The Financial Student

Where Do Your Ethical Boundaries Lie?

One of my favorite things about personal finance is that it’s not all about numbers. When people and emotions are involved, there’s not usually a black and white answer. Ethics are also Everybody has their own rules and inner thought police that tell them what’s OK and what’s not. Below, I’ve listed some possible ethical gray lines along with my own thoughts.

1. Sneaking food into movie theaters – Yeah, I know the sign says not to. But I do it anyway. I’m sorry, but there’s no way I’m paying $10 for a small popcorn and Coke.

2. Being given free stuff – You have a friend who works at a local resturant. When you come in, she gives you free drinks and dessert. None of this is authorized by a manager. Is she stealing or are you? Does it matter? Should you make her charge you?

3. Ordering water, but getting pop – This one drives me crazy! I have a friend who always says “just water” when we’re at a fast food place. Then he proceeds to the pop dispenser and gets Mountain Dew or lemonade. To me, this is 100% stealing. He doesn’t get it.

4. Using company resources (ink, fax) for personal business – Some companies don’t have a problem with this while others specifically forbid it. I’m somewhere in the middle. A few printed pages here and there or sending a fax every now and then? No problem. Photocopying hundreds of posters of your lost dog? Abusing company property.

What are your thoughts? When have you crossed an ethical boundary?

How I Try To Make Personal Finance Less Boring

It’s no secret that personal finance isn’t the most fascinating subject in the world. I try to do my part and change that with this blog, but I know logging into Mint.com isn’t exactly a roller coaster ride of excitement (unless it’s payday). With that said, there are a few ways to keep things fun and interesting. And most of all: less serious! Money (specifically, the lack of) can cause a lot of stress, so anything to reduce that is a good thing in my book.

First, I give my bank accounts cool names.

OK, maybe not cool, but they at least make me laugh when I look at them. Take a peak:

• I Do What I Want Checking is, obviously, my main checking account. I call it that because it allows me to buy what I want when I want it. I’d have a “I Do What I Want (within reason)” credit card, but no bank will approve me. It’s a conspiracy against people with little income I tell you!
• When Shit Hits the Fan is my emergency fund. I feel that it has an appropriate name and reminds me of its true purpose
• New Ride is clearly for a new vehicle at some point far in the future. For some inexplicable reason, the account has fifty cents in it
• Blogging Hustle is money I make from this blog
• Christmas Materialism lets me poke fun at the fact that as much as we say Christmas is about people and memories, we all buy each other mountains of Stuff
• Graduation Gifts doesn’t have a cool name, but it’s cash I’ve received from family and friends. Thanks everybody!
• Apple Kool-Aid is for my Macbook Pro or some other Apple product I convince myself I need
• I’m On a Boat is for travel: random trips, vacations, study abroad someday, etc. Does not mean I’ll actually be on a boat. The name comes from this video

Second, I use Mint.

I could just login to my bank’s website when I want to check things out, but Mint creates cool charts and graphs that let me see what I’m spending money on and if I’m staying on budget.



Finally, I don’t let myself worry (much) about money.

I equate stressing to boring. I realize that this is extremely easy for me to do since I’m just out of high school and have no real responsibilities. But still, finding a way to relax will make finance more interesting. You can start working out goals and stuff you want to do instead of freaking out over credit card debt and student loans. Here’s how I do it:

• I have automatic transfers setup to my savings accounts so I don’t have to worry about whether or not I’m saving anything from this week’s paycheck
• I read interesting personal finance blogs. Punch Debt in the Face and Budgets Are Sexy are both funny and have commonsense advice. The Financial Student is also a great blog to visit.
• I buy stuff with money. Simple, I know. But a lot of people get their finances in order and start saving like crazy. Then they forget that the point of money is to improve your life. Don’t be one of those people.

Do you have any ways to make finance more exciting? Share ‘em in the comments.

