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Idea: post (serious) advice for 18-21 yr olds here...

Discussion in 'BBS Hangout' started by BrianKagy, Feb 2, 2002.

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BrianKagy Member

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Well, I'm getting old. And with age comes the increasing conviction that not only have a made a ton of really dumb mistakes in my life but that I have the right-- no, the obligation-- to bore the youth of America with advice on avoiding similar missteps.

I am sure I'm not the only one. Hell, I'm pretty sure I'm the youngest member of the Crew and right around the median for the BBS, so just think-- there are dozens of other posters here who'd like to bore the BBS's younger members with unsolicited advice.

But in all seriousness, there are some mistakes I made when I was younger that I really wish I could change. I know this is probably a boring topic, but if you're 18-21 years old, please read this and take it to heart. You will be a much happier 27-yr old if you do.

Learn how credit, credit ratings, and money really work.

This is the biggest mistake I made when I was 18. I signed up for a student credit card, ran up the balance, watched them raise my credit limit, ran up the balance again, and then just stopped making the required monthly payments.

On one credit card, I managed six 90-day delinquencies. On another, I stopped paying for so long that the credit card company wrote the account off as a "charge off" (this is one step from having big, angry men show up on your doorstep).

I had no idea what I was doing to my credit rating-- I had only a vague notion that anyone was keeping track of my credit history anyway.

What are the consequences? Well, besides the obvious consequence that those $50 tabs at Sixth Street bars or $75 shopping sprees at Tower Records ended up costing me hundreds of dollars thanks to late fees and interest charges, I managed to ring up a terrible credit score. Your credit score is a combination of a lot of factors:

* How many active credit accounts you have, and how old the accounts are
* How much you owe on those accounts
* What percentage of your available credit is being carried as a current balance
* How often you make payments on time
* How many times you've failed to make payments on time
* How late you've been when you've failed to make payments on time
* How many credit inquiries (i.e., applications for further credit) you've made in the last year

Your score can range from 300 to 850. Roughly a third of American consumers rate betwen 750 and 799; 60 percent rate at 700 or higher.

If you are below 700 on your credit score, you will have varying degrees of difficulty in acquiring credit. You might be rejected outright-- let me tell you, there's nothing more humiliating than being rejected for credit (it's happened to me twice, though not since October of 2000). You might have your application approved, but at a higher interest rate (making anything you buy on credit that much more expensive).

It takes a long time to repair a credit rating. I've managed to bring mine up 24 points in the past eight months by not applying for credit, paying off balances, and not carrying new ones. But I'm still a long way from where I want to be.

The good news is that mistakes are not permanent. Delinquent accounts fall off your record seven years after the date of last activity-- but seven years is a long way to wait. You may be 21 and blowing off credit card payments, but six years later you might be ready to marry and buy a house. And you'll end up wishing for a time machine in order to kick the crap out of your 21-yr old self for ruining your credit score.

It's very, very easy to avoid hurting your credit rating. I'll characterize it in two ways:

1) If you're really serious and disciplined, don't carry balances on your credit cards. Get a charge card (one that requires you to pay the balance off each month), and on;y buy things you can pay for within 30 days.

Don't carry long term debt on anything other than your car and your house-- that $2000 Strat might seem tempting, but if you finance it over two years, it will end up costing you hundreds of dollars more than that.

Live within your means.

Now, that's the Boy Scout way of doing things. Most of us are not that disciplined-- especially when we're constantly told that consumer activity stimulates the economy.

So if you're like most Americans and you want it all, right now, and are willing to pay interest on televisions and DVD players and jetskis, here is my pragmatic advice to you:

2) Make your payments on time, no matter what. Never, ever, ever be late with a payment to a credit card company. You can carry large credit balances without ruining your credit score. It's not very responsible, of course, or necessarily even very smart, but the real key is to live up to your obligations.

If you finance something-- furniture, a television, an expensive guitar-- don't be late. Ever. It might not seem like a big deal to skip making a payment for a month-- hell, the minimum payment's only $21, VISA won't miss that-- but every deliquency gets marked on your credit report. Every delinquency costs you points on your credit score. Those points add up, and when they do enough damage to your score that you being to have trouble securing credit for things you really want-- a new car, or a house-- you will hate yourself for having been so foolish.

Don't carry balances, don't run up credit card debt on things you don't need. But if you do, at least pay the minimum every single month until you can be more aggressive in cutting your debt.

