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          Let me preface this by saying that if you are in the target audience of this blog, I believe you are too young to even contemplate getting married.  You simply don’t have the maturity to take care of someone else— most likely you can barely take care of yourself.  You are in a time where everything is way more intense for you than it will be in a week, or even a month from now.  The person you are sure is “the ONE” today may not even be someone you are speaking to tomorrow.  You are going to go through many changes in taste of people between now and when you are actually ready to settle down with someone.  That being said, I am a realist, and I know that there are those among you who are in a relationship, and are considering taking the next step.  Before you do this, you should consider some basic ideas and evaluate moving forward.          

     I don’t want to turn this into a morality lesson, but one of good financial management.  In addition to all the warm, fuzzy, feelings that you may be feeling towards this person, you should also look at reality.  Marriage, or any long term commitment, will eventually cross into a financial arrangement.  This is where many young people start making mistakes that too often result in divorce.  In fact, money is often listed as one of the causes in divorce cases.  Whether it is a difference in philosophy, or a terminal lack of management skills, a household with financial troubles often becomes a broken household.           

     When you think you have found the one, you should be comfortable enough to talk to that person frankly about finance.  If this is not a comfortable topic, that should raise huge warning flags for you.  Consider that you are contemplating spending the rest of you life with someone.  You should be able to talk to this person about anything.  If either you or your prospective can’t do that, take it as a sign that you may still need a little more time to mature.  If you are able to talk about finance, you should make sure that your goals and those of your prospective’s are in-line with each other.  Do you both want to have the same standard of living?  If not, is there some middle ground where you both can be happy?  Do you both understand the level of work and commitment to these goals is needed to make them come true?  The answers to these questions should help serve as a guide to how ready you are to make any kind of commitment, or if this person is the one you thought they were.          

     If you have been smart about your own finances, you manage your income well, pay your bills on time, have a positive credit history established, and are working towards financial liberty, you recognize all the hard work that you have put into it.  You want someone who has a compatible philosophy about finance, who has done the same amount of work to stay in a positive track.  To this end, NEVER, EVER, one more time, EVER assume someone else’s debt because you think this may be “the one”.  I’m not making a judgment on the person with the debt, and I’m not questioning your love for the person, but you are not doing anybody any favors if you pay off someone else’s debt as a precondition to being in a relationship.  In fact, doing this will usually only end up in hurt feelings if that person isn’t able to pay back the loan, and may make them angry if you even call it a loan.  If you call it a gift now, when things are good, you have lost that money if the relationship ever turns sour.  There is no way to win here.  Once you have made a commitment, any debt incurred should rightfully be paid by both of you, but not before.          

     Prenuptial agreements are a tricky thing to talk about with some people.  Some people try to equate intelligent planning with a lack of trust or love.  These people are programmed to believe that you don’t love them if you are protecting yourself from financial harm.  Others will tell you that you don’t have anything worth protecting now anyways, and a ‘pre-nup’ is pretentious.  I would ask these people if they would like you to believe that you will always be in the same financial situation you are in today.   Pre-nup’s are not just for the rich, they are for anybody who wants to avoid a huge messy fight over the least important aspect of a marriage should that marriage ever fail.  Some people will tell you that prenuptial agreements are for someone who is planning on getting a divorce.  I object to this because I believe that to say that pre-nups are planning for divorce is to say that insurance is planning for an accident, or that a will is planning for death.    You are planning on living, but if something does happen that interrupts that plan ever comes up, you are prepared.  I believe that knowing you will never have to have a fight about the separation of money takes away some of the stress of marriage, helping to ensure that your marriage will last longer.

When I dealt with consumer loans, I dealt with a lot of people who wanted to buy a car.  While each application is unique, there are a few things that always stick out in my mind as “red flags” when somebody is applying for a loan.  Since most young people have little or no established credit, if you plan on trying to finance a vehicle, take a look at some of the application mistakes, and avoid them at all costs.

1.  Multiple Loan Signers:  I expect to see one person applying for a car loan, or maybe even two.  As long as I can see a legitimate relationship between the two applicants, I don’t have a problem.  Occasionally, there will be three or more people trying to apply for credit to make a vehicle purchase.  As a matter of policy, some lenders won’t even look at these types of applications.  While others will, there should be extreme circumstances before you try this.  When I see three applications, I also look at three credit reports, three sets of income verification, and three stories as to why the third person is needed.  What usually happens, is that there is some aspect missing from one or more of the applicants that will cause a denial.

2.  Dishonesty in the application process:  I know that mistakes happen, but when you are filling out a loan application, you are also telling me that you are affirming that what you said in the application is true and accurate.  As soon as I catch a lie, that loan will almost always be denied.

