﻿What’s up everyone, Logan here, my brother Tim just graduated from high school a couple months
ago, now he’s off to college, so I’ve created this video with him in mind because unfortunately
schools don’t teach kids personal finance by and large, I know one school in town does have
a personal finance class, but it’s not required and most schools don’t teach personal finance
as far as I’m aware, so today I want to talk to you recent high school graduates out there
as well as you parents of high school graduates, grandparents, aunts and uncles, feel free to
share this video with the high school grad in your life, in this video I want to talk about
how high school graduates can put themselves in a good financial position after they graduate from
high school. Because that’s a really strange time when it comes to money, for one thing
you have a lot of new financial responsibilities coming at you that you may not have had before,
and that varies from situation to situation, for some people their parents are still very
much a part of their financial lives, maybe they still live at home or are supported by
their parents in some way, that’s not everybody, but for some people that’s the case, and I think
the unfortunate thing is a lot of high school graduates think, “Ah, I still live at home or
at least mom and dad are still supporting me in some way or I have all these student loans to
cover my life for the next few years, I don’t need to worry about money, I’ll figure that out after
I get into my career,” and that tends to be the thought process, but the reality is now is the
perfect time to start building those habits, those financially wise habits because once you
start your career, whatever it is, and you go from making, what’s the federal minimum wage,
seven dollars and twenty-five cents an hour to double that or more, right,
if you’re an engineer or something like that, now you might have some extra income coming in,
OK what to you do with it? Build these habits now with a little money so that in the future when
you have more money you already know exactly what to do with it and you don’t waste it,
be good with a little and you’ll probably be good with a lot, don’t be smart with a little
and you probably won’t be smart with a lot. It’s not like all of a sudden when you start making
decent money that you’re all of a sudden going to automatically know what to do with your money,
it doesn’t work like that, and that’s why you need to start now and familiarizing yourself now with
these financial concepts so you don’t end up like everybody else because, look around you,
everybody else is broke. You high school graduates who are just starting your adult lives are in a
unique position right now to position yourself not only for career success over the next few years,
whether that’s going to college or trade school or some other career path, but also in a position
to set yourself up for a lifetime of wealth and abundance and don’t whatever the heck you want
when you want rather than a lifestyle of scarcity and want and stress. And you might not know what
you should be focusing on or what you can do to get ahead right now, so I’m going to tell you
or at least point you in the right direction. Obviously this is going to look different for
everyone, I can’t tell you there’s one specific change you need to make to be a millionaire by
twenty-five other than to get extremely lucky, maybe millionaire by thirty is possible depending
on your career and choices you make and the market and things like that, but there are a few general
ideas that I think will help you out, I know they would have helped me out if someone had told them
to me when I graduated from high school. So let’s get right into it, here are seven of the best
things you can do to improve your financial situation as a new high school graduate.
Number one, if you’re going to college, please make sure to take a close look at
how any student loans you take out are going to affect your finances. Of course I can’t tell you
whether college is right for you, there are so many factors that go into that decision,
but you don’t want to make that choice unless you’re sure that you’re ready for the long-term
impact it can have on your financial situation. I went to a state school, here in California,
go Bruins, but I still ended up with over thirty-five thousand dollars in student debt even
while working through college and that was before the big run-ups in the University of California
system in the 2010s, so I’ve been there, I know what that’s like, and if you too are needing to
take out student loans to finance your education, it’s really important that you understand
what those would look like before you sign your name. So first you’ll need to know how much you’re
going to need to borrow in total, but you’ll also want to know the interest rates attached
to those loans. The interest rates make a really big difference in terms of how much you’ll end up
paying, and it’s easy to overlook them if you’re just looking at how much you’re borrowing. And
remember interest compounds over time, in other words you have to pay interest on the interest
that has already accumulated, so any increase in the interest rate leads to an even greater change
in your overall interest payments. Along with the overall size of the loan and the interest rates,
you should look into the minimum monthly payment so you know what to expect after graduating.
If you’re taking out federal loans, look, are they subsidized where no interest accrues while you’re
in school or are they unsubsidized. There are all these things you need to know about student loans,
I can’t make this video all about student loans, but I guarantee you that that there is somebody
at your school’s financial aid office who will gladly explain your student loan situation to you,
walk you through the numbers, there is probably someone at your school whose job it is to do
that, and so few students talk to that person, they’re just waiting to hear from you
so they can help you understand your numbers. Find out who that person or people are at your school
and talk to them. Make sure you understand your student loan situation because unless
you’ve been living under a rock, you know that student loans are crippling a large subset
of the young American population from really getting ahead in life and I don’t want you to
be one of those statistics. And finally I would recommend researching the job market for people
in your career path in order to determine what your budget will look like when you’re paying
off those loans and trying to build a life for yourself after graduating from college. Student
loans can sometimes be a good investment, even if you’re borrowing tens of thousands of dollars,
but you shouldn’t take that step until you know that it makes sense for you.
