Haha, I can’t decide whether this is the best parenting I’ve ever seen or the worst!! Regardless, that kid has an awesome picture to show friends when she’s older. I also predict a future beer pong champion!

While our parents teaching us to drink may not be the most productive skill, it’s undeniable that we learn from them and as much as we hate to admit it, end up becoming them. Like they said in The Breakfast Club, it’s inevitable.

My own parents did a good job of teaching me not to be an idiot with money. My dad especially stressed saving. I had my first savings account by the time I was 8 (maybe even before). That account held the money I earned through the 4-H program. For 4 years, I took dairy feeders and pigs to our county fair and the money from selling them allowed me to buy my first car.

In 8th grade, my mom let me open a checking account. I think I was the only 13 year old I knew with a debit card at the time! I’ve heard that a lot of people don’t like letting kids use plastic, even in debit form, but I say haters are gonna hate. I did overdraft once. It was a dumb thing to do, but I paid my $36 non-sufficient funds fee and have never done it again.

Once I started driving, my dad added me as an authorized user on his credit card so I could buy gas. Yep, he paid the bill too. Not sure if that taught me a lesson other than “Not having to pay for stuff is nice. ” But…being an authorized user got my credit score off to a kicka$$ start. I’m still listed on the account and I’m sure that it’s playing a big part in my 700 credit score.

Those are the main things my parents did to help me out financially, aside from all the actual money they’ve spent on me. What did your parents do that helped/hurt you? If your parents had bad habits, did you emulate them too?

If I had to give someone just one piece of financial advice, I’d tell them to be informed. One thing I’ve learned from being a cashier is that in general, people don’t know nearly enough about their money. Customers tell me all the time to run their debit card as credit or they have to pay a 50 cent fee. Debit cards from PNC Bank and Chase are the most common ones I see, but neither of those banks charge any type of debit card fee for purchases. Or they don’t mention it on their websites if they do.

Not being informed about what fees are charged for using a debit card isn’t likely to ruin someone’s finances, but it shows that people need to educate themselves. There are a million different areas of personal finance to think about, but I think there are a few pieces of information everyone should know.

1 – Net Worth. No one needs to calculate it every single month like I do, but a few times a year would be a good idea. Your net worth lets you see if, overall, your finances are improving. Plus you feel awesome when it goes up!

2 – Amount of Debt. If anybody ever asks you “How much debt do you have?” and you can only say “lol wut?” then there’s a problem. College students especially should be aware of how much student loan debt they have.

3 – Income. Knowing what you’re bringing in is important so you know what you can afford to spend and save.

4 – Expenses. Just like knowing what’s coming in is important, what’s going out is also important. Maybe even more important. Have a rough estimate of what your monthly expenses are will help with budgeting.

5 – Credit card interest rate. If you don’t carry a balance, then you can ignore this. If you do carry a balance, you should be aware of what your bank is charging you. Then, call them up and see if they’re lower it!

Anything you’d add to to the list? Do you know everything above off the top of your head (no cheating!)?

While I think I do a an overall bang up job of managing my money and whatnot, it’s nice to know that other people think so too. More specifically, I’m talking about credit scores. Credit scores are like opinions – most people have ‘em and some of ‘em really blow. Love it or hate it, credit scores are used to sum up our financial lives into one compact little number.

I’ve been keeping tabs on my credit score since the fall just for kicks. (To do list: get a hobby). I’ve been using the website www.creditkarma.com. It’s free and legit. They pull my TransUnion (1 of the 3 credit bureaus) credit score and let me know how it stacks up against everybody else. As of today, my score is a respectable 704. The worst score is 300 and the max is 850.

While my score is relatively awesome now, that wasn’t the case last year. Just back in October, it was a mediocre 637. Here you can see how fast it rose. That’s a 67 point increase for the math challenged.

SEXY!

