Title: FAP926: Personal finance guide, part 1

" Three key personal finance concepts and some budging on this week's financially podcast episode 926."

" Financially podcasts publication of the student. Didn't he stuff I would say. ITunes into music by Charlie -- the biggest -- run up."

" Good Friday September 18 2009 my name is Christopher -- thank you for tuning into the financially podcast got a special for you this week -- a little bit different this we cannot. And probably into next week's up. That organ recovery is some personal finance stuff some things and tips hints and ideas that you need to know. In order to make the most out of the money that she do you have so. Let's get rolling this'll be a part one. The personal finance guide for the financially podcast. So virtually every college student beastie is carries some debt from student loans to student credit cards -- library fines and more than recent studies that have quarters some outlandish numbers the average graduating college student carries 4138. Dollars. In credit card debt and an overwhelming 22500. Dollars in student loans on average now. Managing that much -- successfully right out of college can be incredibly difficult stressful so this short guide that we're gonna do maybe this week and next. Is not gonna be the comprehensive guide personal finance there are plenty of books and videos and self help courses and it daily affirmations and more to do that and instead what we're gonna talk about. Is a ways to help you mitigate the impact of the -- you've already incurred to help you let's start out a path towards digging out. We're -- with a few concepts that are really really important concepts that will help you make the most a sense of the guide and get the most out of your money. The first one's called the time the value of money. Now the cliche that time is money is sort of true more accurately. Money is time time he spent working in the past and present to earn that money. -- time you borrowed from the future from -- future worked he's now in the form of money. Money that Steve -- for use now today through a job is cash. Money that you have borrowed from yourself in the future for -- now is debt. Given we can't ever really predict the future with any amount of certainty it is always always always. Better to spend what you have the the bar which you don't have because cash is king and as a financial experts like -- it's an absolute truth. The second concept is called opportunity cost it's a principal for economics rather it's about the official economics definition -- material eyes crossed the basically it to define. -- opportunity cost is its money that you spend on something that can't be spent on something else. For every dollar they spend on say a food that's Dolly can't spend on music cranked it seems like a logical thing assailant. Every minute you spend at a job as a -- he can't spend doing something else every night had to go out to clubs and he can't spend preparing for exams right makes sense. Opportunity cost. Is important for debt reduction because every dollar you spend paying on debt is a dollar that you can't use now for anything else. Once -- allocated that dollar to that it's god. That is one the principal reasons well why we always -- paying cash if you can. Especially a small stuff like food and hanging over random daily consumables but more on that it. The third concept. Interest is ripped if you rent an apartment from a landlord you are essentially renting these four walls of Florida ceiling -- door to. Renting that space means that you're making use of someone else home for yourself. The opportunity constable landlord is that while you're living in his or her place big -- reliving their -- so. In exchange for you living there you factually have to pay him or her to live somewhere else. When you -- in the apartment belatedly gets back and you stop -- Debt of any kind student loans student credit cards mortgages auto loans payday loans any kind of -- whatsoever. Are effectively rentals of someone else's money. While you're using their money they can do anything else that might as well you've got it so when you borrow someone else's money you have to pay the rent on it. The same we pay rent to someone to -- apartment. If you fail pay rent an apartment what happened to get evicted you stepped up the sidewalk you know the usual things. If you feel pay rent on your loans you effectively get evicted from that money right the most -- specify that if you default let alone which means stop paying the rent. The loan becomes immediately do plus the -- do on the loan plus fees. These three concepts while important individually all tied together put together and they'll help you understand why you're in debt. And TV close to working way out of debt. Here's how you title together. A number one avoid borrowing began. At the end of it all you were borrowing from yourself you fundamentally taking away money from your future self the -- futures -- could use for other things like alma living well having fun of something like that. If you have to borrow. Ball at the lowest ranked you can get now public apartments -- quality and location right you know there's some apartments that a nice of apartments that are intended -- neighborhoods in the and the -- very. When you renting someone else's money of dollars a dollar doesn't have the matter whether you know -- the dollar from a big bank a small bank credit in the dollars dollar. Renting one next dollar is no different than another bank's dollar in terms of quality still buys the same thing so. What what does change from bank to bank is the rent -- to pay which of course is the interest rate you want the lowest -- possible right. Finally when it comes to repaying your debts. Your goal is to pay back debt as fast as possible because the longer -- someone else's money even at low rent and you're still paying more is still spending more on retton that's less money how about other things so. To pay back debt as fast as possible. So now we've got these three basic concepts down let's talk about reducing your debts. If you've ever gotten lost -- driving. You know that just driving around randomly usually leads to getting even more lost really doesn't mean I'm just pick direction drive ever -- get on lost. The same as to your personal finances. Doing stuff randomly on the spur of the moment typically just makes things force. So take a cue from driving the first thing to do when you realize you're lost the own debts is to stop the car and figure out where you are you do this with