Money! Money! Money! by Chris M. '12
Life is like monopoly, except you're not a pewter Tophat and it costs WAY more than
$200 $50 to get out of jail.
Hard to believe July is nearly gone eh? Yup in just a few short months all of you prefrosh will shed the “pre” (presumably through the use of “prease” if Biology has taught me anything) and finally become fully fledged frosh and other alliterations! Want to eat ice cream on toast for breakfast? Go for it! Don’t want to go to class? You won’t get in trouble! Want to give me a plasma screen TV for free? Be my guest! Remember, you’re adults now and that means you get to make choices.
Of course that also means you’re adults now, and you have to make choices. Some are trivial, like what color sheets you want for your bed, others are important, like where you want to live; some are easy like “would you like to go skiing?” and others are hard like deciding if your relationship with a person you said you love is still a healthy one. Yes in the course of one year at MIT you will make exactly 7,873,456,235.834 decisions varying both in magnitude and speed at which their magnitude is clear.
And in true MIT fashion, here comes one of those decision moments before you even have time to comprehend it:
You’re going to have to start paying for things.
Now everyone has a different monetary relationship with their parents that I won’t even dwell on except to say that personal finance WILL become more important to you very fast, maybe to different degrees but it will. And it can seem overwhelming when you get an email saying your account was just billed for tuition and you owe MIT 5 numbers before the decimal. But fear not worrisome frosh, that’s what this entry is truly about (after a wordy introduction). It’s about personal finance and some tips I’ve got for you (get it? tips? in a finance blog? eh? ok nevermind). So here’s some tips and ideas I’ve come up with or gathered from various sources to maximize your meager money monthly (ok, no more alliteration I promise). No particular order:
1. Make a budget:
Save for the pigs sake
It’s not really a hard concept, just hard to apply : Spend less than you make. Easier said than done though (where do you think the credit crisis came from?) Nevertheless, it’s a good skill to have and it will serve you both in business and life. Your first one doesn’t have to be high tech with tables and charts in excel etc. In fact, to avoid being overwhelmed I’d reccomend just a simple paper and pencil one to start. Some sample categories are things like: Entertainment, Food, Clothing, Bills, and Savings. Tally up how much you make in a month, subtract out anything you HAVE to pay for, put some in savings, and budget the rest as you feel fit. It’s a good feeling knowing that you’re spending money you planned on spending instead of just spending willy-nilly on anything that looks shiny and cool and this way you’re constantly making money that you can use later for important things, like investing, buying a car or a house etc.
Green fire will impress the ladies.
Dining is a hot topic for a lot of students at MIT, and that’s because everyone has something that works really well for them. Some people cook all their meals, some eat on campus for all their meals, and lots of people do everything in between. Nevertheless, it is generally cheaper (and potentially healthier!) to cook for yourself. Nearly all dorms have at least a community kitchen that you can use to cook food in, and if you get a few friends together you can split grocery bills and cook for each other. Not to mention one day you’ll have to cook for yourself, and you might as well learn now.
For the summer, I cook all the meals for myself and my two roommates in the apartment, and I spend about $100 a week on groceries. That’s 21 meals for 3 people, averaging out to $1.58 per meal. Compared to the ~$8 it costs to eat out for an average meal, I save around $400/mo. Not bad. You’d have to eat a lot of dollar menu burgers or ramen to beat that.
3.Buy Reusable Instead Of Disposable:
Do your plates have cupholders? didn’t think so
Buy rags instead of paper towels, real or plastic plates instead of paper. Being able to reuse things will make them pay for themselves uber-fast. Not to mention it’s just good practice to throw less away. Not too long ago, some friends of mine over on Conner-2 went through some number crunching for how much they’d save investing in rechargeable AA batteries instead of buying them en masse to feed their Rock Band addiction. Savings add up.
Hey! It’s not impossible, and if this ever shows up on reuse…
A road bike
Awesome Office Chairs
Skis and Ski Boots
…and that’s just what I’ve received! there are frequently old laptops, computer bits and pieces, furniture, utensils–you name it! Most notably I once saw a Cintiq Wacom Tablet, which goes for around $550 used. I also once contributed half a subway sandwich ( I bought a footlong, but only ate half). ReUse is amazing.
Alright so now you’re saving tons of money, you’ve got a budget, you’re wooing girls with your mad cooking skills and all the free stuff you’ve acquired from ReUse. Now to bring it all together, use some kind of financial management software. You can use Quicken or Microsoft Money if you want, but my favorite is Mint.com.
apparently you spend more on orange than you do on green…
If you’ve never heard of it, it’s an online financial management solution that does all the same things that quicken or MM do, BUT it’s totally free! It’s a cinch to set up with your banks if you do online banking (and who doesn’t? this is 2009), and you can access it from any computer (they even have an iPhone app). You can set up your budget, view your spending habits based on card transactions, and even set up alerts to remind you of things like when you’re over budget, when your accounts are low, and when bills are due. Mint.com can also suggest bank accounts, investments, and credit cards that can save you money by matching your spending habits. Which brings us to….
6. Credit Cards
That’s a scary word for a lot of people, and with good reason. Uncontrolled credit card use has made lots of peoples lives really difficult. BUT they are a financial tool that, if used correctly, can give you some great benefits. For one thing, if you’re like most people you’re going to have to eventually take out a loan to buy a house or a car or something like that. When you do, they look at something called your credit score to determine what kind of interest rate you can get, (or if you can get the loan at all!). Well the only way to get a credit score is to have had credit history, and one of the easiest ways to do that is to use a credit card. A credit card is a HUGE responsibility though, and all the sort of rules and responsibilities you should be aware of before making the decision is kind of outside the scope of this entry. Nevertheless, some benefits to having a credit card include: building a good credit score, rewards for your spending, flexibility with how much money you have.
If at this point you’re sold and rushing off to sign up for the first credit card you get an offer for, slow down. You should find a card that matches your spending, and our good friend Mint.com can help! After doing a bit of research, Mint.com helped me find a card that offered 9% interest, 5% rewards on purchases for restaurants, gas, movies, and books, and 1% on all other purchases. I also get a bonus for maintaining a high GPA throughout the school year. It was the perfect card for me and I use it all the time in place of my debit card, then just pay it off every month. So all in all, I’m not spending more money than I normally do, I’m establishing credit, I’m still not in debt, and I get 5% of everything I spend back. Works for me!
I have to reiterate though that credit cards are a massive financial responsibility and an advanced financial tool, and you really shouldn’t pick one up until you’re absolutely positive you can manage it’s use well. It’s like Uncle Ben said “With great power comes great responsibility.” (yes that is a Spiderman quote.)
Peter I want to talk to you about your credit card.
Despite what it may look like, a tree made out of money is a poor investment.
That’s because the most important factor with investing isn’t the amount, it’s the time. That’s good for you and me because time is something that you have on your side whereas abundant money isn’t so much. To make about the same amount in 40 years (like if you waited 10 years to invest), you’d have to invest $33,000, plus the $1000 annual investment. Clearly there is a huge benefit to investing early. Our friend Mint.com can help you find good investments, as well as any investment firm like Charles Schwab etc.So there you go, there’s more information than you probably care to know about what it’s like managing your income in college. It’s intimidating, liberating, exciting, and a host of other -ing words.