The 3 Things You Need to Avoid Doing After You Graduate

Graduating from college is a big accomplishment. You’ve spent the past few years of your life working your tail off to get your degree which is something that should be celebrated.

But at some point after you graduate, life will come knocking at your door.

Here are 3 things you need to avoid doing after you graduate from college.

1. Getting into credit card debt.

No, I didn’t say , “don’t get a credit card”. If you know how to use it, then by all means use them. But do not, and I mean do not, get yourself into credit card debt. Credit card debt is the worst type of debt you can find yourself in because of the enormously high interest rate you will pay (usually in the 20-30% range). And since this interest rate is so high, it can make getting out of credit card debt an absolute nightmare.

Be smart and don’t spend above your means.

2. Forgetting about your student loans.

One thing to note about student loans is that you typically have a grace period of about 6 months after you graduate before you have to start repayments. But when that time is up, it's time to start repaying. Don’t make a mess of your finances so quickly into your career. Remember that you have student loans to repay. Otherwise, if you forget, you will be hit with late penalties that’ll cost you money and hurt your credit.

If you don’t have student loans then count yourself lucky.

3. Not Knowing Personal Finance Basics

School probably didn’t teach you much. You may have only learned things from your parents. You may not know anything at all. That’s okay. It doesn’t matter where you start on your personal finance journey. All that does matter is that you do take the time to learn smart money decision making. 

Learning personal finance basics will help you enormously in the long-run in reaching most life goals you have, as most goals involve money.

Check out our other personal finance resource at The Guide

Is Compound Interest as Magical as Everyone Says it is?

Everyone and their mother talks about compound interest, but what is it?

If you’ve heard finance people talk about compound interest, you’d think it cures every human problem ever created.

While it may not be that magical, it is still really important.

Let’s break it down in simple terms so we are all on the same page.

Compound interest is when interest earns interest. An example may be best.

Let's say you have an account with a bank that earns 1% interest every year. You put $100 dollars into the account on January 1. Come January 1 of the following year, your account now has $101 because it earned a dollar of interest. If you don’t touch the account for another year (and the bank is still giving you 1% interest) you would have $102.10. 

Why not just $102? 

The reason is because now your extra $1 (the interest you earned from year one) is now also earning interest ($1 earning 1% interest is $0.10).

Your interest is earning interest. 

Now let’s look at some bigger numbers. 

If you put $1,000 into an account earning 7% interest every year, and didn’t touch that account for 40 years, the ending balance 40 years later would be $14,974.46. That’s almost $14,000 more than you had to start! And you only put in $1,000!

Whether you fully grasp the concept or not is besides the point. The main takeaway is that compound interest has huge significance in the long-run.

The earlier you start, the more time your money has to compound. 

Let’s start earning interest on interest on interest.

How do I Plan When Most of My Salary is Commission

Planning for an irregular salary is a hard thing to do. You don’t know which months will be good and which months will be bad.

But you do know you’re going to get both.

So how do you plan knowing things are going to be wonky? Well let’s first break things down into two categories: commission + salary (slightly more regularity) and just plain commission.

Salary + Commission 

If you fall into this category then congratulations, you have more consistency than your all-commission counterparts. That doesn’t mean all your problems are gone, but at least some of them are.

The first step in planning for a salary + commission pay schedule is to understand all of your expenses. Rent, food, debt, savings, health, insurance, utilities, etc. etc.. Lay it all out. From there, plan for your bi-weekly, monthly, or quarterly salary to go straight towards these fixed expenses. Since these are your required payments that have serious consequences if gone unpaid, we do not want to leave them up to chance (in case that bad month sales wise comes around).

This leaves your commission. Plan for these funds to go towards your discretionary (non-required) expenses. This includes things like clothing, travel, entertainment, extra savings, extra debt payments, etc.. Better to not buy clothes for a month than not be able to pay rent.

Also, it doesn’t hurt to have a little bit more in your emergency fund than most individuals.

Commission Only

For those who are commission only, things get a little bit tricky. First off, props to you for being able to live in such flux income wise. To make things a little bit less stressful, let’s plan accordingly. 

What you’ll want to do first is set up a bank account that is separate from your normal checking and savings account. This will be where all your commission will go into. After that has been set-up, you essentially want to pay yourself a set salary from this account each month. If it's a good month commission wise, you still pay the set salary. If it's a bad month commission wise, you still pay the set salary.

The hope is that this evens everything out over the long-run, so that you have enough to pay for all your expenses every month, whether they be good sales months or bad ones.

Once again, beefing up that emergency fund isn’t the worst thing in the world.

Why I Don’t Believe in Budgeting

I don’t budget. Maybe I should. Some people would probably argue that I should. Most don’t even care.

But I don’t. And I stand by it.

The reason that I don’t is because for most people it doesn’t work (including myself). For psychological reasons that are beyond my pay-grade, people just can’t stick to a budget. So why fish in an empty barrel? Let’s find a different way to be smart about finances.

Which is why I reverse budget. (I couldn’t think of a better name, but if you can please email me at charlie@thegenzguide.com)

Reverse budgeting is essentially looking at the past month of spending, seeing how much you spent in each category (Rocket Money can help with this) and having that understanding going in to the next month. For me, once I see that I spent an unnatural amount on coffee, golf, take-out, or something else, for some reason my brain remembers that every time I’m confronted with a purchase during the following month. And as a result, I spend less the following month on said categories. I wish I could tell you why, but it works.

When I plan out a budget and see that I’m only supposed to spend so much on a specific category, I don’t stick to it. You can tell me, “try harder”, or “grow up and be an adult”, or “this is what’s wrong with our generation. No one wants to do the hard things anymore. Everyone wants things to be easy.”.

I don’t care.

I’ll stick to my reverse budgeting strategy.

What is my Credit Score & Why Should I Care?

For most people, it's socially unacceptable to rate others using a number system.

For credit agencies, they get paid to do it.

Your credit score is one of the more important financial things about you and chances are, you didn’t even know it existed. Or, you had very little knowledge of it.

Either way, I hope to clear some air and give you a full explanation of why credit scores are important and how they can really impact your day-to-day life.

To start, what the heck even is a credit score?

Your credit score is a number (between 300-850) showing your “creditworthiness” or, in normal people's words, how likely you are to repay borrowed money.

The five most common things the are affected by your credit score are:

1. Loan approval

This includes mortgages (house loan), student loans, auto loans, personal loans, etc etc.. When you have a high credit score, a company is more likely to approve you for a loan. So, unless you want to pay all cash for a home, you better have a high credit score.

2. Interest rate

Interest rate is essentially the cost of borrowing money. For the sake of time, we won’t go into the specifics of interest rates, but simply how credit scores affect it. The higher your credit score is, the lower your interest rate, meaning the less it will cost you to borrow money. For context, if your interest rate on a (30 year) $100,000 mortgage is 3%, then you will pay $90,000 in interest over the lifetime of the mortgage making the total you paid $190,000. If the interest rate was 6% instead, you’d pay $180,000 over the lifetime of the mortgage for a grand total of $280,000. 

That is a lot of money.

Have a high credit score for lower rates.

2. Credit card approval

The higher your credit score, the easier it is to get approved for all credit cards, including the ones with better benefits. Pretty simply. Better score, better cards.

3. Renting an apartment

A higher credit score can make it easier to get an apartment. For some landlords, if your credit score is too low, they won’t rent to you at all.

4. Insurance premiums

A higher credit score can also mean lower auto, home, or renters insurance premiums.

*Add all these things together, and I think it’s pretty important to care about your credit score.