After living comfortably under your parents’ financial blanket for eighteen years (or more), the transition to taking care of yourself can be very difficult. Even if your parents have taught you well, some things just aren’t easy to learn until you experience them firsthand. Many of the toughest lessons are tied to personal finance.
BuzzFeed recently featured 19 Burning Questions Teens Have About Money. Each question was in response to a BuzzFeed Community post asking teens what they want to know about adulthood. I decided to answer four of the questions to provide my personal thoughts and experiences with each.
1. “Why don’t they teach us this stuff in school?”
This is a subject very near and dear to GenFKD. Every human being needs to handle money in one way or another, so you’d think that learning basic personal finance would be a school requirement.
There is not one area of my life that hasn’t been affected by my finances and there also isn’t one area where I’ve made more mistakes. From my previous battles with credit card debt to borrowing my share of the $1.2 trillion in student loan debt, more education and guidance in this area could’ve helped me take a more informed approach to handling my finances.
In the end, I have no one to blame but myself. We all are responsible for our decisions and what we know about a particular subject. Take your education into your own hands and learn how to budget, what types of insurance you need, how rental agreements work and how to save for retirement. Don’t be afraid to ask questions before entering into a contract or opening a credit card. Do your homework!
2. How easy is it to go into debt?
This question should be rephrased as, “How difficult is it to stay out of debt?” The answer is extremely complex. Unfortunately, it’s extremely easy to fall into debt even if you’re aware of the dangers of borrowing money, credit cards and student loans.
When I opened up my first credit card, I worked as a credit card debt collector (ironic, right?). Three years later I had five open credit cards and nearly $15,000 in debt. I didn’t buy a car or spend thousands on jewelry; I mismanaged my spending for several years, and it kept adding up.
Be very aware of getting into debt. It can start off innocently with one $500 maximum limit credit card and quickly snowball after you get comfortable using your credit card. If seeking to build your credit or a desperate need of money turns into debt, start small and minimize your potential risk. Decline additional credit cards and try to pay off your card every month. Debt is a very sneaky beast that can swallow you whole if you’re not careful.
3. Do you HAVE to know how to do your taxes, or can you hire someone to do them for you?
Thankfully, you do not have to know how to do your taxes. But you should, and there are several things you DO need to know. Whether you hire someone to do your taxes or not, you always need to keep track of financial statements, tax documents, deductible expenses and all of your personal income.
The more you know about filing your taxes, the better off you’ll be. Also, if you plan on hiring a professional to do your taxes for you, expect to lose a chunk of your refund in order to pay for it.
4. Is rent really that complicated?
When signing your first rental agreement, you’re entering into a legally binding contract. Anytime you commit to something, like paying $750 a month for the next 18 months; there is risk involved. Rent can be difficult to understand the first time around, and students often get taken advantage of.
Here are what I consider to be the essentials when entering into your first rental agreement:
– Security deposits are often required to provide a minimal amount of insurance to the renter in the event that you don’t pay rent one month or to cover damages after you move out. In a perfect world, you receive your deposit back in full if the apartment is left in the same condition as it was when you moved in. In reality, this an area where many people, myself included, have been taken advantage of. Talk to previous tenants and read reviews to see if who you’re renting from is honest and pays back deposits.
– Rental agreements are binding and if you sign one, expect to pay for every month on the contract, whether you’re living there or find a new place to stay. Depending on the agreement, you may be responsible for the amount your roommates refuse to pay, and if your parents co-sign for you, they will also be liable to pay back any damages or unpaid rent.
– Utilities play an important role in your expenses when entering into a lease. If your new apartment doesn’t cover utilities, get estimates on how much you’ll have to pay based on averages from the last year.
– Maintenance is often needed during the time you’ll stay there. Does the company you’re renting from provide an around the clock handyman, or are you going to be stuck in a flooded apartment for a weekend before someone comes to help?
What financial questions do you have? Please ask below!