My friends get a bit jittery when I try to talk about money. Actually, almost everyone I know gets jittery when I talk about money. It makes it hard for me, because I spend most of my time reading personal finance blogs, or personal finance books, or just thinking about money in general. It creeps into my conversation all the time, mostly because I want to be helpful. I know that it makes people uncomfortable, and that it’s overwhelming to a lot of people, because it conjures up an image of fast-moving stock tickers and nonsensical TLAs (three letter acronyms). But no one can get rid of me just by being scared (as some of my friends have quickly learned), so I’ve developed a plan of simple, small steps for dealing with the money jitters.
Part I: Know Where You’re At, So That You Know Where You’re Going
I start off with two questions, which easily begin to paint the picture of how much this college kid knows: “How much do you currently owe in student loans, and do you have a credit card?”
If I get an answer of “Uh… well, I know I have loans, but I don’t really know…” then I know that this is the type of person who would rather ignore money, at least for now. This is usually followed by “No! I don’t have a credit card! Those are for bad people who have debt and are bad and debt and bad bad bad!” and misuse of the word “credit” when one actually means “debt” (i.e. “I don’t want any credit!”). Misconceptions about credit like this are a bit saddening, but also fairly common.
The key here is to explain the difference between credit and debt, and explain why starting to establish credit now will be beneficial down the road. I usually go with “Well, I assume you’re going to want to buy a house someday. Or a car. Or get a job.” and explain that a credit card (with no annual fee!) can be a simple way of establishing credit, if you do it right. (Emphasis on that last part!)
“But before you run off and get a credit card, you have to know where you’re at. And calculating those student loans is a big step, as well as calculating how much you’ll owe on them once you graduate. Know where you’re at, and know where you’re going!” It scares me a little, seeing people wracking up what’s going to be a major debt in their life, and having no idea of its progress.
This is not to say this is the only response I’ve gotten. Several people have known about what they owe, or even exactly what they know, or at least remembered that they looked it up recently. I’ve also had a few people who are living the sweet college life and will escape free and clear of any loans (lucky bastards). This is all music to my ears, because it’s an indication of people who aren’t necessarily afraid of their money.
My advice across the board for Part 1 comes down to:
- Know how much (if any) you currently owe in student loans, and how much you’ll ultimately owe once you’ve graduated.
- Understand how credit can help up, apply for a good rewards card with no annual fee, and pay the balance off every month!
- Start keeping a log of your spending for the next month.
- Get your credit score and credit report for free, so you know what (if anything) is already on your credit record.