Monday, May 11, 2009

A brief history part 1

Anyone who looks at my networth chart on Networth IQ probably sees the big turning point in mid 2005. In the interest of sharing, I'm going to start a series of posts discussing my financial history. I'll try to work chronologically, but I'm going to skip my childhood years because I feel those stories are important enough to warrant more than a few line mentions in the history. The start of adulthood was really the start of my habits, even if the chart seems to suggest a major change, it was less a change in me and more a change in my status.

Thus we start with college, 2002. I enrolled in a respectable solid school, though I have to admit both at the time and retrospectively I wish I had focused on getting into a better one. On the plus side, with some very very good test scores the school wanted me pretty badly and between the scholarships and funding my family had put aside I was able to get through school without taking out any loans at all.

One of the advantages I had was a family that had multiple highly educated members several generations back. For most of my generation college has become all but a requirement; in my family, however, it was more so. The upside to this is that my college fund was started before I was even born and I was able to graduate with some left over.

The other financial boon was that I was, as I mentioned, disappointed at the school and determined to make a better go of it. I took some crazy semester loads through some finagling and ended up graduating in just over 2 years of school. This saved over a year's worth of housing costs at the college and put me into the work force earning a year earlier. It also looked great on the resume.

By the time I got to college I had a few good habits already under my belt:
  1. I knew better than to buy things on credit. Until I was about 15 or 16 I didn't even know you could carry a balance on a credit card (I thought the whole 'credit' was they trusted you to pay them back in full at the end of the month). Therefore, in addition to no student loans I had no credit card.
  2. I already tracked my finances. When I was a senior in high school I got a laptop as a combination graduation gift and college requirement. It came with MS Money, and I started using it to work towards savings goals
  3. My bank statements went 'back home'. This meant just about every purchase could be looked at by my family. Generally they trusted me, but every so often I'd get a call about spending $60 on a meal. This gave me a very real 'angel on my shoulder' when I spent my money.
There were also a few major financial developments while I was in college:
  1. My interest in economics went from 'passing' to major. Learning about things like how savings turns into capital was fascinating to me and improved my savings incentives.
  2. For the first time I was responsible for the majority of my spending. I was given an allotment (one big payout at the start of a semester for books and supplies, and smaller ones every month for living expenses like food) and expected to make due.
  3. I learned the lesson of not loaning friends money. While nothing major was lost two friends in particular were the 'on the edge' types financially. Luckily, I knew enough when I gave the loans to not depend on getting the money back but it did teach me that the type of person who takes loans from friends is the kind who constantly needs them.
When I graduated from college I had basically stable money habits: I knew what groceries I could afford, I knew not to loan friends money, I knew how to balance my checkbook. When I went on to my first job it helped immensely since the only new bill I had was rent -- a consistent amount every month. Suffice it to say I didn't go wild and raise my standard of living.

My networth during college may have been flat, but I see it as the time I really came into my own regarding money and it set up the attitudes that would lead to some incredibly amusing stories at my first real job.

The big lessons:
  1. Keep track of your money. I think this is one of the most important items and it deserves its own post. I only got 'paid' once a month in college and by design it just barely enough to live on. I had to make sure I knew what I was spending or that new DVD would mean living on water at the end of the month.
  2. Don't take debt as a first choice. I went to a high school where most of the students were from a significantly better financial standing than my family, so it completely shocked me when the school's guidance councilors told everyone to fill out the FAFSA forms. Later I figured out that despite making more, the other families had basically saved nothing - they were dependent on loans to put their children into college. Through a combination of merit scholarships and my family's savings I got through loan free.
  3. ESPECIALLY don't take debt on something that won't pay off. I found it mystifying how so many people taking on heavy debt loads had no idea what they wanted to major in. There were juniors who were undeclared, and some who had never lasted one semester in the same major. Overwhelmingly the people with those habits eventually dropped out which meant they had taken on a huge debt and had nothing to show for it. If you're completely undecided, go to community college - take the universal prereqs (english, math, etc.) and some cheap 'intro to' topics that you're considering.
  4. Leave cash at home. One of the easiest ways I had to blow money was to walk around with it. Living on campus meant 'emergency cash' needs were basically nil. I walked everywhere, kept a charged cell, so there was almost no chance of an emergency leaving me with a need for money that couldn't wait for a run home. To this day the easiest way I have to blow my budget is on 'cheap' dining out when I get hungry.

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