As awesome as Credit Karma is, the TransRisk score they provide is not necessarily the same as my FICO score. FICO stands for the Fair Isaac Corporation. They are the king of credit scoring and what they say matters most. I decided I should find out my official score, in case Credit Karma was lying to me or something. It was even better than I thought:

awwww yeaaahhhh

731! Now that’s what I’m talking about. At this point, my score has no where else to go but up. My credit card accounts and student loan will continue to “age” which should tack on more and more points as time goes on. Plus I’ll be able to get credit line increases, which will also make my score climb.

Have you checked your credit score? What is it?

Today, you can finally do something you should have done a long time ago: check your credit report. While FreeCreditReport.com has catchy jingles and clever commercials, it’s not really the best option when it comes to checking your credit report. Free Credit Report will, of course, give you your credit report. But, they’ll charge your credit/debit card something like $15 every month if you don’t cancel your “membership”. F that noise, free should mean free. Not “free if you have a really good memory”.

Anyway, the place to go is www.annualcreditreport.com. This website was set up by the big 3 credit reporting agencies: TransUnion, Experian, and Equiax. All 3 of these companies gather your credit information from your creditors: credit card companies, student loan providers, mortgage lenders, etc. Anytime you apply for a new form of credit, your report is checked to see how good of a risk you are. Do you pay your bills on time? How long have you been using credit? That kind of stuff.

To check out what everyone has been saying about your financial habits, go to www.annualcreditreport.com. Select your state and then supply the necessary information: name, SSN, address, etc. Also expect to be asked some odd questions like “Do you have a mortgage from Wells Fargo in the amount of $200,000?” It’s kind of creepy – I was asked a question about my father’s cousin’s birthday. So there are some tricky questions. It’s all a way to verify your identity.

Once you can view your report, check it for any inaccuracies. Make sure you name and address are spelled right. Verify that you actually have a credit card through Chase Bank, if one appears on your report. If there’s a suspicious entry, it could be a sign that you’ve been a victim of identity theft. Those of you paying for college with loans should keep an eye on your loan balance and make sure it reflects what you thought you borrowed. It’s possible for someone to take out loans in your name if they have access to the right information.

Go check it now!

I’ve been receiving a steady paycheck for about a month now. Every week, my earnings are directly deposited into my checking account. But I’ve noticed that someone (or something) is stealing a bunch of my cash before it gets deposited.

The nerve!

As you can see in the scan below, FICA is taking a decent amount of money from me every single week.

I’ve blurred my city to keep the Internet predators away…

I’m not a fan of people taking my money, so I started an investigation. Thanks to the Internets, more specifically – Wikipedia, I discovered that FICA is actually an alias of Uncle Sam – A.K.A the Federal Government.

It turns out that FICA stands for Federal Insurance Contribution Act. This act allows for a tax to be levied in order to pay for Social Security and Medicare. Some people argue that it’s not really a tax because you get your contributions back when you start collecting benefits. Whether or not you agree with this assessment is another topic completely…

Here are some quick facts and figures related to Social Security, Medicare, and FICA:

• Accounts for 37% of government spending
• Estimated to keep 40% of Americans over the age of 65 out of poverty
• FICA is calculated as 6.2% of your earnings, up to $106,800. This means that anything you earn over that ceiling is not subject to FICA

My Thoughts:

1. While 37% is a large chunk, I think it’s appropriate to spend a lot of money to keep the elderly from being stuck on the street and without medical care. Honestly, I think the priorities for government spending should be (in no specific order), health care, education, defense, and awesome stuff. Awesome stuff includes NASA, high way system, high speed Internet, etc. I do think we spend a tad too much on defense though. Just a thought….

2. I can’t believe that so many people are completely dependent on Social Security. I mean, I’ve always viewed SS as simply being one part of a retirement plan. Really, I think of it as a bonus because I have a strong feeling that the whole FICA, SS, and Medicare mess will go through a huge overhaul in the coming decades. Personal responsibility plays a hand in this too. Everyone should be saving something in a retirement account.

