Why You Should Save at Least 10%

The Importance of Retirement Savings

I know, money is tough. You never make enough and you have tons of bills. But you should be saving at least 10% of your money for retirement. You may think that the money is important now, but there will come a day that it will be even more important.

Someday You Can't Work

Even though you probably feel like your money is important today, someday it will be more important. There will come a time that you are too old to be able to work, and then you will need to rely on your savings. You can hope that you will have social security benefits, but they do not by any means provide you with a pleasant standard of living.

Additionally, you should enjoy your retirement, not dread it. Would you rather spend your golden years traveling the world or worrying about how to put food on the table? $50 today for a new pair of shoes could turn into hundreds if not thousands of dollars many years in the future! 

You Won't Miss the Money

You may think that you need every dollar of your paycheck, but it is actually pretty simple to scale back. Once you have gone a month or two living on a little bit less, you will realize that it's not impacting your life very much. You may have to make some lifestyle choices, but ultimately these sacrifices will pay off. 

Help! I Need to Improve My Credit Score

Managing Your Credit Score

Credit scores are like GPAs for the adult world. Everyone has one, but not everyone knows how to manage them. Many people find that they get into trouble with debt, usually in the form of credit cards, student loans or mortgages. Understanding and managing your credit score is one of the best things that you can do to manage your finances. Credit scores can range between the 300s to the mid 800s, but the average score is a 678. If you can raise your score above 700, you are doing well! Here are some tips to help you to understand how your credit score is calculated.

35% Payment History

Payment history is the biggest individual piece of your credit score. Essentially this is a measure of how reliable you are at making payments every month. This score is determined by whether or not you pay on time each month and how much you pay. If you pay only the minimum, your score will likely be lower than if you pay off your full balance each month!

30% Amount Owed

The amount owed is simply how much debt you carry. The less debt you have relative to the amount of credit you have available the better off you are! You should strive to keep your utilization ratio to as close to 10% as possible. This means that if you have credit cards with a $1000 limit, you should try to spend no more than $100 of this balance. This will quickly help to raise your score.

15% Length of History

This may seem unfair to young people, but 15% of your score simply is calculated by the length of your credit history. Older adults with longer credit histories tend to be more responsible, so that's why the length of your report matters. There is not too much you can do here!

10% Type of Credit

There are many different types of credit, but the most common are installment and revolving credit. Installment debt, such as that of a car loan, is more favorable than revolving debt, which is typically in the form of credit cards. If you can change your ratio of installment to revolving debt, you can do yourself a big favor!

10% New Credit

Whenever you open a new credit account your score tends to drop. This is because people tend to take out credit when they "need" it, which indicates that they are riskier than they were before. So when you apply for credit, your score takes a temporary dip!

100% Responsible

Managing credit cards and loans can be scary, but it is an essential part of life. The more that you can do to take charge of your financial future, the better off you will be in the long run. Look forward to more posts about money management. 

No More Starbucks

My Pledge to Cut Down on Starbucks

In an effort to save money, I made myself a goal of reducing my Starbucks consumption to 0 until I have some more money to spend. This was obviously unrealistic. I am a habitual Starbucks patron. By habitual, I mean daily. I love the experience of walking into a nicely lit store and being greeted with pleasant aromas. I used to sit everyday in Starbucks and write; it was just so relaxing.

No more. I kept track of my number of trips to Starbucks over the last 2 weeks. 4. Those days were probably just because I had a craving or was in a bad mood. But I did make a point to change my order from a Venti Iced Costa Rica to a Grande Cafe Verona. That saves me about a dollar per trip. I know that it's a downgrade and the coffee doesn't taste the same, but all people see is the cup, they don't know that I'm drinking a cheaper blend.

On the plus side, I think that I'm starting to appreciate things a bit more. I was so happy to actually go to Starbucks because it actually felt like a special occasion. But I'm going to try and cut back even more. In the next two weeks, I'm going to try to go to Starbucks at most twice. I think that I can do it.

How I Became Poor

From Burberry to Broke

The story of my life as it currently stands is a bit unfortunate, but it may also be a blessing in disguise. For most of my life I have gotten everything that I wanted and much of it was provided through my own work. I grew up in a wealthy town with wealthy friends and I never imagined a life for myself that didn't include organic raspberries. I am a 20 year old gay man with a strong craving for all that is material in the world, but something has changed. It's my senior year of college and I have run out of money for the first time in my life. 

To be clear, I am not the prince of Monaco nor am I the beneficiary of a wealthy grandparent. I just happen to be from a white upper class family living in suburban Massachusetts. My parents had enough money to buy my siblings and I nice things and take us to nice places and I was able to save up a lot of money before I left for college. The money that I started off with wasn't enough for extravagance; I never rented suites when I travelled and I would only buy items from Club Monaco that were on sale, but if something cost less than $75, I would barely think before buying it. And to be fair, I was able to secure some lucrative intern positions during my summers that were able to bolster my spending. But now I am entering my senior year and I realized that I am dead broke. 

Well, dead broke is a bit harsh I suppose. I am not living in abject poverty; I happen to be slurping down the last of my flaxseed smoothies. But the money that I do have will cover my rent, my car payment for the new car I bought last year and little else. I may even need to stop shopping at Whole Foods. Thankfully my prospects for after graduation appear bright, but for the first time, I will be temporarily poor. 

In order to make it through the next nine months without crashing my credit scores, I need to seriously adjust my lifestyle. My boyfriend advised that I should stop beginning every day with a trip to Starbucks. I will have to drink Dunkin Donuts instead, but I bought one of those reusable Starbucks cups to put it in so that nobody will know. 

Stay tuned as my life unfolds.