6 Financial Mistakes I see 20 Year Olds Make

1.) Putting too much money in savings.

It’s good to have money saved in case of an emergency, but a savings account isn’t the best way to store money long-term.  This may come as a surprise, but money left in a savings account is actually losing value! Due to inflation,-although the dollar value stays the same- your money has less buying power the longer it sits. Instead you should invest some money so you not only match inflation, but gain value over time. (How Inflation Affects Your Savings)

2.) Overusing your credit card

Many college students are enticed into getting a credit card.  Credit cards are a great way of building credit, but are also a great way of building debt. Many people don’t learn how to use their credit card efficiently until they already have mountains of debt. Learn how to use a credit card before you get one. ( Should You Have a Credit Card in College?)

3.) Over-speculating

In your 20’s is a great time to invest in riskier investments since you will hopefully not need your money for a few more years.  However, it is possible to put too much of your money at risk.  The most common thing I see millennials over-investing themselves in is cryptocurrency as a get rich quick scheme.  I own cryptocurrency myself, but try to keep in a set, smaller amount of your overall investing portfolio.

4.) Not bringing in enough income

When you live at home, it is easy to live off a part-time job. Although you might not need the money now, it’s important to save and invest for the future.  Pick up a side gig or barter for a raise to bring in more income. Funnel any extra money into an investment account.

5.) Overspending

Having your own money to spend is invigorating! The sense of financial freedom can encourage some people to overspend.  Decide how much money you want to save and invest each month.  Don’t be afraid to wait a few months for something you really want to buy.

6.) Oversharing

If your friends are having financial trouble it can be tempting to loan them money so they don’t miss a fun night out.  This money adds up overtime, and you will likely not get it back.  Spend money on your friends, but know where to draw the line.

Anything you would add to the list? Let us know!

Learn to Love the Spreadsheet!

My dream boyfriend is cool, always available, calculating… and a spreadsheet?!  It’s true, I have a secret love affair with spreadsheets.  I absolutely cannot get my hands off them. Sometimes I dream of coming home, slipping into something comfortable, and getting down and dirty in the spreadsheets.

I’m so sorry for that imagery, but I really wanted to drive home the idea that I love making spreadsheets.  Spreadsheets have a bad rap for being boring and only for people who like math *Bleh*.  But if anything, I think spreadsheets are best for people who DON’T love math.  They do all the math for you!

Spreadsheets are the best budgeting tool at your disposal.  They make is easy to adjust numbers and data if it changes.  You can also make colorful graphics so the data is easy to read. Instead of estimating 12% of your income, you can use a spreadsheet to calculate the exact number for your budget.

Unfortunately, many high school and college students never learn how to use a spreadsheet much less how helpful they can be.  Although not hard to learn how to use at the beginner level, there are many spreadsheet commands that can be hard to figure out on your own. Advanced mastery of spreadsheets is an impressive skill that requires mathematical knowledge and knowing where to look.

Knowing how to use a spreadsheet is crucial for many jobs. Thankfully, it’s easy to find learning resources if you need some extra help. Online there are Youtube tutorials and blogs that provide a quick answer to any problems. If online learning isn’t your forte, then check your local community college for classes! That is probably the best way to learn, as you will have an instructor available to answer any questions.

 

Do you love spreadsheets as much as I do? What’s your most impressive spreadsheet feat?

 

Should You Get a Sugar Daddy?

It sounds easy to have a sugar daddy, right?  Some older rich man will just pay for your company.  And you can use that money to pay for things you actually enjoy doing instead of selling yourself out to some boring job.  Unfortunately, the realities of being a sugar baby are rarely so ideal.

Being a sugar baby is NOT EASY.  For one thing, you have to have a likable personality and favorable looks.  You don’t need to be a model to be a sugar baby, but you have to keep yourself well kept up.  That’s why becoming a sugar baby is also expensive, although you can make a good amount of money, you will also spend a lot on clothes, makeup, and sometimes even travel.

If you are going to have many men after your company, you will also have to learn how to schedule your time.  This may not be a job you can easily juggle part-time.  You have to keep track of all the “gifts” the men give you and report them on your tax forms, but you can also get tax write-offs for things you deem necessary for your business.