Number two, live at home as long as possible. I know that’s not a super exciting piece of
advice, and again it’s not the right decision for everyone, but there are a lot of benefits
to staying at home after high school until your finances are a little more stable. In a
lot of cases that’s where you’re going to know the most people, that’s where you’ll be able to find
jobs, and you won’t have to worry about moving costs, putting food on the table, et
cetera. Even if you pay some rent to your parents or you chip in in other ways,
it’s almost always going to be a lot cheaper to stay at home than it would be to rent an apartment
or something like that. So if that’s something that’s practical for you then I would recommend
doing that until you feel like you’re ready to leave without having to worry as much about money.
There is of course a flip side here, and although I went to college when I just turned seventeen and
never lived at home again apart from a couple summers,
I’m speaking from the perspective of someone who has always lived in a major metropolitan area.
I understand that if you are from a very secluded town like for example, Crested Butte, Colorado, or
Marfa, Texas -- I just looked up a list of the most secluded towns in the U.S. -- I get it,
there may not be career opportunities there for you and you may have to look elsewhere. That said,
especially along with the COVID pandemic, so many places are allowing remote work now
that it’s possible to potentially still live in Crested Butte but work for a company in New York.
Some of my wife’s and I good friends actually recently moved to the Nashville area,
he’s a CPA like me, and he found an accounting job at a tech company in San Francisco,
but he lives in Murfreesboro, Tennessee, and that’s really working out for him. That said,
word on the street is that many companies are looking at cutting pay for employees that choose
to permanently work from home, they’ve obviously already received some backlash for this, of course
time will tell how these scenarios play out. Number three, set up a budget that makes sense
for you. I have a quick ten-minute guide to budgeting here on the channel, there’s a
link to that video at the top of the screen as well as in the description below, and I highly
recommend checking it out if you’re new to the idea of budgeting your income and your expenses.
I’m not going to have the time to get into the details of those steps in this video, but the
first thing you need to do is figure out what kind of budgeting is right for you. Some people prefer
the old fashioned method with a notebook and pen, but there are also a lot of websites and mobile
apps that take some of the busy work out of your hands and make it simpler to get started. Also,
in my Prosper course, coupon code in the description below, I tell you my method for
no-fuss budgeting. But whatever works for you, the important thing is that you find a strategy that
you’ll be able to stick to over time, hopefully even after you move out and your budget starts
to look a little different. And the closer you get to moving out, the more important it becomes
to have a little financial cushion to get you started when you’re living on your own.
Number four, get a side hustle or a summer job. You don’t have to work 40 hours a week to make
money, obviously you can if you’re comfortable with that, but there are easier ways to transition
into making your own money. Maybe you can find a part-time job, maybe you or your family knows
someone who could use some extra help, maybe you can even start a side hustle on your own and start
earning some extra money without having to work a nine to five. I know that starting a business or
a side hustle can sound scary or overwhelming, but there are so many ways to generate a new source of
revenue. Some of you may even be thinking about starting your own YouTube channel,
you might be wondering how much you can make as a content creator, and I put out a video on
that topic last year so please check that out if that’s something you’re interested
in, link to that video is at the top of the screen as well as in the description below. And even
if you’re not working 40 hours a week or bringing home a full-time salary,
just being able to put some money in your pocket will be really helpful as you work out
a plan for those years after high school. Number five, start contributing to a savings
account. For adults I would usually recommend something like $1,000 to get you started with a
basic emergency fund, and eventually I think most adults should have around three to six months’
worth of expenses saved up just so they aren’t too vulnerable to any unexpected circumstances. Now
that’s obviously overkill if you’re living at home and you don’t have many expenses in the first
place, so you don’t need to start working toward a three or six months’ emergency fund if you’re
in that situation. But even so it’s still good to get used to the idea of saving extra money because
even if mom and dad are there for you now, one day they’re not going to have your back financially,
and if you don’t have the five hundred bucks for a car repair or emergency dental work
or what have you, you can get into a cycle of debt that’s extremely difficult to get out of,
and the way you avoid that is by having an emergency fund. You don’t want to get in the habit
of spending all the money in your account, and even if it’s just a few dollars a week
it’s still moving in the right direction. Number six, open a Roth IRA, that stands for
individual retirement account, which is a kind of individual retirement arrangement.
I wasn’t thinking about retirement when I graduated from high school, most of you probably
aren’t either, but this is actually one of the best things you can do for yourself financially
when it comes to the long term. Now you do have to have some income in order to contribute to a Roth
IRA, you can only contribute as much as you had in earned income for that year, but even if you
just make a few thousand from a summer job you can get a lot of tax benefits by putting that into a
Roth IRA. Basically how that works is you make contributions out of your income, and you have
to pay income tax on those contributions in the year that you earn the money, but you won’t have
to pay any income tax or even capital gains tax when you take the money out as long as you follow
certain conditions. And one thing a lot of young people don’t know about IRAs is that your parents
can also give you money for you to contribute to your account. Now those contributions can’t exceed
your earned income, so if you only earn $3,000 in 2021 then you won’t be able to contribute any more
than that. But let’s say you earn $3,000 through a summer job, well even if you spend most of that
your parents can give you some extra money to contribute your full earned income. So that’s
a good way to start saving for retirement if your parents are in a position to give
you money for contributions. Again the maximum you could contribute to a Roth IRA this year
is the lesser of six thousand dollars or the actual amount of money you made from your job
or netted from your side hustle, minus the deduction for self-employment tax,
and you would have to make that contribution by April Fifteenth of next year. That said, there are
definitely some things you should know about Roth IRAs before jumping into one, I recently published
a video on my channel about fifteen Roth IRA warnings, be sure to check that video out before
setting up your Roth, link at the top of the screen as well as in the description below.
