5 BIG money choices that will change your life
Goal 1: SAVE FIRST.
This is, THE key principle at Troutwood. SAVE FIRST. Do not fall into the trap of letting your spending dictate your saving. It doesn’t get more important or more straightforward than this. Whether it’s saving $5, $50, or $100 per month – you pick what’s best for you – just do something and be consistent. When payday hits, put your chosen amount straight into your Roth IRA, 401k, or similar type retirement account.
Goal 2: Understand the Opportunity Cost of Your 1st Car Purchase
The opportunity cost between a $13,000 car and a $10,000 car for an 18-year old, high school senior who knowingly purchases the less expensive car can be up to $400,000! Yup, a one-time purchase at the age of 18, can have this type of long-term financial impact.
Don’t believe it? Learn how by reading Chapter 5 of The Missing Second Semester (FREE, under “tools” -> “library” in the Troutwood App).
P.S. If you don’t already have the app downloaded, you can do so here:
Goal 3: Understand the Opportunity Cost of Your 1st Home Purchase
United States Household debt (the money we, people, owe) is $16 trillion. Yes, trillion. The largest slice of this $16 trillion is mortgages, which is the outstanding debt on our homes and totals about $11 trillion.
Managed correctly a home becomes a valuable asset. Managed incorrectly it becomes a BIG liability. Buy a hammer, and a home you can afford. Get your DIY on!
Consider this, you want a house with hardwood floors, but can only find houses in your budget range that had carpet? Guess what – DIY TikTok has gotcha covered!
Goal 4: Understand the Opportunity Cost of College
Compare not just the colleges you are interested in, but:
- The cost to attend
- The total amount of grants and scholarships
- Your needed Private vs Federal loans
- The return on your investment (ROI). Ask, is the career you are considering worth the cost you are paying?
“I was more worried about not getting into college than I was about how to pay for it.”
If you’re paying attention to the news lately, you’d know President Joe Biden just gave some borrowers financial relief of up to $20,000. While this is certainly a step in the right direction, loan forgiveness is not a guarantee and should not be taken into account when considering if/which college is the right option for you.
Goal 5: Understand the Opportunity Cost of Not Paying Off Your Credit Card On Time
If you want to go through life with an anchor pulling you away from your financial dreams, this is the way to do it. Did we scare you? Good! Credit card debt is one of the most dangerous types of debt you can have. If you don’t pay your credit card on time, not only does your credit score decline (which will prevent you from being able to make important future purchases) but you also will accrue interest, and ultimately owe even more than you bargained for.
Credit card debt is painful, and hard to get rid of. Avoid this trap by paying off your credit card IN FULL each month. Having a credit card does not mean having free money. Make sure to only make purchases on your credit card that you can afford (aka you alternatively could pay for it on your debit). A credit card can be used to your advantage, as it is possible to earn rewards such as cash back or airline credits, but only if used correctly.
Now that you have these five tips under your belt, you are one step closer to owning your financial future!