5 Methods to Fight Your Latte Factor

As I mentioned last week, I’ve increased my spending on things I don’t really value – mainly food from Speedway and Tim Horton’s. These types of purchases show the latte factor in action. The latte factor is the effect that small, insignificant purchases have on your finances. They don’t actually have to be lattes, but that’s a term many people can identify with.

These small expenses of course add up over time. $3 for coffee every day during the work week is $15. Every month, that’s $60 down the drain – or more accurately, the throat. This isn’t to say that you shouldn’t spend money on coffee (or whatever your “latte” is), but you have to ask yourself if you’re really getting the value out of it that you think you are. You might find that you honestly do want to keep that expense in your life because you vaelue it. For me, I decided that I’d rather work on getting my emergency fund where I want it and saving up for something I really want to do – travel. Below are some ways you can “fight” your latte factor if you decide it’s not an expense you want in your life.

1 – Simple Self Control

As you drive past the coffee house or wherever, don’t pull in. This is painfully obvious, but it’s clearly not easy to follow. Otherwise, people wouldn’t be pissing away large amounts of money when they have huge credit card balances and student loan payments. You have to fight the urge of “I can afford it, so I should buy it”.

2 – Change the Route

Consider taking a different way to work or school every day. Try to avoid driving near your latte factor’s location. Don’t drive too far out of your way of course – you may end up spending more in gas (and frustration) than you would by just buying your latte!

3 – Reduce, Don’t Eliminate

If the thought of never (or rarely) making your purchase seems a bit too much like deprivation, consider reducing your spending. Instead of everyday, maybe you get coffee once a week. You’ll save money, but still have a special day every week.

4 – Give Every Cent a Purpose

Make a monthly budget and account for every cent that will be spent. Don’t allocate any money for your latte. Perhaps you increase your Roth IRA contribution or save up for that killer vacation you’ve always wanted to take. If you do this, then you won’t feel like you’re missing out on anything. You’re simply spending your money the way you said you would.

5 – Take Advantage of What You Already Have

Most of you reading this own a coffee maker. Make sure it gets used. Homemade coffee will be cheaper than Starbucks. Way cheaper. Bring your own snack, like a bag of chips, to work instead of hitting the vending machine for that mid-afternoon candy bar.

Final note: I’m really not against buying something if you really want it and value it. Everyone spends money differently and there’s no single “right way” to control spending.

The Beginnings Of Lifestyle Inflation

I’ve been working for the U.S. Census Bureau for about two and a half weeks now. The job is great. The pay is almost too good to be true for a high school senior (around $300-$400 a week). My supervisor is flexible and my co-workers are all nice people. The worst part is that the office isn’t located within walking distance!

Financially, however, I’ve noticed my finances are suffering. Kind of.

I know that statement sounds like a contradiction. Here I am making more money than I ever have in my life and I have the nerve to think I’m worse off? There are some countries that don’t even have a census bureau! The nerve!

In all seriousness though, my spending has gone up. Almost every day, I stop by Tim Horton’s for an ice cappuccino. Or Wendy’s for a Frosty. It’s only a few bucks here and there, but I’m still spending more money than I was just a few weeks ago.

This, in its own small way, is called lifestyle inflation.

Lifestyle inflation is when the amount you spend rises in relation to your increase in income. You start bringing home more cash, so you start spending more cash. This is exactly what I’ve done. I even think “I have a job now. I can spend money.” when I pull into the drive-thru lane. It’s amazing how this line of thinking has allowed me to seamlessly justify my purchases. And quick too – I started my daily coffee purchase just 3 days after I began work.

So far, the amount I’m spending isn’t much. About $2-4 per day. But that’s still $10-20 per week. $80 per month could pay for a trip to an amusement park – and I like amusement parks more than I like coffee.

This kind of spending reminds of how just because you can do something, doesn’t mean you should. I could smoke a pack of cigarettes everyday or I could go and protest funerals of fallen soldiers . But just because I can, doesn’t mean I should. I can afford to buy coffee every day. But that doesn’t mean I should.