Don’t assume no one will find out; your friends and family are likely to find out eventually.  This is not a job you should do if you want it to be a secret.  Selling your time to men for money is often stigmatized and it could hurt your relationship with jealous partners or worried family members.

There is also a safety aspect and you must be ready to protect yourself not only physically, but legally.  You can’t give out too much personal information because it could make you susceptible to stalking. Learn the laws in your state for the job.  Prostitution is illegal in many states so you must make it clear if you engage in sexual acts with these men that they are NOT paying you for sex.

Some women and men have been able to use sugar baby/daddy sites to fund college, a family, or even made it into a career.  Although it is often seen as a way to make easy money, there are many risks and drawbacks that you should be aware of before committing to the job.  If you think it’s right for you, then be prepared to do your research.

 

Have you been a sugar baby or something similar? Share your experience!

Is it worth it to use a Coinstar?

Coinstars offers a helpful service for a very costly fee.  At 11.9% you can have your coins converted to cash at your local grocery store.  Although I’m all for saving every bit of money you can, sometimes the Coinstar is more convenient.  Also, it’s better to have the money in easy to spend dollars than sitting on your shelf.

Here’s when it’s worth it to go to the Coinstar:

Your personal bank doesn’t have a coin machine.

Some banks have coin machines where you can convert your change into cash for free. Personally, I haven’t seen one in any of the banks I’ve been to, but it’s worth it to call and ask around.  If a local bank has a coin machine that you don’t have a bank account with, you can make an account, but this is pretty drastic unless you are converting large sums of change consistently.

You have under $100 in change.

If you have a small amount of money, it’s better just to take it to the bank.  If your bank doesn’t have a coin machine you can ask the teller for coin wrappers to hand-roll them. I’m not going to sugar coat it.  Rolling coins is a bitch. The first few minutes can be very relaxing, but over $100 it becomes a pain to roll and to transport it to the bank.

You don’t have lots of free time.

Going to the Coinstar and paying the 11.9% fee is sometimes worth it just for the amount of time it saves you.  However, if you have a lot of free time, there are tons of fun things you can do with the coins as you roll them.  Look for interesting dates or coins with a high silver content. I always look for wheat-back pennies and war nickels.

You shop at a few places consistently.

GIFT CARDS! Check the Coinstar website to see if any places you shop at offer gift cards from the Coinstar kiosk. The best part is, if you convert your money to a gift card, you don’t have to pay the fee!  This is definitely the best option, but be warned that not all Coinstar kiosks offer the same gift cards.  I always convert mine to an Amazon gift card, because it gives me the most options.

You want the silver content.

Because of the way Coinstar evaluates the coins, it will reject most silver dimes, quarters, nickels, and half dollars. You can sell these online or keep them for their solver content. There is some dispute online about what machines reject silver.  But currently, the consensus seems to be that almost every green Coinstar machine will reject silver, but some bank machines do not.

You just want the coins gone.

If you just want the coins to stop cluttering off your shelves and are feeling particularly charitable you can use the Coinstar to donate to a charity. The donation you make is tax-deductible. Currently, Coinstar has 8 charities you can donate to including the Red Cross, Feeding America, and the Leukemia and Lymphoma Society.

Whatever you do, make sure to save the receipt.

Do you use Coinstar or prefer to hand-roll your coins?

 

 

Why You Should Take the Change in Your Tip Jar.

Working a job where you make tips is one of the most satisfying thing I have ever experienced.  Even if it’s just a few cents or a dollar every purchase, it quickly adds up.  When I first started making tips as a barista, I would always ignore the change at the bottom of the jar unless it evened out to a full dollar. This small daily habit could have ended up making me lose out on a considerable amount of money if I hadn’t noticed.

Below I have a chart showing how much money you could save in a year just by grabbing the leftover change at the bottom of the jar.

Days/week Cents Total in a Year
4 $0.40 $83.20
4 $0.25 $52.00
5 $0.25 $65.00
5 $0.40 $104.00

Although this may not seem like a lot of money compared to how much you make in dollars, you have to calculate the marginal cost/benefit.  Marginal cost is how much it burdens you to do something.  Marginal cost can include money, time, and stress. In this case, the marginal cost is small, because it’s money you have already earned.  One inconvenience is getting the change into your bank account or into a more liquid form. But this can easily solved with Coinstar, or finding a bank with a coin machine. Just get a large jar in your house to keep your change in and convert it to cash once a year.  The marginal benefit can be substantial, depending on the number of days you work.

