J Money at Budgets Are Sexy wrote yesterday about why schools teach about the stock market. It got me thinking about my personal finance education.

During my senior year of high school, one of the school administrators came into our class and began to talk about finances. I didn’t realize it at the time, but what she was really talking about was personal finance.

She spoke about balancing our checkbook, not going overboard with purchases, and using credit wisely. Most of the advice she gave was vague (what does using credit wisely mean? I didn’t even know what mistakes I COULD make!), and parts of it didn’t apply (What is a checkbook??).

Back then, I was interested in saving my money instead of wasting it, but I didn’t realize exactly what college would be like. I didn’t know that eating out can get expensive, that going out, new clothes, and video games would all be coming out of MY bank account. None of that applied to me in high school, and this lecture didn’t help get me on the right track.

In college, I took three economics classes, two accounting classes, and one finance class. I remember very little from those classes, although I do remember learning about supply and demand. What I didn’t learn was how much money I would need, where that would be coming from, and that credit could be your best friend or your worst nightmare.

I didn’t know anything about student loans. I didn’t know the first thing about retirement, and I had no clue why I would be doing any long-term investing. I was focused on making $2,000 in the summer so I could survive the year without running out. And for me, running out meant running out. I didn’t even know how to get a credit card, and I’m glad, because I definitely didn’t know what 19% APR meant.

If I could speak to the high school class of 2010, I would say:

1. If your parents are going to be paying for any portion of your college tuition, go home and thank them. They spent a lot of time working so you could live a great life, and you should appreciate that, even if you don’t understand that they gave up vacations, a nicer house, and a fancy car.

2. Learn about credit. Here is a nice first resource: Credit Series. Try and build your credit throughout college if you can. If you skip that reading, at least know that you will hurt yourself if you open a credit card at a football game in order to get a free t-shirt.

3. Set up a budget. Figure out what is most important to you and spend your money on things that make you happy. You will quickly realize that you don’t have enough money for anything, but you can stretch your dollar enough to have money for what you really want.

For those in the 2010 college class, I would give them this advice:

1. If you choose to start work now, work to get out of debt quickly. Compound interest will hurt in a few years. But if you get out now, it will be your best friend and retiring at 45 could be a real possibility. If you hate doing homework now, think about how nice it would be to be able to stop working 20 years before everyone else.

2. Build a Budget – Find out how much money you will need to pay for necessities. Sign up for Mint.com, keep track of your finances, and make a budget in a few months. Save 20% for long-term goals and spend 10% on whatever you want (travel, video games, going out).

3. Open a Roth IRA. Don’t worry about trying to time the market or earn 20% a year. Doing that is like playing poker online. You COULD do great, but you could also lose your money quickly. You don’t want to risk your money like that.

I think it’s a big problem that students are forced to learn hard lessons on their own. While it’s nice to learn technical skills, it wouldn’t be hard to create a class where students learn the upsides and downsides of money and the basics of budgeting, credit, retirement, interest rates, mortgages, and the like.

I found my accounting class extremely boring. I KNOW students would rather learn about topics that apply to their lives. Believe it or not, college students like gaining knowledge, and if they are provided with classes that interest them, they will be much better off in the future.

This is a guest post by Bucksome, a baby boomer trying to make the most of her money while saving for retirement. Read more about her at Buck$ome Boomer’s Journey to Retirement. Subscribe to her RSS feed to follow new posts.

The common goal all people have when managing money is financial success. But what does that mean?

The dictionary definition of success is “the favorable or prosperous termination of attempts or endeavors“. Adding the adjective “financial” would mean positive results pertaining to money matters. There are many ways to measure monetary outcomes.

Debt Reduction

When I made the final car payment recently (six months early) it was a great feeling. Not as good as those who get to call up Dave Ramsey on debt-free Fridays but nice nonetheless. Reducing the debt load or eliminating a payment can be success to those with outstanding obligations.

I have short term and long term goals related to debt ranging from paying off consumer debt to burning the mortgage.

Savings

A second way to measure financial progress is savings. There are all kinds of vehicles people use to save ranging from emergency funds to retirement plans. You’ll see many personal websites with various savings tickers.

If you are out a debt, the next financial goal should be a fully-funded emergency fund. Daniel’s written about his goal to fund a $5,000 emergency fund. Saving for retirement will most likely be continual during working years.

