Photo: Courtesy of Scott Gramm
Scott Gamm is the author of "More Money Please."
At 21 years old, NYU undergrad Scott Gamm is not your typical co-ed.
Since the ripe age of 17, Gamm has been an avid student of all things finance.
He launched a blog, HelpSaveMyDollars.com, soon after the recession took hold as a way to help people his age grow into conscious, responsible spenders and savers.
"You know, my parents' finances were one of the main causes of their divorce, and right after that [happened], there was the recession," Gamm told Business Insider. "Those were two reminders within a few years of each other that finance is a serious topic and it's not something I want to leave up to trial and error."
Gamm released his debut personal finance book, "More Money, Please: The Financial Secrets You Never Learned in School," on Tuesday. We asked him to share a few tips that every 20-something should learn to master their finances early:
1. Ignore the minimum payments on credit cards.
The only way you should be using a credit card is by paying off the entire balance every month –– no matter what your minimum balance says. By paying the minimum payment, you’ll wind up leaving a balance on the card and your interest rate will kick in. Minimum payments are calculated to keep you in debt. Ignore the minimum and pay the entire balance, or at least as much of it as you can.
2. Use credit cards for one or two small expenses.
You're young and you're just starting to build up you credit history. So use credit as a useful tool to get there –– not as a free pass for a fancy lifestyle. Do that by picking one or two small expenses each month to charge on your credit card. And try to keep your spending under $100 per month. That’s at least a manageable amount of money to be able to pay off the bill in full. A good rule of thumb: Never spend more than you earn.
3. Prepaid cards are stupid. Don't you forget it.
If you’re looking to build up a solid credit history, you won’t have any luck by signing up for a prepaid debit card. Why? Because none of the activity on a prepaid card is reported to the three credit bureaus (Experian, Equifax and TransUnion). Plus, you’re going to get slammed with fees on prepaid cards like monthly fees, dormancy fees and, get this, a fee just to load money onto the card –– that’s the entire point of a prepaid card!
4. Stop paying bank fees.
The days of free checking are disappearing. And unless you maintain the bank’s minimum balance requirement, which can be $1,000-$1,500, you’re throwing away $10-$12 per month. If you’ve been charged this fee before, consider switching to an online bank or a credit union. You'll find there are either no or fewer fees to deal with.
5. Do yourself a favor and unsubscribe from store emails.
When you get an email from your favorite store letting you know they’re having a sale, this reminds you to head over to the store. If you hadn’t received that email, the store wouldn’t have even been on your mind. Unsubscribe. The same goes for those daily deal sites – unless you’re in the market for something specific (a trip to Europe, new shoes or a restaurant deal), being reminded of random flash sales is a sure-fire way to start spending beyond control.
6. Negotiate a higher salary.
Most of us are too scared to ask for a higher salary. But if you don't, you’re leaving money on the table. Negotiating on your first job out of college might be a tad risky, but don’t feel afraid to ask for more money on future job offers. Plus, negotiating reflects persistence and that “stop at nothing” attitude that employers expect. Do some research in your field to find out what someone at your level is earning, so you'll know whether to ask for more during the hiring process.
7. Face it –– 401(k)s aren’t that into you.
If your employer contributes to your 401(k) (a retirement account that lets you automatically contribute a portion of each paycheck), then you should contribute, too – up to the employer’s match. If you don't, you're basically throwing away free money. If they don’t contribute anything, you might be better off going a different route.
The fees are exorbitant (employers hire large asset managers to take care of the employee’s 401(k) accounts, and that isn’t free). In fact, a survey last year from Demos showed that on average, a couple could spend $155,000 in 401(k) fees over a lifetime. Instead, take ten minutes and open up a Roth IRA online from a discount brokerage firm. This is an account where you contribute money that you’ve already paid taxes on and your money will grow tax-free. Who knows where tax rates are headed (probably up), so get the taxes over with now.
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