Here’s the formula you can use to calculate how much you could earn:

Tips in a year=(Days working)*(52)*(Average change)

Do you grab the change in your tip jar? How much could you earn?

Compound Interest: When Less is More

Did you know that you can invest less money, but still end up with more money saved for retirement? Because interest is compounding, money you invest grows larger the longer it is invested.

Here’s a helpful chart to help you understand:

chart

This chart shows $100 growing at 8% annually over 30 years. Compound interest means that the 8% interest rate keeps growing off the interest you earned in all the years prior.  By year 10, your $100 is worth $200!  With simple interest however, you gain $8 per year every year.

Compound interest is the reason why you can invest less money earlier, and get huge gains in the long term.

Take the example of Chloe and Zack.  Chloe invests $2,000 each year from age 20 to 30.  Zack invests $5,000 each year from age 35 to 49.  Zack is investing more money, but Chloe has her money invested for a longer amount of time.  Here’s how their worth compares:

chart (1)

Although Chloe invests $22,000 dollars total, while Zack invests $75,000, she still ends up with slightly more money.  That’s because Chloe’s investment had more time to benefit from the compounding interest. (Interest rate here is 8%.)  Had Zack invested 5,000 for a couple extra years, or started investing a few years earlier, he could have caught up with Chloe, but at a much higher cost.

Not everyone is capable of beginning to invest as early as 20, but everyone should be aware of the benefits of compounding interest.  Retirement is not about being rich, it’s about being money aware.

How Inflation Affects Your Savings

What is Inflation?

The money you have today is most likely going to be worth less than that same amount of money tomorrow.  That is why saving for retirement is not just about squirreling money into a savings account, it’s about investing.

Have you recently gone into the grocery store to buy a can of soda and thought “Man, soda’s more expensive than I remember when I was a kid.”  If you have you have just noticed inflation.
The average rate of inflation is about 2% per year.  That means that 1 dollar this year will be worth .98 cents next year.  Similarly 100 dollar this year will be worth $81.71 in 10 years.  Here’s a chart for how the value of money decreases over time:

chart

As you can see, in 40 years the value of your money will almost half.  A savings account will generate some interest, but usually less than a percentage point.  In order to combat inflation, your money needs to grow more than 2% a year.

Why do we have inflation?

This is a highly debated topic for economists.  The current prevailing opinion is in support of inflation targeting.  Inflation targeting is the idea that economies do better under slight inflationary circumstances.  The argument states that inflation causes people to see increases in their salary (although they might not notice the raising costs) and also stimulates the economy by encouraging people to use their money instead of letting it sit in a bank account where it will lose value.

The Federal Reserve has a target rate of inflation of about 2% annually.  This is considered small enough to decrease volatility in the economy that come from high inflation and large enough to effect decision making in the general public.

How Do I Prevent Inflation From Affecting My Retirement?

In  order to stop inflation from chipping away at your retirement savings, you need to make sure your retirement money is earning interest at a rate greater than 2% a year.  Investing in the stock market is the most common way people grow their money; although, you do have to be careful with how you invest it.

Exchange Traded Fund (ETF)

Exchange Traded Funds are pools of investments that match the stock market.  ETF’s are not managed daily meaning you don’t have to pay the same fees as you would for a mutual fund.  ETF’s are a great tool for long term investment, because the low fees mean a smaller marginal cost which over time can save you loads of money.  For beating inflation, ETF’s historically average 10% returns per year, although that is a long term percentage.

Mutual Funds

Mutual Funds are very similar to ETF’s in that buying a mutual fund gives you access to many stocks at once.  Mutual funds, however, are usually run by hedge funds that try to beat the market.  Because they are providing a service by trying to get greater returns than the market, there is a larger fee for a mutual fund than an ETF.  Mutual Funds can also be a great addition to a portfolio.  Mutual funds also make about 10% a year.

Individual Stocks

Buying individual stocks CAN give you amazing returns on your investment, or you could lose it all.  Although this all or nothing mentality can seem attractive to some, it’s not a guaranteed way to stay above inflation.  If you really support a company and it’s product then go ahead and invest a small portion of your portfolio, but I wouldn’t bank on every stock beating inflation in the long or short run.