Net Worth

If you have no debts and have met savings goals then net worth is the another way to measure financial progress. You’ll see blogs that regularly update the author’s net worth figure. The problem with this method is that it can be volatile.

Just ask anyone who owned real estate in Michigan, Nevada or California the past few years or invested heavily in the stock market. We saw a plummet in net worth which is still recovering.

Financial Success

Meeting your monetary goals however measured is what counts. For us, financial success will be a comfortable retirement with no debt and more than enough savings. I hope to see you there too!

As you know, I chipped my tooth on Tuesday, but unlike last time, I was prepared. I put $400 in my FSA about two weeks before I chipped my tooth the first time, thinking that it would last until 2010. I was wrong, but chipping it again on Tuesday gave me a reason to use some of my FSA. I purposely set money aside to fix this exact problem, so the funds would serve their purpose.

Of course, since I had planned and was prepared to take care of the bill, the very nice dentist told me that since I broke it so quickly after she fixed it, I wouldn’t be charged. Awesome! But now I have a lot of extra money in my FSA that I wasn’t expecting. It’s not really a problem because I can always buy extra contact lenses, nicer glasses, and stock up on over the counter medicine, but I was excited to be able to use my FSA, and she ruined it! Still, I really like knowing that should something else happen to me in the next year, I won’t have to pay out of pocket.

Also, one nice thing is that my FSA allows me to use my funds up until March 31st of 2011. Which means that I’d be able to pay for a January 2011 dental appointment with my 2010 funds. It also means that I don’t have to worry about finding ways to use my funds for quite awhile. Three dental appointments, various over the counter medicines, cough drops, and a first aid kit should cover most of those funds. And if something does happen, I’ll be prepared.

It’s very hard to judge how much money should go into an FSA. If you put too little in, you’ll have to pay for some expenses out of pocket. If you overestimate how much you’ll spend, you end up throwing away money that could have gone towards your paycheck. I thought I did a good job, and then I had my tooth fixed before I needed it. Then I broke it and was on track again. Then the dentist did me a favor and I may have some money left over. Oh, well, I guess this is a very good problem to have.

In college, students will do just about anything for money. Many kids try online gambling, donate blood, or participate in medical studies with potentially harmful side effects. When kids are in need of money, they are willing to go to great lengths to make money (even if that means using morally questionable techniques. Here are two short stories about how I was able to abuse the system in order to stay frugal as a college kid.

6% = ??

When my roommates and I moved into our new apartment, we needed lots of new furniture. So we headed over to IKEA, where we found everything we were looking for. As we headed over to the checkout, we noticed a sign offering a coupon for your next purchase worth 3% of today’s purchases if we used a debit card. Plus, if we waited a week before redeeming it, that coupon would double. Not bad, but for the $300 worth of kitchen supplies, it came out to only $18. Worth taking a separate trip? Probably not.

But then we came up with our grand scheme. Why not buy $5,000 in merchandise, get the coupon (for $300!), return all the merchandise, and keep the coupon?! It was a perfect plan, so we went around the store looking for the most expensive item that we could fit in our cart. We found comforters for $300 each, piled them into our cart, and headed back over to checkout. The plan worked perfectly. We had no problem returning the comforters just seconds after purchasing them, and we had ourselves a nice little coupon.

The next week, we headed back over to IKEA to pick up our kitchen supplies, bought our $300 in merchandise using the coupon, and suddenly we had a kitchen full of beautiful pots and pans without costing us a penny. We were proud of our catch, but did we do the right thing?

Free BBQ Sauce

At our local supermarket, my roommate found barbeque sauce for a dollar. Each bottle came with a coupon for 35 cents off a bottle, plus a special offer doubling the coupon, plus a manufacturer’s coupon for a dollar back with the purchase of two bottles. He quickly realized that for two bottles, we would actually make 40 cents ($2-$0.7-$0.7-$1). He brought me back later in the day and we bought about 60 bottles of barbeque sauce, for free!

Better yet, we came out with $12 in coupons to use on our next purchase of anything in the store. Needless to say, lunch and dinner that day were free (actually as college kids, it was more like a week’s worth of pasta and sauce). Illegal? No. But did we abuse the system to get ourselves over $70 in free food? (If anyone needs any barbeque sauce, I’d be happy to give you some of ours.)

Since starting work, I’ve made a pledge to get what I deserve, but not take advantage of other people. I’d like to think that I’ve grown, but maybe now that I have a job, I won’t compromise my moral integrity in return for a few dollars. If I lost my job and was tight on cash, would I revert back to my “frugal” college ways?

