We were talking about cell phone plans and a guy (who I know makes around $10.50 per hour) tells us that he has an iphone and pays about $110.00 per month for his data plan. I don't know the guy well enough to offer financial advice and even if I did it would be a tough conversation to have. And it is a tough conversation that people need to hear. I thought the conversation was going to be about knowing what you make and what you can afford.
But it is about planning for the future. Just for the record, if you are only making $10.50 per hour, you cannot afford any luxuries and expect to retire with any kind of dignity. If your income is that low and you don't take steps to bring it up significantly, you will NEVER be able to retire and have enough cash to even approach the poverty line much less inch above it. Wasting cash on data plans that you don't need is just going to exasperate that fact.
But that kind of poor decision making goes to the lack of training and preparation that we give our young people today. I know that financial counseling or education was not even available in high school while I was going through and I can only guess that it is not any better now. Kids have no idea how much things cost and what those costs mean to their long term future. They also don't (if they are like I was) understand how to plan for their financial futures.
I think all kids could benefit from a class on basic financial planning. Just what does compound interest do to your bills when you borrow money? What can compound interest do for you if you invest money? How much wealth do wage an hour jobs (that sound lucrative when your only bill is gas for your car and your cell phone usage) really generate? How much does student loan debt act as a boat anchor for those who don't find a way to cash flow college?
One of the more common sayings now a days is "live for the moment" or "live in the moment". That is such complete horse-pucky. You have to have a plan. You have to know the rules of the game - and one of those rules is that you have to plan ahead.
So, how do you do that? Well, first thing a young person will need to determine is if they are going to need to go to college or not. College is not necessary to be successful and not everyone is cut out for college. Both of those statements need exposition.
College is not necessary for success. It is true. There are countless stories out there of people who have become multi-millionaires who have never gone to a college except when they named something after them thanks to a huge donation. If you have a particular skill or talent, you may not need college. If you are able to learn a particularly well paid trade, you don't need college.
There are a number of professions out there that pay quite well and offer great benefits if you have some sort of professional certification. And some professions only require a 2 year degree that costs much less but still allows access to higher pay and better benefits. Think about jobs like welders, plumbers, nurses, dental assistants, and such.
Now to the fact that not everyone is cut out for college. Back when I was in school, if you were not in the college preparatory classes, then you were surely a future well-fare recipient and probably were going to serve jail time of some sort. At least that was the way it was painted to us. The "good kids" or at least the "smart kids" (I am pretty sure I was not ever considered a good kid) were going to college. But that is just too simple.
Not everyone is cut out for college. And, yes, sometimes that cutoff point is based on intelligence. But I have met many intelligent people that just cannot abide the lack of practicality found in many college courses of study. But we try to fit a square peg into a round hole.
The decision of what career to pursue and whether or not to go to college can both be made much easier and much more important if we get to kids at the 7th or 8th grade level. And I want it to be in simple mathematic terms. Rent costs this much. Cars cost this much. Cars depreciate horribly. Ten dollars per hour means you make this much per year. Interest on a car loan, on a student loan, on a credit card costs you this much in interest. Saving this much per month at this rate will return you this much at your retirement age.
I have done pretty well in life despite not finishing college. I can tell you that while I was job hunting the past few months, I did find myself wishing that I had gotten my B.A. just to make the job hunt easier. But I like to think that if I had been exposed to simple money management while young, that I would have come back to it later in life - say in my early twenties.
If I had been handling my money when I was 22 like we are today, I would have retired last year. And I am not exaggerating for effect. For all the negatives out there about Walmart's pay for their Associates, I can tell you that I was 22 and my pay (even while I was still hourly) was great compared to other jobs in the area and that if I had been intentional with my money, I could have retired without ever moving into management.
Now, I know myself well enough that even if I had access to money management techniques, I would not have used them until I was a good deal older. And I like to think that sometime around 22 to 25 years of age I would have chosen to do the right thing.
But I keep meeting young people out there who are in their mid to late 20's and they are driving a car they can't afford with a phone they can't afford with credit cards they can't afford and they think the little bit they put in 401K is going to be enough along with social insecurity. I get scared on their behalf. And I don't have kids. If you do, then you need to educate them on money just as you would about sex or drugs. All three, if handled irresponsibly, can ruin a life.
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