Financial Planning

First, lets all agree that saving money is a bitch and difficult to do. Its not easy and sometimes it’s not manageable or affordable. Sometimes your savings are emptied because of emergencies and sometimes we have to give every bit of cash to Sallie Mae because our Student Loan payments are due. Sometimes your car stops working around the same time your pipes in the house freeze and the dryer no longer works and your text books cost $600 and now you don’t have any money left over after paying everything you could in order to survive. Shit happens, and we don’t talk about this shit as often as it happens. We need to further the conversation on financial planning.

I’m going to start the conversation off with self care. Self care is important and it is a PRACTICE. I’ll say it louder for the people in the back, SELF CARE IS A PRACTICE. It is protecting your well being FIRST! Self care can be practiced mentally, physically and financially. So with that being said, a bill that should be prioritized is YOURSELF. PAY YOURSELF FIRST BECAUSE YOU COME FIRST! I promise you, this is the best thing you can do for yourself. If you have a checking account, you should have a savings account, and you should be putting money in your savings account. In case of any emergency, you should have enough money to provide for yourself for at least six months. If you can afford to save $5 a paycheck, DO IT! If you can afford to save $100 a paycheck or even a month, DO IT! Shit, if for now you can afford to save $1 every week, DO IT! Get in the habit and the practice of saving. Save whenever you can, save at YOUR OWN PACE, and set small goals for yourself. Believe me, you may dip into your savings every once in a while, you may deplete your savings at some point too, but one day you’ll eventually have $1,000 saved up, and that comma will make you feel so accomplished that you won’t want to see it go away. Think about it, if you save $100 every paycheck (26 paychecks a year), starting at the age of 22, and never stop until the day you retire (age 65 on average, 43 years from today), you’ll have $111,800 saved + interest from your bank + whatever you get out of your 401K. With $100K, you can Buy Kobe Bryant’s championship ring from 1999-2000 and sell it for double the cost. Think about it.

Speaking of 401K’s lets discuss how important they are. Most people who are employed get a 401K or a Roth IRA, which are retirement funds. You should always invest in this and ASK QUESTIONS. The earlier you save and the more you know, THE BETTER, and the more you save, THE BIGGER YOUR REWARD. A rule of thumb is to try to save 15% of your salary into your retirement fund. This is something I learned from my freshmen mathematics teacher and I never forgot it. If you make $28,000 annually and save 15%, you’re putting $161 in your retirement fund every paycheck which is $4,200 saved after 26 paychecks in one year. If you’re 22 today and save $4,200 up until you’re 65, you’ll have $180,600 NOT INCLUDING THE INTEREST YOU GET. But wait, there’s more! If your employer matches your contribution by 100% on 3% of your salary, that’s $840 a year they’re putting into your account. That leaves you with $5,040 saved every year which is $216,720 in your 401K and $111,800 in savings all by age 65 . That’s $328,520 on a $28K salary. With $300K you can go ANYWHERE and flip houses to double your income! Take advantage of what you have today and put it towards tomorrow.

Now that we have the importance of saving your money out of way, lets discuss what matters the most today, YOUR CREDIT SIS! If you are in your early 20’s, you should have at least two credit cards and you should use them not only faithfully but RESPONSIBLY and it will do nothing but HELP YOU IN THE END! Listen to me, have a credit card with a high balance and use it for large transactions over $100 ONLY. Buy your flights, groceries, bus tickets, home necessities, with it ONLY. DO NOT buy personal items with this card, keep the usage at a max of 30%, pay off at least $200-$400 on the card every month without missing a payment, and you will see not only your credit score slowly rise, but every six months to a year you may get a credit line increase of over $1,000 which now gives you more money to spend within your 30% usage bracket. Even better, if this card is a rewards card, you’ll gain cash back in response to you spending so much. I practiced this method when I moved into my first apartment and watched my credit score jump from a 602 to a 740 within five months. You will feel nothing but accomplishment as you watch this happen!

The second credit card you should have is a personal card. Use this when you go out to eat, get your nails done, buy new cloths (on a tight budget), get your hair cut, or even when you buy a new wig. Use it when you’re catching an Uber or Lyft, for gas, and every little expense you incur on a monthly basis. BUT! Still keep your usage on this card at a max of 30% and do not go over this percentage UNLESS YOU HAVE TO. Now, when it comes to paying off this card every month, you should do $100-$300 every month or even the minimum if you’re expenses are minimal. Practice this method, let your credit limit grow over time, and you’ll eventually have more money to spend so long as you keep usage at 30%.

I stress that you keep an excel file with all your expenses and see what you can contribute to your credit cards every month faithfully. The 30% usage cap I keep stressing is as small piece to how creditors grade you. Credit usage, missed payments, credit history/length, and debt amounts are some of the things that’ll help and kill your credit score. Credit usage and missed payments are two things people in their early 20’s should worry about today. Do not spend more than 30% of your credit limit, and I cannot stress this enough, practice self discipline. as long as you pay above the minimum and stay under 30% you will watch your credit score flourish within time. Practicing this small thing will do nothing but benefit you and your credit score in the long term.

The last thing I want to discuss is financial management. We, as a group, need to collectively understand how stability and management fit hand in hand. You cannot be financially stable if you do not practice financial management and it takes a LONG TIME to master this type of practice. Today, we may only have student loans and credit card debt to worry about. But tomorrow, we may have a mortgage to add to the list or a car loan or medical bills or even children. So it’s important that we grasp this understanding now, to prepare us for the future. First, get your shit together! Make a plan for yourself and SET GOALS! How much money do you want in your savings by the start of the new year? Do you want to take a week long vacation next year? Do you want to backpack across Europe? Do you want to start your own business? Are you going back to school and need to pay your tuition? Are you looking to buy a car or a house? Make your needs a goal and BUILD UP TO IT SO YOU CAN DO EVERYTHING YOU WANT TO!

Keep track of your finances and study them. Have you ever looked at your credit card statement and thought there was a mistake on your account? You called your credit company and had them go through all of your purchases because you thought someone stole your identity? Nah sis, it was you. You spent too much money! Open Excel or Goggle Sheets and create an expense sheet for yourself where you map our your monthly expenses that are fixed for the whole year Subtract this from your payroll to see how much cash you’ll have on hand. Then add your general expenses that may fluctuate and any upcoming expenses you have like groceries, vacations, flights, bus tickets, car repairs, everything you can foresee coming your way in the next 12 months. Subtract these expenses from your available cash to see how liquid you are after all your purchases. In another cell, list everything you’ll be spending via your credit card and the prices, add it to your current credit statement and subtract how much you’ll be paying off per month. The more you forecast how much you’re spending, the more you’ll understand that you may be spending too much and you’ll be able to manage your expenses more efficiently.

Lastly, have fun and plan accordingly. There is nothing wrong with getting your nails and toes done every few weeks. There’s nothing wrong with buying yourself clothes every month. There is nothing wrong with eating out whenever you can. There is nothing wrong with getting your hair done and flying down to Miami for the weekend, or going to New York for a concert, or taking a cruise in the summer. there is nothing wrong with TREATING YOURSELF! Just do it responsibly. There is nothing better than living your best life on a budget! Imagine laying in the Mediterranean sand and sipping a martini under the sun knowing that you got a 800 credit score, you’re an American Express Platinum member, all your bills are paid, you got $7K in savings, $1500 in cash, and you get paid tomorrow. This could be you tomorrow if you get start managing TODAY! IMAGINE THAT!