What Kind of Relationship Do You Have With Money?

Money is a powerful force in all of our lives. This force can be positive or a negative, depending upon your relationship with money.

Everyone’s relationship is going to be unique, but there are a few types that probably describe many people.

Materialistic – money buys Stuff. High priced electronics, cars, vacations, etc. Money exists to purchase things.

Security - money’s purpose is to provide a safe-haven, like the security blanket children carry around everywhere.

Miser - security has long ago been reached, but you can’t stand the thought of spending (or giving) money.

These three categories aren’t nearly specific to sum up one’s entire money relationship, but I think we all know of a person or two who’s remarkably similar to one of these.

For me, my relationship has definitely changed over the years:

Childhood - money can buy me toys and should be spent as soon as possible.

Teenage - money makes the world go round. Some needs to be saved, but I can worry about that later when I’m an adult.

Now - money gives me options. Freedom. The ability to do what I want.

I think my relationship now is much healthier than it ever was before. I’ve come to think of money as a mostly neutral tool that can be used to either enhance or hinder my life.

What’s your relationship with money look like? Good? Bad?

I’m Not Talkin ‘Bout Rich, I’m Talkin ‘Bout Wealth

This video from Chris Rock does a pretty damn fine job of showcasing the difference between rich and wealth. Warning: Extremely explicit language. Plug in head-phones or bookmark this post for a later date if you’re located in an office or school.

Obviously, Rock is using the example of the super wealthy (see: Bill Gates) and the super-rich (see: celebrities that could lose their money in a summer with a drug habit).

But the general concept is the same for “middle-class” citizens.

Usually, we use the words “wealth” and “rich” interchangeably. Someone who has a really nice home, car, and job is said to be rich. Likewise, we assume they are wealthy.

But realistically, the two terms don’t mean the same thing. At least, I don’t think they should.

Rich is subjective. My definition of rich might differ from yours. Plus, you can appear to be rich when you’re actually broke. Rich can be taken away or lost in the blink of an eye. This is because the rich are often controlled by other entities like banks and corporations. Or, they squander away their new-found richness (see: lottery winners).

The financial crisis going on over the past few years is proof of this. Tons of people in the U.S. borrowed to “buy” private school educations, fancy cars, and huge homes. They whipped out a credit card to fuel exotic vacations and a nicer day-to-day life.

Then, banks tightened up credit. Credit card interest rates went through the roof. Companies downsized and rightsized. People suddenly found themselves in a big mess.

These individuals may have been rich (by living off credit cards and using their decent income to secure financing) in appearance, but they certainly were not wealthy.

Wealth can’t be faked. Wealth can’t be taken away because of the decisions other people make. Wealth, in its simplest form, is a set of behaviors that lead to financial success.

Some of these factors include:

• Saving a certain amount or percentage from every paycheck
• Refusing to take on debt except when necessary (like a home mortgage)
• Spending less than you earn

These factors aren’t new or exciting. They’re honestly just common sense. If the entire working population (including teens) were to just simply start saving 10% of their pay, millions of people would be better off. And that’s just one small behavioral modification

At the end of the day, remember that you have the power to make wealth happen. Being rich though, is often just a fad.

Do Not Buy Stuff You Cannot Afford

The following is a clip from Saturday Night Live that explains how to spend less than you earn.

This video is simply awesome. If I was in the business of comedy, this is the type of stuff I’d do. Common sense, yet surprisingly uncommon.

Hilarious and true.

Just remember that you save up money before you buy something. You do not buy something because you think you can pay for it later. You pay for it now, if you can. If you cannot, you don’t buy it.

I just prevented you (and myself!) from ever incurring credit card debt.

You’re welcome.

I’m 18! What Should I Be Doing With My Money?: Planning For the Future

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.