These are things that I suppose a lot of people know, without being told. In my blissful ignorance, I managed to get myself into some trouble before hitting rock bottom and beginning to claw my way back. If just one member of the BBS reads this and avoids making the same idiotic mistakes I made, it will have been worth it.

BK

#1 BrianKagy, Feb 2, 2002

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Thanks Dad...

Seriously, that's great advice that my parents have harped on me for a good 2 years now.

I also have a little bit of secondary experience because my aunt has had horrible luck with credit cards. All she used to do was charge charge charge and just pay off the minimum fee, it didn't seem like a big deal until 5 or so years ago when she was in serious debt and had to sell off a lot of her goods, only being able to keep her house and some furniture.

I also hear a lot of stories from current college students about how much debt they're in and how much they burn on their credit cards.

Any other serious advice?

Like best bars in the downtown area?

hehe...

#2 Band Geek Mobster, Feb 2, 2002
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Thanks BK. My Dad has set the ultimate example for me by outlawing credit cards in his house. And well it may just make me want to go out and get one I have learned from 60 minutes and 20/20 of the horror stories of college credit and have made up my mind not be be swayed by the dark side.

#3 moestavern19, Feb 2, 2002
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Good one's BK.

Here are a couple:

<b>Keep an open mind</b>

There is no more difficult way to live (for you and others) than to live with a lack of belief that possibilities are limitless. Even if you don't agree, listen to what is out there. You might surprise yourself.

<b>It is better to be kind than right</b>

This is one I have a REALLY hard time with but it never fails that, when I use it, I feel better. It is particularly important in relationships.

<b>Know when enough is enough and how to say "no."</b>

Another one that I struggle with. In some ways, it contradicts the last one, but it really means you have to know where your line in the sand is and, sometimes, when you need to move the line.

#4 Jeff, Feb 2, 2002
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Sure, BK, now you tell me.

Where were you six years ago?

Actually, I probably wouldn't have listened. Ah...the days of being young and stupid.......

#5 Gascon, Feb 2, 2002
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Thanks for all the advice guys! I think for the most part, young adults are really greatful for the concern and advice, although we don't always admit it.

I've been really good with my credit cards. Never missed a payment in 3 years (except during Allison). It's something more people should take seriously. And I do think it's good for parents to let their kids have cards when they get a little older. Teaches responsibility.

Any other words of wisdom are greatly appreciated. Like, any advice for me in this long distance thing with Lynus??

#6 Princess, Feb 2, 2002
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Good advice guys! I'm 18 and a senior in high school.. now maybe you can give me some advice on paying for all my college starting next year.. or you can just send me cash

#7 Rocket Fan, Feb 2, 2002

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Time is the only unrenewable resource. Seriously take time seriously. How often do people look back and say I wish I would have done this or that diffrent. As garth would say, LIVE IN THE NOW MAN LIVE IN THE NOW. think of today as a day you will never get back. try harder so you dont look back and say. I wish,

thats been the most depressing thing for me looking back and saying I wish

#8 IVFL, Feb 2, 2002
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I got some advice for the juvenile delinquents: FIGURE IT OUT ON YOUR OWN.

If it makes you lose money, so be it.

If it makes you feel pain, smile.

If it puts you in jail, be careful

If it kills you, too bad.

The most important advice is to just do your thing. You have a choice in this thing called life. Learn. Use your own judgement, use common sense. If you are smart you will reap the rewards in life. If you are stupid, you will learn a thing or two.

It is o.k. to be young and dumb, because all of us have been young and dumb,....the key is to not be stupid.

Thank you very much.

#9 ROXRAN, Feb 2, 2002
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Here's one:

<b>Don't even think about starting an RRSP until you are finished school, working at your chosen career and are reasonably financially secure</b>.

Sure, the tax benefits of an RRSP are attractive, but if you ever get in a bind and have to cash in prematurely, you're going to lose a good chunk of it right off the bat (20% in Canada, not sure about the US). Make sure that you are settled down and living comfortably before you contemplate starting an RRSP. Until then, if you want to put money away, just use a savings account or non-RRSP eligable investments.

I had to cash in my RRSPs this year and ended up losing $1200.

#10 fadeaway, Feb 2, 2002
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1) Have fun - Do different things while you are able to, once you get a career, family, etc you are much more limited in where you can go and what you can do.

2) Absorb diversity - It is very easy in high school and college to be around people similar to yourself. However once you start a career you will usually work with many different people and you must know how to relate to them. Life is about relationships and how you mange them.