3.  Job Hopping:  When you are young, you usually don’t stay in a specific job for a while.  This is a huge red flag for loan officers.  We are going to look for at least two years of steady employment, and when we see several jobs during that period, we question that you will be able to make your payments on time.

 4.  Be Prepared:  If you are shopping for a car, you know that you will usually have to follow some sort of application process.  This process almost always includes some form of income verification.  The easiest way for you to do this is by applying for your loan at the same place you have your banking.  The most common way is by providing copies of pay-stubs or of filed Federal Tax Returns.  Some people wind up having to scrap a really good deal because they weren’t prepared for the application process that they were starting.  Morale:  Always carry your income and work verification when you are doing your shopping.  That makes you one step closer to completing the sale.

 There are of course, others things to be aware of when you are applying for an auto loan, but this will help you to avoid common mistakes.  In the next few posts, I will be going over some more of these common mistakes, so stay tuned. 

Some of the young people who have been reading along have asked me this question a lot lately.  The conversation usually starts off pleasant enough, but it usually dissolves into a full on rant.  And if they ever get to tell me their side, I imagine that it won’t get any better!

I can give you all the advise there is about the difference in financial institutions, I can even pick the right one for you.  But the best institution in the world won’t do you any good if you don’t have the discipline needed to set up and stick to a proper budget!

The word budget to teens, acts like garlic on a vampire.  Stick with me here because this is going to be an important lesson!  The fact of the matter is, nobody wants to think of limiting their enjoyment of the fruits of their labor.  I know I don’t, and I’m pretty sure that you don’t either.  That being said, I now have to ask, “So What”?  Having been in a position where I was a very young man making a very respectable living, (and consequently having blown it on nonsense), I know that there is way more to life than the instant fix we have all been programmed to seek.

So we have to be realistic about what we really want, and what we are willing to work for.  When I was a teen living at home, theoretically, I could save every penny I earned, and retire now.  In theory that sounds good, but the reality is that I wasn’t willing then, nor am I now, to make that kind of sacrifice.  There are some things that I just can’t live without.  There are others that, while I could live without them, I choose not too.  There are yet others that I really don’t care one way or another about, but I usually wind up getting them anyways.  This has always been the case for me, and I’m sure it’s not that different for you.

 What worked for me, was writing down my plan.  My paycheck rarely changes from period to period, so it’s kind of easy to figure out what I take home on a monthly basis.  Since most bills also come on a monthly basis, it’s even easier to figure out what it is that needs to go out.  The difficulty comes when I have ran out of incoming, and still have several outgoing still waiting.  It is for this reason that I now rank each of my expenditures on a 1-10 scale of importance.

 The entire scale is reprinted in my upcomming book, Finance For Youth:  The Book, (look for further announcements this year!), but the gist is this; most of what I spend is a “5″.  I don’t NEED it, but I’m also not willing to do without.  There are some things that are “10’s”, meaning I cannot do without, (food, gas, etc), just as there are a few “1’s”, stuff I really don’t need, and don’t particularly want either.  The real secret of how this works, is honesty to myself.  I have to ask myself every time I look at my finances, “Do I NEED that thing?  Would I feel good about telling my wife I spent as much as I did on that thing?”  If the answer to either of those questions is no, I move on to the next bill, downgrading the original, until all my major bills are paid, (on time!) and I still have money left over.  This money goes on buying some of those things that fell lower on the list.

 What types of things are a “10″ in your budget?  Is it really a “10″, or are you trying to justify to yourself your spending a lot of money on something you really don’t need?  Once you have started this process, don’t forget to make sure it’s in writing, and don’t forget to stick to it!  You’ll be surprised at your success!

I’ve been asked, “But what about me?  I’m not ‘youth’, and it’s already too late for me to follow your advise.  Where were you when I was young?”  To those people, I’m sorry I wasn’t there when you were young.  That being said, I’m here now, and most of my advise is as true for a 30 year old or a 50 year old as it is for a 17 year old.  While you are the only person who will know your financial picture, the strategies presented here, on my website, and in my upcoming book, (hopefully out before the end of the year, stay posted for details!) will work for almost anybody.  The people who taught me weren’t youth, and I’m no longer a youth, and I practice everything I preach!

If that’s not good enough for you, then it’s time for something a little more drastic!  Finance For Youth will soon be spawning, Finance For YOU, an off-shoot that will provide tips, strategies, and advice for those who don’t consider themselves to be ‘youth’.  If this is you, please email me @ wil@finance4youth.com, and leave any questions, comments, or concerns that you would like to see covered in a future editions!  Also, remember to continue to read these pages, as well as my pages on myspace.com, and of course, finance4youth.com.

Thanks

-W

I was recently posted a comment to another ‘blog where online banking was touched on.  That prompted me to talk here a little bit about this service, which I feel will become the standard in our lifetime.

