I am not a money expert. Never have been. And also, let's go ahead and get this out of the way: money is sort of awkward to talk about, right? I think of it kind of like body image– we all think about it, it's a part of all our lives, but it still feels kind of weird to talk about. And honestly, I can only talk about my own experiences and perspective. So, take that for what it is.
Despite the money weirdness, I wanted to share with you a few money lessons I've learned so far in my 20s. And I'd love to hear about your experiences and different perspectives as well… if you want.
1. Seek Advice and Don't Be Afraid to Learn.
Like I said, I am no expert and I never have been. I'm okay admitting that. The truth is, numbers in general terrify me. I have always struggled with math (gradeschool through college). So when it came time to start thinking about my own personal finances, I was more than a little intimidated. And if I'm being honest, I still am at times! What has helped me most over the years is to try and approach it all with an attitude that is willing to learn. I seek advice, I ask questions, and I read articles and books on things like budgeting. It's helpful. Two authors I've always enjoyed are Dave Ramsey and Suze Orman. So if you have no idea where to even start, try checking out one of their books from your library and see what you think. The more you read about these types of things, the more confident and empowered you will feel. You don't have to know everything in order to make a good decision.
2. Build Credit Now.
I think it's super easy to think about credit as this nebulous thing that you'll need some day way far in the future. Credit scores are so mysterious, right? But the truth is, credit can be a little tricky to build. It takes time. And although it might feel like you don't need it right now, you probably will need it sooner than you think. Having good credit is useful for a whole host of things from getting a loan to buying a car or house to credit check requirements for rental agreements (even renting a car!). Bottom line, it doesn't hurt to have good credit. So, it's good to start building it now.
There are lots of different ways to do this, and tons of helpful resources out there that you can research (and you should). But here's the true story of how I built credit for myself, making it possible for me to buy a house when I was twenty-five. First off, I got a credit card when I was pretty young (like eighteen or nineteen). Sometimes this is referred to as your account mix, meaning how many lines of credit you have open. Having a few is good. Although I would not suggest this to just anyone, as having a credit card can have some bad consequences if you are careless. The secret is to pay off your balance (or the majority, like 90% of your balance) every month. There have only been probably 3-4 times over the course of the last ten years that I didn't pay off my credit card balance in full every month. If you feel you are the kind of person who will overspend and then not be able to pay off your balance, then I would not recommend a credit card. They can be dangerous in the wrong hands, but honestly pretty useful if you can stick to a budget.
The second thing I did was take out a small loan to, again, have multiple lines of credit in my overall credit history at a young age. I think it was around $3,500 from my bank. During the summer before my last year of college, I had decided to utilize my university's study abroad program. I spent a summer semester taking a few classes at the University of London while also checking out the city, and I got to visit Paris as well. I had never been to the United Kingdom or Europe before, and that was probably just about as educational as the classes I took. Anyway– I had saved up enough money to do the trip without the loan. But I had read (while seeking advice, my first point!) that taking out a small loan or line of credit and then paying it back is a good way to build credit when you are young. So I did it. I paid the loan back easily within the year (before I graduated). Yes, there was a small amount of interest that I ended up paying along with the initial loan (as that's how loans work). But, because the loan was so small and I paid it back so quickly, it didn't amount to very much at all. A worthwhile investment into my future credit score.
3. Avoid Unnecessary Debt.
Sort of the opposite of those two stories I just told you, right? Not really, well maybe, let me explain. I chose to get a credit card and take out that small loan because I had a plan: to build credit. And I knew I could manage those two little bits of debt. Debt that you are unsure you can manage is what you should aim to avoid. It sounds simple, but it's SO hard to do! And there's no clear cut way to do this. I have three challenges for you to think over though. Just a thought experiment.
First, and this goes back to the previous point, ask yourself if you really need a credit card. If you already have one and there's some kind of promotional to sign up for another, do you really need it? It's not bad to have multiple credit cards or to leave a little balance on your credit card each month. But do you really need all that? Credit cards tend to have fairly high interest rates, so once you get into a cycle of debt with it, it can be difficult to get out.
Second, if you want to buy something just for fun but don't really have the money, ask yourself if you'd be willing to sell something in order to pay for it. That's right. You really want a new food processor? (Now you know where my head was at in my early 20s.) Well, would you be willing to sell part of your DVD collection for it? Mainly this exercise helps me figure out if I really want something useful, or if I'm just in the mood to shop. Shopping for fun is fine if you have the money for that kind of thing, but if you don't, it's just a money suck.
Last, and this one's tough, but I would challenge any young person to really think hard on their college choice before jumping into a school that will require them to take out loans (which is most schools unless you have scholarships or outside help). Educational loans tend to have the best interest rates out there, but even still, if you find yourself at the end of your college career with a degree you don't really plan to use and a bunch of debt, you'll be disappointed. Even though I absolutely think we should value education, you still have to consider the worth in perspective with what job options you'll have when you're done with your schooling.
Thanks for letting me ramble on about a few things I've learned in my 20s. So, what's the verdict? Do you like talking about money? Wanna hear more? Or did you hate it and never want to hear about it again? I love talking with you guys about life stuff, but I also love hearing what you all think and want to talk about. Also, if you all have any lessons or personal stories you'd like to share, I am all ears. xo. Emma
Credits // Author and Photography: Emma Chapman. Photo edited with A Beautiful Mess actions.