3. Just thinking out loud here, but would raising (or gasp, eliminating!) this cap help solve the budget crisis? I honestly don’t know and I’m not an economist so I can’t say with any certainty, but maybe we should look at the possibility. Perhaps eliminating it would allow for a true national health care system where everyone was covered? I know, I know – the horror. What would it be like to not have to worry about health insurance companies denying claims or being able to quit your job and start a business without the lack of health insurance benefits holding you back?

How do you feel about FICA? Friend, Acquaintance, or Foe?

There are a lot of terms in the world of personal finance that many people don’t understand or even know exist. This is especially true for high school and college students. Because of that, today I’d like to talk about a pretty basic, yet also important, topic:

Net Worth

In the simplest terms I can think of, the definition of net worth goes something like this: a single number that describes your entire financial situation. Generally, you arrive as this number using the following formula:

ASSETS – LIABILITIES = NET WORTH

Assets are things that have a monetary value – items like a house, car, and the money you have in savings, checking, and investment accounts. Liabilities are debts such as credit card balances, student loans, or a mortgage.

As an example, here is my current net worth:

Since I don’t have any debt, I have zero liabilities and my net worth must be a positive number. In a few months however, I’ll be taking out loans for school. Let’s say I sign for a $10,000 student loan. My net worth changes accordingly:

As you can see, net worth is simply a number that measures what you’re (financially) worth. A positive number is (typically) better than a lower number. I say typically because, like I mentioned above, my net worth is going to go substantially down in a few months. However, it’s for a pretty good reason – college. The degree I earn there should help me to make more money later on in life.

Some people don’t include their car or home when calculating net worth because those assets can’t usually be sold without a substantial lifestyle change. In my case, I feel that it artificially inflates my net worth. Really, I only have a few hundred in liquid assets. Selling my truck would net me some cash, but at the expense of not being able to drive to work – or anywhere.

That, in a nutshell, is what net worth is all about. With just a few quick calculations, you can see how you’re doing and make an adjustment for the next month if need be.

If there’s one personal finance lesson or skill that everybody should learn as early in life as possible, it’s this one.

The skill? Paying yourself first.

What Is Paying Yourself First About?

Once you enter the Real World, expenses can start to add up. Your parents stop paying for your car insurance, if they were paying it to begin with. Any allowance you were receiving suddenly dries up. But the cell phone bill won’t pay itself. Student loan interest payments are expected to be made.

But the most important obligation is usually forgotten. That obligation is you.

Paying yourself first means that before you pay your phone bill, before you send in a student loan payment, and before you go to the movies with friends, you take part of your paycheck and set it aside to save.

Why Should I Pay Myself First?

1. It makes “you” a priority. You are the most important thing in your life. Your cell phone bill? Not so much. We typically pay for things that are valuable. If you think you are a valuable person, then you should pay yourself first.

2.You get in the habit of saving. Most people use any income they receive in the following order: bills, fun shit, savings. The problem of course is that there’s barely going to be any savings left. After bills are paid, people think “Oh, wow, I’m so responsible. Time to buy the PS3 that I deserve“. The actual order should be: savings, bills, fun shit.

3. It keeps your options open. When you set aside money for you, you build freedom. The freedom to spend a year traveling the world. The freedom to retire with an impressive nest egg. The freedom to not worry about unexpected financial emergencies.

How Do I Pay Myself First?

1. Start putting money away in an emergency fund. Start small if you must. Just add $25 every month. If you sign up for an ING Direct savings account through this page, you’ll receive $25 just for opening the account. That’s free money.

2. Open a Roth IRA. This is a killer place to invest money especially if you’re young because you probably don’t pay much, if any, in taxes. That means that the money you put in a Roth IRA will never be taxed!

3. Contribute to your company’s 401k. This option won’t be available for high school or college students, but many companies offer a 401k plan where they will match your contributions, up to a certain amount or percentage.

By paying yourself first, you setup a strong foundation from which you can make strong and sensible financial decisions.

Finding good information about personal finance and money can be difficult. Parents are sometimes guarded and don’t always jump at the chance to teach good money management skills. The Internet is full of get rich quick schemes and scams, so it’s hard to find truly reputable information. Because of this, I’ve put together a list of some of the best financial resources.