If you’ve ever bought or sold anything on Ebay, you know that Paypal is the most convenient and most widely used form of payment for transactions.

Paypal is really convenient. You get paid immediately and can transfer the funds immediately after getting paid (there are some restrictions) to your bank account. It’s one thing you don’t have to worry about and you definitely save a lot of time not having to be concerned about accepting certain credit cards and processing payments. It’s automatic and you don’t have to deal with it.

Of course, with any service, there are fees. Paypal takes part of every deposit that comes to your account, for business accounts. For a $250 transfer into your account (from your own bank account), you would pay over $6.50. That’s almost 3% just to fund your account. And of course there are fees for accepting payments too. Another 3%. So if you’re doing business regularly and there is money coming in and out of your account, you can end up paying a lot for this convenience.

There are no other tools out there that do what Paypal does and is used and accepted by so many people and online stores. When using Ebay, you actually pay two sets of fees: Ebay fees and Paypal fees. This can really cut into your profits and you should calculate this when deciding on the price you want to set for your items.

I just received $40 for selling an item, and of that, actually received $38.54 after the fees, which is over 3% in fees. Not horrendous, but if you’re doing a decent amount of business, it definitely adds up. Paypal is a great service and there’s no replacement. But know that you’re paying for that quality. With all the free services out there, I’m surprised they are able to be THE go to payment service with little competition from others who would accept smaller fees.

This summer, Paypal sneakily rolled out new fees of 2.9%, plus 30 cents for payments classified as “Goods” or “Services.” Previously these types of payments were free (typically they were used for transfering money between friends, or having money transferred from outside of Ebay), but without alerting anyone, Paypal added these fees to all types of accounts. They sent an e-mail regarding the positives changes that were happening, but that email didn’t say anything about changes to the fee structure.

Enjoy this service, but be aware that with Paypal, you are paying a high premium for the convenience of using their service. For awhile, Google Checkout provided comparable service for free, but started charging similar fees earlier in the year. At least they were up-front about it. I’m interested to see when the next service will roll out with lower fees and higher transparency.

In college, at the beginning of every semester, I told myself that I was going to stay on top of my reading. I was really excited to be responsible. The only problem was that the booklist hadn’t been released yet, so while I was able to tell myself I was going to do something, the reality was that I couldn’t really get anything done.

This used to happen a lot to me, whether it was in school, when planning to run (it was raining that day), or job searching (I’m going to get a good job by networking. But the career fair isn’t until next week). It’s very frustrating to want to get something accomplished when we are unable to. At the same time, by telling ourselves that we WILL start, that starting at a certain point we’re going to be better, we’re putting a stumbling block in front of ourselves.

Sometimes it’s hard to take action immediately, but there are always things we can do. We can ask friends what book was used last year, we can decide that running in the rain isn’t actually so terrible, and we can go find out which employers will be coming to the career fair and make a plan.

We love putting things off, and quite often, by doing this, we hurt ourselves. Still, there are almost always things we can do immediately to improve. Here is a list of 5 things we can do today to improve our financial lives:

1. Create a Budget – Create an account at Mint.com and find out where you can cut down expenses.
2. Adjust your Withholdings – Are you overpaying on your taxes when you could be
3. Open a Savings Account – I absolutely love my ING account, so sign up and set up an automatic savings plan to deposit a certain amount each month. Plus, email me and I’ll send you a link for $25 when you sign up!
4. Read! There are tons of great personal finance books out there than can help you make significant changes in your lives, and there’s nothing more important than getting educated.
5. Negotiate – Call your wireless carrier, your cable company, and your internet provider and ask for a discount for being a long-time customer. Or explain that you don’t think you will be able to continue service at the current rate, and they will most likely be willing to work with you.

There’s no reason to put off until tomorrow what you can do today. So get started changing your life right now!

Being Frugal
I’ve always believed in not paying full price. That used to mean just looking for coupons before making big purchases, but it slowly turned into watching the prices of external hard drives drop while the amount of space offered increased drastically. Of course, by the time I decided that I had found a good price, it was time for a new computer, which came with more space than I knew what to do with. I’ve also learned how to reduce monthly bills and have had literally thousands of dollars taken off various AT&T bills, some because my brother decided to put his SIM card in an iPhone without paying for a data plan, and others because I simply thought that our family shouldn’t be paying for things like text messages. Or minutes.