Finance lessons that should be taught before college

by Saving with Spunk

When I graduated high school I thought I knew everything. Much to my disdain, I realized I didn't, especially when it came to money. My mistakes left me with $60K in debt and no clue how to or why I should pay it back.

If there's someone in your life you can save from these mistakes I encourage you to share this with them. And if there's anything on this list you're still unsure about make it a priority to educate yo' self on these finance lessons.

When I was in school I thought a budget was what you were on when you were broke. I had no idea the scope of the word "budget." Businesses use a budget to plan, control, and evaluate their spending & earning. It's the same concept in personal finance. We should treat our bank account like a business instead of a bottomless pit.

How to Read a Pay Stub
How many people still confuse net and gross income? (Guilty) Everyone should know how to read their pay stub because it's not only vital to know what you're making but how much is being taken out for taxes and other expenses. This knowledge is also necessary if you need to fill out a W-4, W-2, or ever, ya know, file taxes.

Compound Interest
Compound interest can be your best friend or your worst enemy. Millennials have an average student loan debt of $41,000. Those loans accrue interest whether you pay them or not and that interest compounds so the $40K loan you thought you took out can double or triple over time.

On the other hand, when you invest your money increases at a rate of interest often higher than your federally insured loans. I'm not talking day trading but mutual funds and ETF's are a long term investment that will increase what you put in exponentially.

If you're interested, Motif is a great and affordable way to dip your toes into the world of investing.

Why Credit is Important, and Why it's Not
Financial aid offices don't care about your credit history. They'll give you as much money as you want to go wherever you want and tell you it'll build when you pay it back. Good credit just tells banks you're not a risk to lend money to. But that's only important if you want to borrow more money.

The most important (if not only) reason to have good credit is to get a good interest rate on a home mortgage. Otherwise, your net worth is way more important than your credit score. And you don't have to get a credit card to build credit. You can use rent payments and credit-builder loans to increase your score without subjecting yourself to the temptation of credit cards.

How to Pay for College
The most important factor in going to college without taking out student loans is school choice. If your parents aren't paying, it may not be worth going to an expensive private university. Fewer employers look at alma maters and instead look for resourcefulness and experience.

Obtaining college credits in high school is another way to save in college. If someone would've told me that maybe I wouldn't have dropped that Comp 1 class my senior year. And for heaven's sake, if you can't find the time to work a part-time job in college then good luck being a working parent one day.

How to Save Money
Instead of calculus, I should've been learning how to negotiate auto insurance rates and the importance of having life insurance. There are times when you can and should negotiate to save money and some things you should pay more on for good quality.

What are some financial tips you could've learned early on that would've saved you some headaches? Don't' forget to sign up for The Friyay Money Party to get your Free Budget Cheat Sheet with 10 hacks to help you stick to your budget.

The post Finance Lessons I Wish I'd Been Taught Before College appeared first on Saving with Spunk.

RELATED: 10 purchases you shouldn't make with a credit card

10 purchases you shouldn't make with a credit card
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10 purchases you shouldn't make with a credit card

#1: Household bills

If you are already cutting it close for the month, you may be tempted to use plastic to pay the utility, cellphone or cable bill. But if you’re not paying off your full balance each month, the interest you will be charged makes those monthly bills even more expensive.

Photo credit: Getty

#2: Cars 

Car dealers often don’t allow credit card purchases, or may limit the amount of the purchase price you can put on your card. Dealers don’t like credit card payments because they have to pay the 1 to 3 percent fee the card company charges to process the transaction.

You could exercise the cash-advance option. But you’ll pay a fee and a higher interest rate. Also, you won’t get a grace period on the interest — it will begin to accumulate right away.

Instead of using a card, go to a credit union or bank to get financing approved at a reasonable interest rate before shopping for a car.

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#3: Student loans

If you can’t afford to pay your federal student loans, you have options. They include an income-based repayment plan, deferment, forbearance and possibly loan forgiveness. Take a look at “How to Get Free Help With Your Student Loans” to learn more.

Paying your student loan debt with a credit card increases the amount of interest you’re paying on the debt. Even if you have a zero-percent introductory credit card offer, it will expire in time.

And while the federal government will accept a credit card payment for loans in default, many student loan servicers won’t allow this form of payment.

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#4: Retail therapy

Think a new purchase will cheer you up? Perhaps. But remember that cash is king if you choose this mode of “therapy.” Use cash, and you won’t let your credit card balance spiral out of control.

Photo credit: Getty

#5: Medical bills

If you use a medical credit card available through your health care provider’s office to pay bills, be careful to read the fine print about your obligations.

Also consider steps you can take to reduce health care costs. See “10 Ways to Fight High Medical Bills.”

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#6: A night on the town

Handing your credit card to an unscrupulous waitperson equipped with a skimming device isn’t your only worry. If you’re out on the town throwing back drinks, it’s easy to run up a tab you can’t afford.

So when painting the town, it’s best to pay with cash.

Photo credit: Getty

#7: Big-ticket items you can’t pay off immediately

Credit cards offer great purchase protections and should be used for many big-ticket purchases. But buying something on credit when you can’t afford to pay it off right away isn’t smart.

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#8: Credit card payments

You can’t charge your monthly credit card payment on another credit card. But perhaps you’ve been tempted to use a cash advance from a credit card to bolster your checking account so that you can pay other bills.

We’ve already explained the folly of cash advances. Your credit card is not an ATM and should not be used as one.

There are real benefits, however, to transferring high-interest credit card debt to a new card with a generous zero-percent balance transfer offer. Just be aware of the balance-transfer fee and find out how long the offer lasts.

Photo credit: Getty

#9: ‘Sale’ items

Convinced that you might miss out on savings if you don’t purchase a specific item on sale right away? That’s one of the warning signs of an impulse buy.

Wait a day and think about whether you really need the item. Nine times out of 10, the answer will be “no.”

You aren’t saving money by spending it for something you don’t need.

Photo credit: Getty

#10: Unsecured online purchases

When shopping online, make sure the web address has “https” at the beginning. If it doesn’t, that’s your cue to take your online shopping elsewhere.

In fact, do your homework before purchasing anything online to make sure a company is reputable and not the source of many consumer complaints.

Which purchases do you refrain from making with your credit card? Let us know in the comments below or on our Facebook page.

Photo credit: Getty


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