Wednesday, September 22, 2010

Figuring it out

I did a presentation a few years ago when I was in grad school about personal finance for teens. My group and I tried to tackle as many issues as we could, and I ended up with the topic of "real world expenses." It's interesting because, in a roundabout way, I actually did pick that topic, but as soon as I got home and started thinking about it, I had no idea what to say.

The problem is, despite my parents near constant personal finance counseling--usually in the form of talking about credit score, I was still ill-prepared for the cost of real life. No one really talks about how much the day-to-day is going to cost you. People drop percentages like, "you shouldn't spend more than 60% on housing." That's fair, but then when you're a college student making minor ducats but living in an expensive town, you look at that percentage, say "well that's not anything I can change, best say screw it and just get through this phase of my life. I'll start making money once I graduate."

As more and more people are finding out (myself included), that may not actually be the case.

My high school did something when I was a senior, which I can honestly say was one of the most effective educational experiences of my life. It was called the Real Life Fair, and I don't think they told any of us about it beforehand. Just one day, we seniors showed up, and they hustled us into the gym. We drew a career, education level and income from a bucket, and then learned about all the expenses we would have to cover with that income.

They listed cost of living like rent and utilities and that was non-negotiable; they drove in a variety of vehicles and told us how much insurance would be, and the monthly payment for the vehicles. They talked about insurance and investments, student loans, pretty much everything and it was really effective because they gave us actual numbers.

So what is the point of this long, drawn out story? The point is that I had all the tools at my disposal to be a responsible, financially savvy gal, and I still screwed it up because it was all theoretical and I didn't have any hard numbers. If someone had said to me, "You will be paying $400/month in rent, $200/month for food, $100 a month for utilities, $100/month for beer (this was college) and you'll make $5.75/hour at Barnes & Noble where you'll also probably go a little nuts buying books and CDs--that would have given me a bit of pause.

That means that if I was working 40 hours per week, making $5/hour after taxes, I'm taking home $800/month. That's already spent just looking at the figures above, and I really shouldn't have been working that much because I was a full-time student.

I didn't want to hear it at the time, but no one was telling me either. Because I didn't want to hear it, I certainly didn't seek out this information and make a list like I just did. Instead, I charged everything, and convinced myself that with my BA in English, I'd be raking in a healthy salary soon enough.

This is why I advocate complete honesty when it comes to your personal finances. This is why I write every single number down, no matter how painful. This is why when I'm planning a Real Life Expenses lesson for teens, I tell them to look at Craigslist listings for apartments in their area so they know approximately what their rent is going to be; to go onto the local grocery store's delivery site and fill a cart with what they would probably buy regularly at the store and note how much it costs; try to figure out how much gas they'll use and factor that in, etc.

I need numbers to keep myself on track. Percentages don't cut it. And I need to know how much real life costs.

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