to understand personal finance, this question may cross your mind once or twice. You might feel betrayed by your secondary school for having failed to teach you all about how to handle money, insurance, and retirement. I could tell you a thing or ten about this from a teacher’s perspective but I remember being a high school student not too long ago. The foundational things you need, you did learn. Budgeting is an exercise in adding, subtracting, multiplying and dividing. You know those skills, you just might not be used to using them. But more importantly, you learned the underlying concept to interest – which is how credit cards, all loans, and retirement operate – in your Algebra 1 and Algebra 2 classes. Exponential functions and exponential growth are taught in both of these classes. If you forgot that information, I strongly encourage you to spend some time with Sal over at Khan Academy to relearn this concept. Even though you can find online calculators to do the math for you, I really believe that you are more empowered and more in control when you understand what those calculators are doing behind the screen. You need to be able to estimate and imagine what would happen to your credit card bill if you only paid the minimum, even if just for a month. That way, you don’t make that choice for yourself.
I had a discussion with my mom a few months ago in which I asked her a similar question, though. I didn’t ask her why I didn’t learn this stuff in school, I asked her why she didn’t teach me more when I was living with her. I was specifically referring to all of the components of buying a house and getting a loan. She simply said “you weren’t ready.” There is a time for everything and she said she knew that if she had tried to talk to me about these minute details, that I wouldn’t have been interested or remembered. But at least I had the math skills to be able to do all these careful calculations now. That conversation changed my mindset that some things probably don’t need to be taught when you are 14 or 15, but you need to have the foundational skills to come in and learn later on. It’s up to you to invest your time learning now, as much as you can, about how to adult. You’ll learn it well and remember it if you put your mind to it and then take action based on what you learned.
So if you’re looking for a way to learn the tips and tricks for how to adult well, I suggest you spend 10 or 12 bucks on Amazon the next time you get paid to buy this awesome book. I discovered it a few years ago and I actually have run a Donor’s Choose grant to get this book as the text for my financial algebra class. There are tons of great pieces of advice in this book that I continue to come back to for myself and for others. I picked my 7 favorite principles and if you want more, check it out for yourself! There is even a workbook to go with it. I haven’t used it but I would recommend trying it if you are really struggling to get your budget under control after having read the book.
Principle 1: Marry the “financially right” person
Trying to live out this principle is actually what led me to finding and buying this book the first time. I had an ex who I thought I was going to marry. We’d been together a few years and things started slowly coming out that made me pause and eventually start thinking, “what would we teach our kids?” When all the cards were on the table, I learned that he had accumulated at least $24,000 in credit card debt and that it was no accident. He spent more than he made for years. I had to walk away from a person I loved because there was no way to build a life together with that much debt plus all the other “normal” debts we had: student loans and financed cars. I found this book on Amazon and gave it to him right before we broke up. Marriage is a partnership and you have to have similar values and goals, otherwise one of you will always lose out. And you don’t want it to be you.
Principle 15: Save/Invest 50% of every salary increase
I love this idea because it prevents you from constantly inflating your lifestyle or constantly waiting for the next raise to start saving, investing, paying on time, or whatever. Saving gives you a sense of safety like no other financial move. Whatever your lowest income level is, learn to live on it and stick to it.
Principle 16: Save 90% of every bonus (or nonplanned income)
This is important to remember if you work in an industry where bonuses are a regular, yearly thing. Some people plan on their bonus in their budget. But it’s not actually guaranteed. Don’t make plans for it until you know you’re getting it and make that plan be to save it. Use it to build up your emergency fund. Just put it out of your mind and out of your spending reach.
Principle 58: Invest in your 401(k) – at least to the company match
Oh my gosh! This is so important! If you are not putting into your 401(k), immediately contact HR tomorrow morning to get that account set up. The greatest asset you have as a millennial is the time to let your investment grow. As I mentioned above, you need to refresh your memory on exponential growth to really grasp this. And if your employer is willing to also put money into the account on your behalf, you need to do that! That is free money you’re leaving behind. You wouldn’t leave $100 cash sitting on a table so don’t reject getting your company match for retirement. It will be worth much more 30-35 years from now when it’s time for you to spend it.
Principle 62: Renting – if you have paid one month’s security deposit, don’t pay your last month’s rent
Boy, do I wish I had learned this while I was in college. I am a clean person who didn’t have rowdy parties in her apartment. I left every apartment in the same condition as when I moved in, but I never have gotten a full security deposit back. There have always been ridiculous items on the statement sent back to me. And it’s not worth the time or money to try to fight it. As I get ready to leave my final rental, I am finally going to follow this advice.
Principle 70: Always choose the highest deductible
This is something I am not fully following but wish I was. As soon as I get a true emergency fund built up and my car ages a few more years, I will switch my car insurance deductible to the $1000 level. For my newly purchased homeowner’s insurance, I have chosen the higher option of $1500. The point here is to save on your monthly expenses by choosing a higher amount that you will pay for damage to your car or house should something happen. Insurance is just there in case something happens, so don’t pay too much for it.
Principle 82: Bring your lunch to work as often as possible
Let’s talk about how multiplication fits in to personal finance. A lot of people I work with buy lunch at Subway down the street. They get a 6 inch sub and a drink. Assume they spend $7 and go three times a week. That’s $7*3 days= $21 a week, or $84 a month. Do you need to spend $84 a month on sandwiches?! Do you need to spend $1008 a year for lunch? You could make those same sandwiches, which would probably be healthier, for about $5-10 a week at home. It just depends on what you buy to put on it. It drains your budget to eat out all the time. I didn’t even bring up the miles on your car or gas you could be spending just to get those subpar sandwiches. Make eating out a special occasion.