For the Youngsters

Today's blog is specifically for my young adults, our future leaders who were not taught the basics for financial success and financial self-sufficiency. So what is financial success? To me it is as simple as not having to worry about how you will pay that bill, or how you will buy that thing you want, or how you will pay for that vacation you so need. To be financially successful doesn't necessarily mean being able to afford extravagant and expensive things. It is the financial peace of mind. Financial self sufficiency is to not have to worry about money when you lose a job. So many people realize how unprepared they were during the pandemic when massive layoffs took place. If it weren't for government programs many people would suffer as badly as during the great depression. Both financial success and financial self -sufficiency don't require you to come from rich or become an instant millionaire from winning the lottery. Believe me there have been stories of lottery winners who end up a pauper after a couple of years. It doesn't take a miracle and you don't need to be born into riches to become a financial success. 

For starters, those who are not of legal age to work need to work for their parent's businesses. The parents get to keep the money in the family and take a write off in their taxes. For those who are of legal age, get a part time job and develop a saving habit. You're not living on your own so you really don't have bills to pay. So save 25% of your net pay every paycheck. And please put single and zero deductions for your W4. And when the next year comes, don't go running to do your taxes to get that little refund when your parents can claim you up to the age of 24 if you are still in school. So many people do not know this simple fact. And so many young people are so eager to get their first refund check they follow their peers to file on their own and end up screwing their parents on their taxes. Remember, it typically doesn't change a thing for you if your parents claim you because chances are you didn't make a lot of money. And if you did, you should still allow them to claim you because after all they are still providing a roof over your head and food in your belly. If nothing else, tell your parents what the difference in refund is between you filing independent or dependent, and see if they will repay you that difference from the extra refund they will get from claiming you. I guarantee you they will. If they don't tell them to come see me.

Next, I want to talk about college. For those of you who aspire to go to college start at 9th grade. First of all, prepare for the PSAT and take it with confidence. Here's what you may not know. Colleges do not just look at your grades. They look at the "whole" child. They look at your SAT score, they look at your grades, they look at your leadership capabilities, they look at your sportsmanship and they look at you as a social servant. What does that mean? Work on your grades to be sure, but join a club or two, get involved with some community service work, and most definitely take part in sports. And do not listen to those who are negative about college, whether it is your parents, your family, your peers, your teachers and even your own counselor. Never be influenced by the negativity that destroys your dreams for college. And never accept this myth that you cannot afford college. You can. There is financial aid. What is financial aid anyway? It is not just scholarship and grants but loans that are private and guaranteed by the government. There are loans for parents and loans for the students. And so what if it is a loan? Consider these loans as investment into your future financial success. Most doctors and lawyers have huge student loans but have jobs that can pay off these loans and give them the good life. And what if you don't get a job that pays enough for you to afford to pay off your student loans? People, there are programs to help you with income based repayment, forbearance and even loan forgiveness. Did you know you can work for a non-profit for 10 years and your loans could be forgiven? Outside of loans there are grants and scholarships. There is plenty of free money out there if you are diligent in looking for them and applying to them. Apply to as many as you can and do this early instead of waiting until the last minute. The same goes for the colleges as well. Apply to the colleges on your wishlist early and make sure you apply for a fee waiver. Go online and complete your FAFSA on the government student loan site, not a private site such as FASFA or any other website that looks like a government site; https://studentaid.gov/understand-aid/types/loans. Anytime you go to apply for something you thought was free and then at the last part you have to pay, get out of it. You are not on the government website where it is free. This is the same with credit. To get your free credit report you have to go specifically to the government national credit site and not one that asks for payment; https://consumer.ftc.gov/articles/free-credit-reports. It is unbelievable how many scam companies are out looking for naive people who don't know any better. Now let's talk credit.

If your parents haven't set you up with good credit by the time you turn 18, you will be bombarded with credit offers. Rule of thumb, do not apply to all the offers. Scrutinize each and find the one that has no annual fee. Forget about the interest rates because it doesn't matter with how you will use the credit card. Start with only one application and if you get it, that's it. DO NOT apply to all of them because it will impact your score before you even begin to establish credit. Next, if you don't get a good one, at least find one with the lowest annual fee and zero processing fee. Once you get the card, use the card only for those purchases you have the cash for, and use the cash to pay it off when the bill comes due. Never ever pay the minimum balance. Pay it off and in six months apply for another card. And that should be good enough to move towards a great credit profile. So the rule is never to spend money you don't have, and what you do have, spend what you need to and save the rest.

I know it is tough not to spend money you are finally making on your own but get in the habit of saving. If you're still living with your parents you don't have real bills, unless you were foolish enough to go finance a car. If you're going to college you don't need a car. If your parents want to cosign for you a car make sure it is a basic one that you can afford without stress. I personally do not advise this. I prefer cash cars but one that I can get a warranty for. Yes, you need a few thousand dollars to do this versus zero downpayment for a new car. So what? Patience pays. Save your money until you can get that few thousands. Map out how long it will take you to save that money. Ask your parents to loan you the money. Do extra work to earn money. Don't sit and wait for someone to hand you what you need. Make it happen yourself. But it is not advisable to get into debt just as soon as you get a job because you can pay for it yourself. Isn't that what most young adults think? First things first, establish yourself before you get into any debt. Establish a bank account. In fact, apply for a credit card through your bank or better yet, find a credit union. I love credit unions. They are good to their members as long as you don't screw them. Bank account is crucial for depositing paychecks or any checks you get instead of going to a check cashing place and just handing them your hard earned money. And stay away from payday loans and title loans. These will all suck you into a financial void that keeps you in financial failure. 

So how do you stay within your means? Put a budget together. Go back and read my blog on developing budgets. Within this budget set aside a percentage for savings. Like I suggested earlier, get in the habit of saving money. At minimum you should set aside 10% but 25% is better and for those of you who live with your parents you should be able to do this. Why? Because savings are for the future. For your retirement, for investments, for emergencies or maybe even to start a business. Discipline yourself to save. The ability to save seems to be very difficult for most people because they were never disciplined. So if your parents never instill in you the love of saving, and never taught you all these that I am teaching you, you have your blueprint on how to become a financially fit adult first and then move towards financial success. Not just for yourself but for your descendants. To build generational wealth, if your parents did not, you can do better, and you can be the first ancestor to do this for your next generations to come. Hope you can use my guidance here as a start towards helping you make your dreams a reality. 

Until the next time, this is Dr. KnowItAli 

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