Monday, January 30, 2012

Lesson Learned: High School Savings

What did you do with the money you worked for during high school?

Back when I was in high school I, like many others, had a part time job. I worked fast food and was paid near minimum wage. I took it so that I could..well..spend it on something I wanted.

So I worked long enough to save up money to buy the parts I needed to build a computer. When the computer was complete, I was proud of myself for earning the money to buy something I wanted, and then saving up to buy it. So I did pretty good, right?

Sort of. I didn't get a loan, use credit, or borrow money to buy the computer. I earned the money the way it should be earned, by working at a job. I balanced my time between work and school and I maintained good to decent grades.

But when I was working, the only thing on my mind was using the money to buy the parts for the computer. I did just enough at the job to stay employed and get a paycheck. Then, I quit the job when the computer was complete. I later realized after I quit that my parents had planned on getting me a computer for graduation (ARGH!!!)

I should have worked not just to buy a computer, but to prepare for my future. If I had worked for a longer period of time, worked to serve the customers instead of myself, and cared more about the job, I would have received a raise and promotion and saved up more money. But if I did save the money rather than blowing it, what could I have done with it?

  • I could have set the money aside in an emergency fund. It would have easily covered the car repairs and parking tickets I had during college that I ended up paying for with money that was "refunded" me with private student loans.
  • I could have used the money for college expenses and take out less money in student loans. I will touch on the student loans in a later post, but it would have gone a long way towards covering the expenses I ended up paying for with a non-subsidized student loan.
  • I could have invested the money. If I had set the money aside in a Roth IRA and ignored it for 45 years until retirement, the $2,000 I earned would have grown to roughly $72,000 averaging an 8% annual return, or even $176,000 averaging a 10% annual return, tax free!*

I am probably a little hard on myself. After all, I was only in high school and there is nothing wrong with spending the money I earned on something I wanted. But this does demonstrate how decisions with money early in life can significantly affect finances later in life.

Next up: My first credit card

*Investment return estimated using the investing calculator tool at  http://www.daveramsey.com/articles/article/articleID/investing-calculator/category/lifeandmoney_investing/

Saturday, January 28, 2012

Introduction

Hello, and welcome to OpinMoney.

First, a little background information about me. I graduated from college in December of 2007 with a bachelor's degree in computer engineering. I now work as a software developer for a software consulting firm and am married with two kids.

From the get go I was making all of the wrong moves in regard to money that quickly led me down the slippery slope of debt. I blew all of my money I earned at my high school job on computer stuff; I opened a credit card account on a whim; I completely borrowed my way through college; I financed everything immediately after college; I bought a house with just the bare minimum down payment, and borrowed money from relatives to cover expenses for when we moved into the house.

Luckily, before my wife and I got too far in debt, we enrolled in a personal finances course at a local church after encouragement from family, friends, and coworkers. It completely changed how we handled our finances and saved us from the impending disaster of my past money mismanagement and the potentially crushing debt we were accumulating. Since then, we have been slowly but surely paying off our debt, saving money, and improving our financial wellness.

So why even bother writing a blog about personal finances if I have mismanaged my money so poorly in the past, let alone have no educational background in personal finance? For several reasons. The first one is to discuss those poor decisions with money so that others can learn from and avoid them. I also plan to discuss what we are doing now and will do to improve our financial wellness. And lastly, to discuss various topics of personal finance that are applicable to everyday life that can contribute to improving not just my financial wellness, but yours also.

That's it for now. Check back often and feel free to share you thoughts, opinions, and experiences.