3) Always know your own personal priorities, wheter it be wealth, location, those around you, make sure you understand yourself. You will have many choices in your life but before you commit know what is the most important things in your life and how this choice effects them.

4) Live and learn - As someone else already mentioned life is about making mistakes and learning from them.

5) Have a stress reliever in your life - Whether it be exercise, meditation, etc make sure you have something to get away from life when you feel like you need it.

#11 4chuckie, Feb 2, 2002
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I thought of another...

<b>No 40-year-old would ever ask an 18-year old for career advice so don't expect that you'll get your own choices right the first time.</b>

The average person changes careers 6 times in his/her lifetime. Be easy on yourself and enjoy it. Don't feel the pressure to always make the right decisions. Sometimes the mistakes teach you more anyway.

#12 Jeff, Feb 2, 2002
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Either do what you love, or love what you do.

Also, your first love will end up being really mean. Trust me.

#13 gr8-1, Feb 2, 2002

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Thanks for the advice. Credit cards is the DEVIL. So far I am doing great but have some bills to pay with my Best Buy card. Thank God that they have the 90 day no interest thing and thats what got me through the Christmas season. after this month I should be clear with every credit card I have. Thanks again though, this should open alot of people's eyes and pay attention to those powerfule plastic things.

#14 FrancisFan3, Feb 2, 2002
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Time is your greatest ally at your age. Start saving now & you'll never have to worry about your financial future again. Here's some advice that I wish had been given to me & pounded into my brain when I was your age. If you make depositing a set amount of money each month into an interest bearing account a permanent part of your lifestyle, you'll be both amazed & financially set for your later years. I've drawn up 3 different examples showing how wasting that precious time will cost you a significant amount of money.

Saving from age 18-65

8% annual yield

$50 per month = $310,618.00.

$100 per month = $621,237.00.

$200 per month = $1,242,475.00.

10% annual yield

$50 per month = $640,959.00.

$100 per month = $1,281,919.00.

$200 per month = $2,563,839.00.

Saving from age 20-65

8% annual yield

$50 per month = $263,726.00.

$100 per month = $527,453.00.

$200 per month = $1,054,907.00.

10% annual yield

$50 per month = $524,125.00.

$100 per month = $1,048,250.00.

$200 per month = $2,096,500.00.

Saving from age 30-65

8% annual yield

$50 per month = $114,694.00.

$100 per month = $229,388.00.

$200 per month = $458,776.00.

10% annual yield

$50 per month = $189,831.00.

$100 per month = $379,663.00.

$200 per month = $759,327.00.

As you can see, time & interest rates are your greatest assets at you age. These figures are just annual yields & don't account for a monthly compounded rate, which would give you a higher yield. While you're young, you can afford to take greater risks with your money & invest it in higher risk/higher yield investments. However, if you choose to do that, I would highly recommend that you find a very good financial adviser.

Even if you can't put $50 per month away, put what you can away each month & never touch it for anything less than a life threatening situation. As your career takes off & your income increases, you can increase your deposit amount. If you treat it like a car or house (or rent) payment & just make it a lifetime part of your monthly payments, you'll be glad you did. An added benefit to doing this, is that you'll insure that you're never a slave to a job that you might grow to hate.

Use your parents, grandparents, other relatives, or friends as an example & motivation. I realize that some of you may have very wealthy families, but for those that don't, how many times have you seen them fight over money or just let it stress them out? How many times have they said they hate their job, but can't quit because they can't afford to? Have you ever seen the worried look on someone's face when they've been laid off or fired? I have, & it was mine both times.

By making a savings plan a part of your lifestyle, you can eliminate a lot of future stress from your life. I hope this advice helps someone.

#15 Hottoddie, Feb 2, 2002
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Do not drink and drive. Take it from someone with two DWIs from the college days - you do not want one. Oh, and you probably don't want to die in a car wreck, either. Or kill anyone else.

You're college age, so you'll probably be drinking like a fish. Sometimes it might seem like you've got no alternative but to drink and drive (you've really got to get home or something), but trust me, you'd much rather walk, call a friend, or call a cab than either A) Die, B) Kill someone, or C) get arrested for DWI (they are very tight on DWIs now).

Now, I still drink like a fish, but I've learned how to avoid drinking and driving - I literally have not done it once since my last one (7 years ago). If you think or know that you might be drinking that night, get the ride worked out beforehand (designated driver - getting your drunk buddy to drive is just as dangerous, and you'll still go to jail). If you have to drive, then simply do not drink. It is that simple.