1. Your Parents - Ask your parents how they manage a family budget (if they use one). Carefully, ask if they have credit card debt. Genuinely be interested in what they have to say. Realize that while your parents aren’t perfect, they can provide valuable insights into how to handle your finances. If they won’t budge, don’t bagger them.

2. Your Friends - Peers can be a great way to see both what you should be doing and what you should not be doing. For example, are you working a part-time job to save a bit of cash up? Are you going to a pricey college just because you want to impress your friends?

2. Blogs - There are literally thousands of blogs discussing personal finance and how to mange money. Here are some of my favorites:

• Get Rich Slowly is perfect for understanding the nuts and bolts of personal finance.
• The Simple Dollar has solid, truthful information on just about every financial topic imaginable.
• The Digerati Life is geared towards those comfortable with technology and no non-sense advice, so it’s perfect for young people.
• I Will Teach You To Be Rich is a fantastic blog for a younger generation. There’s funny jokes and even some swearing. You just can’t lose…
• Frugal Dad will provide you with some great insight into how parents handle money.

3. Bank Rate - This website has fantastic calculators that allow you see just how much credit card debt can cost you or how long it’ll take to pay back a car loan. Some of the charts can be pretty eye opening. My favorite is the retirement calculator.

4. Your Bank - Don’t be afraid to call your bank up if there’s something about your account you don’t quite understand. When you’re opening an account, ask questions and make sure any terms or fees are clear.

5. The Library - There are all kinds of personal finance books out there with great advice and information. Best of all, you don’t have to spend any money on them. Some titles geared towards teens and young adults include: I Will Teach You To Be Rich and The Money Book for the Young, Fabulous & Broke.

6. The Motley Fool - This website has tons of information on investing, along with some basic personal finance content. There’s even a specific part of the site designed just for beginning investors.

Eighteen is a unique time in your life. High school is most likely coming to a close and legally, there isn’t much you can’t do. But yet you’re probably still living with your parents and have to obey many of their “house rules”. Financially, you aren’t independent and must still depend on Mom and Dad for many of life’s necessities.

But don’t let the downsides depress you. This is a great time to figure out what exactly what you want out of life. Start thinking, seriously, about career options and what you want to accomplish with your time on Earth. Think about personal issues. Do you want to get married? Have kids? Stay a bachelor forever? Become a nun?

Think about things about you may want to buy…someday. A nice home? A sport scar? A medical degree? You don’t have to make any concrete decisions right now, but it’ll help tremendously if you have a certain “life plan” you can look at for direction.

Why is this important financially?

The world, as they say, revolves around money. Almost any decision you make will have a monetary consequence, good or bad. Try to figure out what things/people/experiences you enjoy spending money on. This is where your financial priorities lay.

For example, I’m most likely going to a cheaper university than I had originally planned because I’ve decided that I really want to travel during college and after. Instead of spending money at an expensive we-rape-you-because-you-are-out-of-state school, I’d prefer to spend it traveling the globe, or at least parts of it.

Travel is important to me, so I’m OK with not driving the nicest car possible or renting a luxurious apartment when I graduate.

What is important to you? What are you OK with?

Once you’ve figured this out…

Cut costs like it’s your job on things you don’t enjoy, but spend generously on the things you love. Don’t let other people tell you what is worthwhile. Assuming it won’t get you into debt or prevent you from achieving your saving/investing goals, go ahead and buy the Escalade. Go out and party. Hard. If that’s what you want, by all means, go for it. But just know that it’s what you really desire.

Keep in mind that debt is the enemy when trying to figure out what you want out of your life. Besides getting an education or buying a house, there aren’t many, if any, good reasons to go into debt. And even for education and housing, there’s a fine line between acceptable and ridiculous.

I know, this topic is intense. But just think how helpful it will be to think it all out. Just remember that nothing is 100 percent yet. You’re just trying to imagine what want out of life.

Eighteen is a wonder opportunity to “start” the game of life. Don’t waste it away!

If you’d like, you can jump back to the previous post in this series: Saving for Retirement.