This is a great time of the year. High school and college graduates are full of hope and anticipation of new beginnings. Whether they are continuing to their next level of education or entering the workforce, they will be making decisions that may have long-term effects on their financial future. If you know a new graduate, it’s time to have “The Money Talk.” I’ve developed a guide or script that you can use when having the talk. Share the following advice with them and encourage them to practice a financial lifestyle that will L-A-S-T.
L – Live beneath your means. You’ve heard it said that one should live within your means. That’s a misnomer because living within your means implies that your resources extend just enough to cover your current lifestyle. However, living beneath your means provides the opportunity to plan for future financial goals. When you live beneath your means, you have “extra” money to save, invest, and plan for your future. My motto is, “Live as if you have a future.” This requires making wise spending decisions.
A – Avoid consumer debt. Consumer debt is accumulated through the irresponsible use of credit cards, car loans, personal loans, student loans and payday loans to name a few. Mismanagement of consumer debt refers to carrying balances from month to month on credit cards (paying interest); using or accepting too much student loan debt (no foreseeable means to repay or majoring in basket weaving with little potential for future for sustainable income); being late on loan payments (paying interest AND late fees). Accumulating a large amount of debt at such a young age hinders you from reaching your dreams and goals that require money because your money will be tied up into paying off debt.
S – Save money. I realize this may be difficult for a new college student or the individual entering into the workforce who is making very little money. Saving money at this point in your life may not mean taking a chunk of money and depositing it in a savings account or investing on a regular basis (although that is the adult goal). Saving money can be as simple as curtailing spending or developing alternative habits (eating in, free entertainment events). Happy Hour is not a required event.
T – Take care of yourself and others. “What has that got to do with money?” you may ask. Keeping yourself physically and mentally healthy may avoid costly medical bills further down the road. Some chronic diseases (diabetes, heart disease) do not appear overnight but may be the results of poor habits over a number of years. Exercising, eating right, and managing stress are preventive measures you can take to decrease your chance of having to fund costly medical bills during the time when you should be building wealth. Lastly, be kind to others. Being kind has its own reward of reciprocation. And, it may garner lots of invitations to dinner (free food!).