a budget. I can already hear some people think. Hum budgets that that pay. I get that we're not gonna be doing a massive multi page mammoth budgets each scene and monastic view in classes Lori I fancy personal finance suffered a -- in mom and dad bought you worry counts on prior about the intent for you know. In order to make sense your debts we need to avoid all the complicated stuff that got you into debt the first place. And that includes all the failed busing schemes of the past so here's a simple key concept. For your budget. Cash flow. Net cash flow budgeting is a concert taken from the corporate world from the business world. For many people specially most students 80% of the fancy budget terms and ideas and is simply don't apply to elect asset management depreciation and other things. And make your eyes cross but -- personal finance software seems to require because seems to think it's supposed to do everything for you don't need that. The only two key financial indicators truly mattered to someone who is in debt are. Number one how much cash is coming in the door this is income number two how much cash is going out the door -- expense. That's it to me to -- anything else is figure out those two things. To start in any given time period if she wanna have more cash coming in the door and going out the door you're guaranteed guaranteed a 100%. We guaranteed you'll never ever ever be port in your life if you always have more cash coming in the door and going out that are right. As silly as trite as that sounds it is true and you'd be surprised how many people don't know that. You always guaranteed to be in financial trouble always no matter how wealthy family is no matter how. Biggest strike in the next engine -- and you'll always be in financial trouble if you're always spending more than you're earning. How do you figure this out really simple take a blank sheet of paper -- any. -- line cheap paper. Draw a line down the -- on the left hand side put in cash in at the top of the paper. On the right hand side put cash out at the top -- tape this sheet of paper somewhere that you're gonna see every day. Ideally often throughout the day maybe -- on your desk maybe put it on the place we -- keys in your quality your credit cards what every one of to be in your face all time. Then throughout the week every time you earn money with a paycheck money for parents and kind of money -- if you remain independent musician album sales whatever. Right in the cash in the column. Any time throughout the week. Every time you spend money on anything anything at all even -- like fifteen cents on peace and -- small pack of Eminem's or something. Are you student loan payments whenever write it down on the cash out call. Do one sheet a week. And now at the end of the if you need more paper obviously he's more paper but do one of these things a week. At the end of four weeks stapled sheets together and -- up the months totals if you cash out column. Is bigger the new cash in column total you have some work to do. -- logically there are two ways to get things fixed. Number one you could increase the amount of money in the cash in column with a job or second job or third job of whenever. Or other sources of income. You can decrease the amount of money in the cash out common reducing spending and as many areas as he can while still meeting your obligations namely you bills. Since it's usually easier to cut spending than it is to add income because of course time is money. And -- poetry for hours in the day focus first on reducing spending another two fundamental types of expenses. There are things CEO must spend money on the -- debts the money you owe it to in legally bound to repay. This also includes basic quality of life things like a place to live food of some kind to the patents on and so forth -- personal finance -- gotten these are mandatory expenses. -- it's category two. There are things you can spend money on but don't have to do in order to survive. These things like him cable your mobile phone service eating out beer and so on and so forth and personal finance -- on these discretionary expenses. Everything and I mean. Everything in category two is up for grabs when it comes to making your finances work -- goal in managing your budget. Is to achieve a point where the money coming in the door equals or exceeds the money going out the -- Do whatever you need to do that's what's important to do that simple one page sheet every week so that. You can -- that she's at the end of the month and check off the things that you spent money on that chip probably shouldn't have. And -- you'll note not to spend money on those things again. So that's gonna wrap up the first part of this personal finance got to -- this in three key economic -- he need to understand the need to get those in your head. And it basic bunching guide your homework for this week is to actually start doing this but sinking like a citizen not hard you need a single sheet of paper. You need. A pen or pencil you could do it on computer if you want to do to spreadsheet here yeah whenever -- to a -- I don't care you do on napkins you can. You chiseled in stone you can write and you means forehead although they have a really big forehead. But no matter what you you have to start doing it that's the most important part. Next week we'll talk about you know stop getting into more debt and some other things prioritizing your -- and how to pay them off. And things like that but want to start this week with some basic personal finance stuff so stay tuned for next week. While we -- let's do ourselves a scholarship points code that way we have something fun to include in the -- Our scholarship points code for this week is going to be. 01720. You can redeem that at scholarship points dot com. Four -- twenty points towards -- is scholarships over a mutual is we have our 10000 dollar scholarship coming up. At the end of October and we have a 1000 dollar Scott scholarship every month. And we've got a new one and from now until we hit 500000 members of scholarship points the first person to refer. 500 friends on the affair -- program which sounds daunting but it can be done. The first person refer 500 -- a 500 dollar scholarship and we're actually talking around -- making that a permanent thing sort of you know every time. Someone -- five an offense will reset the scholarship but the there are still discussing that -- but anyway PA 1720. For twenty puts its scholarship points dot com. Thanks tuning into the financially podcast don't talk to next week take care."