Online banking, which should also include direct deposit, ATM, and Debit card, in addition to the traditional, online access to your account, bill payment, and paperless statements and correspondence, is a definite, “win-win” for both you and whatever institution you deal with.  They win, because they are able to cut back on some of the expenses that traditional brick-and-mortar branching presents, which can either mean increased profits, (banks) or increased investment into other products or services, (credit unions).  A smart consumer wins because they have more convenience and access.  How much more convenient can it be when you have access to your account at 4:00 am, on Sunday?

Like anything else, there are some things to be cautious of when dealing with online banking.  First, you are putting a lot of your information out there for any identity thieves to be able to find.  If you are not extremely careful about where you access your account, as well as what information you make available, you could easily be cleaned out, and because the Internet is widely anonymous, finding the criminal(s), (as well as your money) can be difficult.  Additionally, some transactions that are relatively simple when done in an actual branch can become more difficult if the transaction is done online.  However, if you are wise, regularly change your online access password, and use standard safety protection when accessing your accounts, you should be fine to use online banking.  When using bill payment services, if you, like most of us, are living hand-to-mouth, you could also run the risk of drawing your account negative if you have automatic payments set up.  On the other hand, if you don’t have them set up, you run the risk of forgetting a payment, which will also have bad consequences to you.

 Personally, once I found the services, and learned how to use them, I have never looked back.  The institution that I deal with allows a lot of account control that I like.  I have my direct deposit going to one account, where I have a bill payment set up for automatic withdrawals of pre-set amounts into my other accounts.  This takes away a lot of busy-work from my life, allowing me to focus on more important things.  I also have most of my bills, (the ones that don’t vary in amount) set up to come out automatically.  Not only does this save me the time in writing the checks and the price of postage, but it is also easier to track if there is a problem with them receiving payment.

If you decide to join the online banking bandwagon, look for a simple service, where you can easily understand and navigate the portal.  Also, you want to make sure that the people who are there to answer your questions are familiar with the product.  Do this by calling customer service and asking some questions and deciding how comfortable you are with their answers.  Most importantly, make sure that the service you sign up for is free!  As I said earlier, the bank or credit union are getting a bargain here too, they shouldn’t get even more by charging additional fees for you to access your own account.

Let me know some of your online banking triumphs and failure.  If you have a good story, or a precaution, maybe others may have the same issue and are waiting for a resolution.

 -W

Are you the type of person who likes to be left alone?  Does the idea of having to, (gulp) pick up the phone and talk to someone about a difference you noticed when reconciling you account, make you break out in a cold sweat?  Or are you the type of person who doen’t know how to PUT MONEY IN the ATM, and would go for weeks without cashing your paycheck if it wasn’t for the nice people who help you survive each day?  Believe it or not, I know both of these people, and if they are reading this now, they know who they are.  Both types of person really needs to sit down and think about which type of institution they will be going through!

In earlier posts, we talked a little about the idea of making a thoughtful decision, and in another post, we went through some of the actual differences between the two types of institution, and you pretty much have the type of institution narrowed down, but you realize that you are still left with a lot of choices for each specific type of institution.  This is where the real fun begins, because now YOU get to interview someone else.

Every institution works with a company that provides, “Secret Shopping” services  so they can get an, “honest” appraisal of how their employees handle routine conversations with customers, (members) in a “normal” setting.  If they can do it, why can’t you?  What stops you from walking into the branch office with a list of questions to ask the employee BEFORE they you open your account?  For me, the answer is. “Not a darn thing!!”

Much like a prospective employer’s job is to sort through all the applications for the opportunity to see WHERE the applicants will screw up so they can walk away, you should take the same attitudes when shopping for a financial service provider.  You need to go in wit a Plan!

First thing, you want to know what things are important to you, so when you ask about them, you sound prepared.  Things like Internet access to your account, branch locations, direct deposit, safety deposit boxes, etc.  Don’t forget, these people will see you coming, and because the are professional salespeople, they will want to put you off guard, and have you signing paperwork ASAP.  Your being prepared is something they never deal with, so you can take a little power back and level the scales.

Some of the important aspects to look at when deciding whether to put your money in a bank or credit union are pretty obvious; how far away from your home or work is the branch office, number of ATM’s available, and whether or not your employer has an affinity for a specific institution.  But many others may not be so clear.  How then, does one decide which type of institution they should join?  Hopefully this table will be able to help you decide.  Since I’m not advocating one over the other, I will only do a listing of positive attributes at this time.  Depending on the demand, I may follow this up with a list of ‘con’s at a later date

I’ve only done a few attributes for each this time, because deciding which type of institution really is a personal choice, and one I believe you should talk over with your parents.

