10 Lessons from "The Grad's Guide to Money"
You’re in your early 20s, making the most of life, traveling the world, falling in love and… saving for retirement? Planning for the future and managing money are probably the last things on your mind. But listen up: if you cultivate smart money habits now, and utilize this precious time, you will have significant payoffs in the future.
Here are 10 lesson’s from The Grad’s Guide to Money by Matt Bell:
1. Your identity impacts your finances
Bell teaches money smarts from a biblical perspective, stating that it isn’t enough to just have financial knowledge, but that we also need to develop the right worldview in order to be successful. We live in a world that teaches us to be consumers and we have wrongly accepted this identity. A consumerist worldview leads to financial stress and mistakes; whereas accepting our biblical financial identity as a steward brings financial freedom and success.
2. We can’t make up for lost time, so save now
Saving and investing for the future might not seem that appealing, but consider this:
- Couple A starts investing $200 a month at age 25 with an annual return of 8%. They stop investing 10 years later at age 35. By age 70 their $24,000 has grown to $600,000.
- Couple B starts investing $200 a month at age 35 with an annual return of 8%. They invest a total of $84,000 over the next 35 years, until age 70, and it has grown to only $462,000.
This story shows that “a little now beats more later.” Even though the second couple invested over 3X as much as the first couple, their nest egg was much smaller. This is the impact of saving and investing early.
3. Be intentional!
It may seem obvious, but being financially successful won’t just “happen” to us. Success requires planning, and planning requires budgeting. Budgeting can seem like a chore, but having knowledge of where your money is going can help you cut unnecessary expenses and be a better steward. Bell makes budgeting easy by explaining how to make a budget and track your cash flow.
4. Make yourself employable
Bell encourages young adults to create “Career Insurance,” so to say. You can’t control the economy, but you can help ensure your employment (and paycheck) by making yourself marketable. Be passionate, proactive, and diligent in your work. Give 110%. Build and maintain your networks. These things could help you if the economy gets rocky.
Giving is a central part of our identity as stewards, and Bell maps out a biblical approach to generosity with suggestions on how much to give, where to give, budgeting to give and how to get started living generously. He stresses that in our world, it makes sense to hoard our money; but in “God’s economy,” it is more blessed to give and the Lord blesses our generosity. “When we give money to further God’s work, we tangibly remind ourselves that He is our highest priority.”
6. Avoid debt like the plague (but if you do have debt, take care of it!)
It has sadly become normal to accumulate debt, especially with the average college student graduating with over $25K in the hole. Having struggled immensely with debt himself, Bell urges students to BE PROACTIVE in ridding yourselves of debt. Learn how much you have to pay per month to pay debt off, and then DO IT. Google a debt payoff calculator, look at repayment options, negotiate with your creditors, be smart with credit cards, and make a plan & stick to it!
7. Credit really does matter
Credit is a word we often hear, but what does it really mean? Your credit score is essentially your financial GPA and your financial reputation. Credit impacts your ability to get a loan or buy a house in the future. Bell explains credit basics, such as how to understand your credit report, and offers tips on how to establish, build, and maintain good credit.
8. Don’t put insurance off
Bell suggests the 3 types of insurance recent grads may benefit from: health insurance, property insurance, and vehicle insurance; insisting that young adults should learn about insurance and deal with it now, because you’ll be glad to have it when an incident occurs.
9. There is a cheaper way to do everything, so spend smart!
When you get a bit creative and buy purposefully, there are endless ways to save money. Bell has some great tips and guidelines on saving cash, such as: try to keep housing costs to no more than 25% of your monthly gross income.
10. Habits lead to success.
We often think that financially successful people just got “lucky,” but it’s important to realize that behind their success is a lifetime of smart habits. There are basic habits that anyone can practice, like budgeting, tracking your spending and living within your means.. The sooner you implement these habits the better, because the money habits you make early in life will only build over the years.
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