It won't kill you to go without alcohol for a night if you're forced to drive. It might kill you if you don't.

Princess:

There's really not much you can do about Lynus for the next 10 weeks. He'll get to write a few letters, but that's about it.

I'm betting that you're not the slutty type, but just in case () - please don't cheat on him. There's nothing colder that you can do to a guy while he's in Basic Training. But I'm sure that won't be a problem...

He should get a little more free time when he gets to AIT. Not much, but a little more...

#16 treeman, Feb 2, 2002
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Do not be impressed with fast food places accepting credit cards. It will quickly add up. Cash is good.

#17 Smokey, Feb 2, 2002
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Glad to see so many responses to this thread, and that it seems to be helping.

Two things:

Where were you six years ago?
Click to expand...

That's sort of the gist of this thread. Six years ago I was ignoring my debt obligations and now I'm paying the price. That's OK. Based on the improvement in my credit rating since I've been tracking it, I am still on track for 6/19/05.

And then...

It helps to have a goal!

My other bit of advice would be related to careers and education. I see people in this thread taking the somewhat typical "Do your own thing, find something you love, explore" approach.

I disagree with this, and I'll tell you why: you're going to do that anyway whether you mean to or not. It's called life. The best position you can put yourself in is the one with the most options-- and that actually requires a good education in a practical field.

Here's what I mean:

If you major in business, get a finance degree, then decide that what you really want to do is study Post-Modern Feminist Mud Wrestling and teach elementary school, you'll have absolutely no problem doing that. Your education will not serve as an obstacle.

If, on the other hand, you major in liberal arts, "explore your options", and then decide that what you really want to do is be the VP of your company, gooood luck. Most of the best jobs in the corporate sector require business education-- if not as an undergrad, then as a graduate degree. So if you major in, ahem, History and English as I did, at least make sure to apply yourself-- because five years after you're done with college, if you decide you might want an MBA, it helps to at least have a decent GPA to fall back on (even if it's in a less rigorous field of study).

I could have gotten into the UT School of Business out of high school. But I decided I'd rather study liberal arts and "figure out what to do with myself". Well, liberal arts at UT didn't challenge me at all, so I didn't apply myself, and when I was done with college, I had a mediocre GPA and a degree in History. Yawn city. I would have been much better served studying business right out of the gate, because now I'm not qualified for the kind of jobs that I find most interesting (financial and managerial).

It's not too late, but I have to get an MBA (more school) to be able to apply for jobs that a business undergrad degree would have qualified me for. Damnit.

In short:

1) Engage yourself in the most practical field of study you're interested in. It's always easier to switch from business or pre-med to liberal arts/etc than vice versa.

2) Work your tail off.

3) Always think about what your goals are. Take seriously your formative years because you cannot get them back.

In short, when it comes to preparing for a career, don't **** around if you think you're going to want to be a high achiever later in life. You can work your ass off in college, then decide to **** around with your life, but you (usually) can't **** around in college and then decide to swim with the really big fish.

#18 BrianKagy, Feb 2, 2002

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Originally posted by BrianKagy
6/19/05.
Click to expand...

How strange, Thats The Day I can legally drink alcohol in California.

#19 moestavern19, Feb 2, 2002
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I've been very mature about my finances since the first time I got a credit card at 17. For my 9 years in the workforce, I have yet to be debt free. The only trap I feel into was the self-employment tax.
Everyone says "fear the IRS" because they can dock your paycheck and throw you in jail but CC can't. Of course, I took this the complete opposite. I knew your CC history was very valuable in years to come (I have one of the best credit ratings), just as valuable as socking away $50 bucks a month at a very young age. I kissed the CC companies asses and make sure I payed my bills. I also religiously put $50 in my IRS's.

Now back to the big scary IRS ... First off, as long as you filed, the IRS can't do **** to you...except dock your paycheck. I also knew the IRS would give PLENTY of ample warning before they did anything. Also, my amount was small enough for the IRS not give worry about me, but it was also too big for me to pay. Since it took them 5 years to tell me to file or they were going to file for me.(saving me that trip to jail). Then it took them 3 months after the Sept 11. bombing to start demanding my money. Now they are threating to dock my check, so I decide to take action. I payed them off using my CC, since I KNOW i'll pay my credit card bills.

The sad thing, in this 5 years, I have payed more money in intrest and late fees than what my original debt was worth.

#20 Space Ghost, Feb 2, 2002

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