Number seven, think about getting a credit card. I know that credit cards
are made out to be this big scary thing when you’re younger, and they do carry a lot of risk,
it’s important to take them seriously, but at the same time there are also a lot of irrational fears
about credit cards and a lot of myths surrounding the things you actually do need to be concerned
about when you get your first credit card. So I want to quickly go over some of the pros and cons
of getting a credit card so that you understand what you’re getting into
and you can make a more informed decision. 1. Pro number one is that credit cards give you
the opportunity to build credit, that might not be a big deal when you just finished high school
and you’re living at home, but it will be a lot more important later on. Your credit score
is going to impact your ability to apply for all kinds of credit including personal loans,
auto loans, and mortgages and it can also come into play for other things
like renting an apartment. Credit cards are a really easy way to start building credit,
you don’t have to take on any major financial obligations, you can just charge a few
small purchases or recurring subscriptions to your card and then pay that balance off before
it has the chance to accumulate any interest. 2. Pro number two is that some credit cards allow
you to earn rewards, those rewards usually come in the form of cash back or some kind of points
system, so you’ll get some percentage of your spending back just by charging it to your credit
card. Unfortunately your options when it comes to rewards cards are going to be pretty limited at
first since you won’t have much of a credit history, but there are a few decent starter
credit cards that are designed for young people and others who are looking for their first card,
in the description below I have a link to a list of good starter and student credit cards
that you might want to check out. Anyway, your credit score will naturally go up as long as
you pay off your balance on time every month, and over time you’ll get access to cards with
better and better rewards like the ones I review here on the channel. Obviously you don’t want to
spend money on your credit card just to get the rewards, that’s part of what the credit
card companies are trying to get you to do when they offer those perks, but it’s better
to earn something rather than nothing on the money you were going to spend either way.
OK that covers two key advantages of getting a credit card, but as I said you can get in
trouble if you don’t know the risks of having a credit card or if you don’t take them seriously.
So there are two negatives I want to talk about before I wrap up the video.
1. Con number one is that your credit card can do the exact opposite of helping you earn money
if you fail to make those on-time payments and you let your balance roll over from
month to month. Basically how that works is your monthly statement will close on a specific day,
all your charges from that month will be added up minus any payments you made during that time,
and then your credit card provider will send you your statement balance.
From there you’ll have a certain period of time, usually between around three and four weeks,
where you can pay off that balance without having to pay any interest. The problem is that if you
leave any of the balance without paying it off, you’ll then be responsible for the interest based
on the terms of your credit card agreement. And credit cards tend to have higher interest rates
than almost any other form of debt so it’s easy to lose control quickly. That’s not so bad if your
balance is something like $20, in that case you’ll have less than a dollar in interest per month,
but it can turn into a real problem if you carry a bigger balance. Let’s say you rack up a balance of
$1,000 on your credit card, it’s easier to do than you might think, and let’s say your card charges
20% in annual interest. Well if you can only pay off $25 of that balance per month, then you’ll end
up spending a total of $559 in interest on top of the original $1,000 that you charged to the card.
So even though credit cards can be a really powerful financial tool when you use them
correctly, you don’t want to underestimate how quickly they can become a problem
if you lose control of your balance. 2. Con number two is similar to con number one,
but with your credit score instead of your wallet. As I said before a credit card can
improve your credit score and give you some extra money if you use it correctly,
but falling behind on your credit card payments is one of the best ways to tank your score. Yes
it’s a good idea to start building up your credit as soon as you have the opportunity,
but the key is that you need to do it responsibly. So if you’re not in a financial situation where
you can pay off a credit card balance every month, or if you just need more time to get on your feet,
remember there’s nothing wrong with waiting to get a credit card until you feel a little more
comfortable. And that way you’ll be able to take advantage of the good aspects of credit cards
without having to worry about falling behind on payments or just getting in over your head.
Of course there’s a lot more I could say about credit cards,
I do talk about some of the pros and cons in another video on my channel, and there
is a link to that one in the description in case any of you want to check it out. Anyway,
I hope I was able to point all you new high school graduates in the right direction
here financially and maybe answer some of your questions about handling your own money. As always
I want to thank everyone for watching to the end of the video, I really appreciate your support
for the channel, if this video was helpful for you or a new high school graduate in your life,
I would really appreciate it if you hit that like button down there and give me a nice thumbs up,
and be sure to check out these other videos on Roth IRAs right here and right here, very,
very useful type of account for most young people, and I’ll see over in those videos.