Once you’ve made this decision, then the fun part begins.  Now you can decide, (depending on your age and your maturity level), what type of account you should open.  I believe you should start with just a regular  Savings account, and build your way up to the checking, but I know there are a few of you out there that are already shouting about how you are responsible enough to handle a checkbook.  For you people, I’ll see you later, when you decide that you may need more help after-all.

I often sit here, at my computer, working on one of several projects, thinking that I’M working hard, or that I’VE got a lot on my plate.  It’s true, Finance For Youth has become a sort of obsession for me, but it would be irresponsible for me to try to take all the credit, or to become the martyr for this project.

This project really was a long time coming, and I’m glad to be part of it!  In addition to fulfilling a really important need, (one that is underrepresented, in my opinion) it is also a lot of fun, and is teaching me more every day!  But it wouldn’t have ever gone past the spiral bound notebook that it started as without the support and encouragement of my wife Karen.  In addition to being my leveling influence, Karen also has a lot of experience dealing with this topic in her own right.  She has been working for financial institutions her entire adult life, as have I, and she has probably helped more teens and youth than I have.  She is an awesome sounding board, and it’s really nice to be able to float ideas and have them understood without extra explanation.  For all of that, I have to thank her.

In addition to my wife, I would also like to thank my family for all the life-lessons that they have taught me about money, finance, and life in general.  Some of them were on purpose, and some were gained by learning what NOT to do.  I would also like to thank Karen’s sister, Princess Edamame, (I usually call her Mel, but that’s okay, she usually calls me, “Cappy”) who has been a reader of this and other projects of mine since the beginning.  Having personally grown up around all brothers, I’m not real sure how to treat a sister, so I’ll throw a football at her and make her eat mud as a show of my appreciation.

Last, I would like to thank those people who I have worked with who have helped guide me along my professional path.  Thanks

That’s all the mush for now.

-W

Now that you’ve been working for a while, you have to make the decision of where to put all your hard earned money!  While I used to suggest my wallet, being the honest person that I am, I realized doing so would ultimately cost me more money than it was worth in taxes, so please don’t put your money in my wallet!  Seriously, there are a lot of choices out there, and if you are young it seems like none of those choices are particularly GOOD ones.  So which is the best on the field?

I’m going to focus on two types of institution, banks and credit unions.  The truth of the matter is, there is relatively little difference between these two choices and any others that may be out there.  If you are familiar with another type of institution, maybe you work at one and are very familiar, please leave a comment with your e-mail, and we can get together to discuss your expertise.

Although the term, ‘bank’ is used interchangeably to define almost all types of institution, there are some very real, and very well-defined differences between actual banks and credit unions.  Most of these differences are transparent and philosophical, but others make compelling arguments to open your accounts either at one or the other institution.

Banks are companies, like the donut store or the clothing store.  They are there to make a profit, as are all of the employees, including the Board of Directors.  The advantage for the consumer is that you will usually have more services available, and you may have more locations available for you to do your banking.

Credit Unions are cooperative institutions that serve people who share a common bond, usually people who live in the same area or work for the same company.  Their Board of Directors are volunteers, and they are technically not-for-profit.  This usually gives the consumer access to better saving and loan rates, as well as having more of a sense of community with other consumers and the employees of the institution.  You trade these benefits for limited access, and the fact that most credit unions are not at the forefront of technology.

Of course, these differences are largely fading with changes being made by both major banks and the credit union segment.  For example, with the advent of the, “community charter”, the common bond aspect of credit unions is stretched pretty thin.  This type of charter allows anyone who lives, works, worships, goes to school, or is related to someone who fits in one of the above categories, to join.  Conversely, banks are increasingly afraid of the competition credit unions can provide, so they are now attempting to capitalize on the “community” aspect of most of their customers.

Other places where the differences are less noticeable are in the areas of rates and accessibility.  Since both institutions borrow money at the same rates, the margin that they pay their consumers for savings and those they charge for loans, is very thin.  Still worth shopping for, but thin.  Since credit unions are cooperative in nature, they are allowing the cooperation of their ATM services as well, creating very stiff competition for banks.

Most people choose an institution based on factors like; which institution their parents belong to, which one is closest to home or work, or which one offers the best opening gift.  While each of these may be important, they are not the only things to look at before you choose one type of institution.  The reality is that most of the institutions offer such similar products and services, that before you choose one, you should decide what is important to you in an institution.

For me, I want to be left alone by my bank.  Having worked at several institutions, I know what services I want, and I know how to access them.  Certain family members want to have a branch that is local to them with a friendly staff who knows them personally.  Others want to never have to walk into a branch, and prefer to only use e-services.

What do you look for in an institution?  Are you in the right institution?  Leave a comment on what is important for you, and I’ll respond with a general recommendation for a type of institution.

 -W