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.
Hi:
Rather than everyone slaving away trying to pay off usurious interest rates on credit card bills, wouldn’t it be far more effective if we all – millions of us – simply stopped paying down these cards until CC companies were forced to lower their rates to a fairer, more humane number?
I understand that people are protective of their credit ratings, but many people have very poor ratings anyway and have nothing to lose – except the chain around their ankles – by simply not paying until the rates go down.
If millions of us did this in unison for, say, a six month period, then what could the credit card companies do?
It’s an odd way to look at things, but ask yourself this: if you have $20,000 of someone else’s money, then who really has the power in that relationship?
I would suggest commencing any “Don’t Pay” period on January 1, 2008, just when those Christmas bills come rolling in!
What have you got to lose..?
..?
Anon: I’m not gonna lie, I hate this idea. Backing out on your debt because you don’t like the terms? Credit cards are a voluntary debt – necessary for the occasional person, but for the vast majority of the population, it’s simply a case of people trying to live beyond their means, and it catching up with them.
A better plan, in my opinion, would be “Debt Free by 2008!” If the credit card companies suddenly start running out of customers – not because their customers stopped making payments, but because their customers stopped carrying a balance – that would turn their heads. Of course, the credit card companies trying to prevent this by pushing for legislation that would charge cardholders who don’t carry a balance a mandatory annual fee.
On a personal level, the best option is just to eradicate all of your credit card debt as quickly as possible, and stop paying interest that way.
I agree. It’s irresponsible to not pay a debt you OWE just because the rate that you AGREED to is high. If it is high now, it was high when you got the card. Should have that about the rate while you were spending the money.
It’s scary. My son is in college and they give him credit cards. He is diligent enough, but just looking at my sorted credit past I hope he do as I say and not as I did. (and do).
Ingvar.
http://www.canadafacts.ca
You can’t blame the CC companies. CC’s are helpful provided that you CAN use it
DragoneMoby’s last blog post..Hispanic College Fund (HCF): Scholarship for Hispanic
I just came across your site and I really enjoyed it. I subscribed. Thanks for the good work here. I will probably be sending a couple of trackbacks from ZenCollegeLife your way!
Hey I am a college student that is working to pay off my tuition. I want to know how to start investing my money in stokcs on a small scale. just to get started. can you give me some tips, websites, books etc
@Ashley J: I wrote another article on this site called Investing For Broke College Students: https://poorerthanyou.com/2008/09/25/investing-for-broke-college-students/
I think it might just be what you need! If you have any more questions, leave another comment or email me via the Contact form.
Hi I just came across your blog after someone recommended it on Twitter. This is great financial advice for college students. On my site, StuVu.com, we provide college reviews of college campuses from the students who go there. If you’d ever be up for writing a guest post in our edu section let me know. Thanks!
Knowing where you want to go in the future is a great idea in a students financial development. Many people charge up their credit card with no idea what they are doing in the future!