Money Lessons Learned

On the off chance my sister (who is not yet grad-school graduated) and various cousins on both sides who just graduated from high school / trade school / college actually read this, I have to share an article I found on msnbc (and via forbes.com and written by David Randall) . Since it is kind of long, I am editing at will (which I can, cuz it's MY blog) but you can read the whole article here: http://www.msnbc.msn.com/id/31155520/ns/business-personal_finance/

Seven things that I wish I'd known about money when I graduated

Saving is a form of freedom. The key to financial well being is spending less money than you earn. That way, when something unexpected happens, like a major car repair or illness, you will expand your options for dealing with it. If you have a hard time not spending whatever is in your pocket, consider setting up automatic withdrawals that will put money into your savings account before you even see it.

Your credit score matters more than your ACT score. Just as your ACT score helped colleges gauge your ability to handle critical thinking, your credit score allows lenders to measure your ability to handle your money. That, in turn, will determine how much you pay for a mortgage, your interest rate on credit cards or student loans, and even your ability to rent an apartment. (The landlord of one recent grad forced him to give two months' rent as a security deposit instead of one because he didn't have a credit card.)

Make more than the minimum payment on your credit cards. If you are an average college graduate, you owe about $3,000 in credit card debt. While recent legislation will make it harder for anyone under 21 to get a credit card, there are plenty of 22- and 23-year-olds who will spend money they don't have because they believe their wealthy future selves will be able to pay off the debt. Instead, many end up stuck in credit card purgatory, forever paying off that $1,000 they used on an Italian vacation.

You can get almost everything cheaper. Negotiate everything. EVERYTHING. There are lots of ways to save money — if you do a little homework and planning. There are more than 60 tax credits and deductions for things ranging from going to graduate school to paying off your student loans to putting solar panels on your house. If you are already doing any of these things, the money is there for the taking. The easiest way to save money, of course, is not to spend it in the first place.

Waiting to contribute to a retirement account will cost you. Here's why procrastinating will cost you. Employee-sponsored 401(k)s let you buy stocks, bonds and mutual funds with pre-tax dollars. Once the money is invested, it can compound for decades without your having to pay a dime in taxes. Many employers will also match a portion of the money that you put into your 401(k). On the most basic level, not setting one up is turning down free money.

Owning individual stocks is gambling — not investing. By buying only one company, you are essentially playing roulette, no matter how strong the company's fundamentals may look. Maybe this company will continue to do well and you'll prosper, but maybe the ball will bounce elsewhere. Some people bought Amazon.com at the right time and made millions; others bought AOL at the wrong time and lost just as much. Invest an index funds - like the S&P 500 - instead.

Knowing what you own in your 401(k) is just as important as opening one. Don't pay 2% to someone else to manage your money. Use lower-cost funds available from fund families like Charles Schwab, Fidelity and Vanguard. The right mix of funds is important too. A good rule of thumb is that the percentage of bonds in your portfolio should match your age: if you're 25, then put a quarter of your assets in bonds; if you're 35, make it 35 percent and so on.