Part 3
Financial Planning:
A Guide for Young Adults
"If you don't know where you are going, any road will get you there."
— Lewis Carroll, Alice in Wonderland:
Building a Strong Financial Foundation
Net Worth Calculation
Assets minus liabilities: Understanding your financial health, which is the value of what you own minus what you owe. This helps you track progress.
"I know I'm living paycheck to paycheck when my ATM receipt says 'LOL' instead of a balance."
Cash Flow Statements
Tracking income vs. expenses to stay financially healthy. Create a budget to monitor where your money goes, helping you save and invest.
"They say money talks. All mine ever says is 'goodbye.'"
Setting Financial Goals
1
Short-term
Financial goals you aim to achieve within a year or less, like buying a car.
2
Long-term
Financial goals that take years to achieve, like buying a house, retiring early, or paying off student loans.
"Wealth is the ability to fully experience life." – Henry David Thoreau
Education ROI
Consider the cost of education versus the potential return on investment in terms of higher future earnings.
Unemployment and Wages by Education
Lifetime earnings potential by degree type (bachelor’s, master’s, Ph.D.).
Student Loans
Federal Loans
  • 👍 Lower interest rates & flexible repayment options
  • Includes Direct Subsidized, Direct Unsubsidized, PLUS, & Perkins loans
  • Often eligible for forgiveness programs
Best when you qualify as they come with fixed rates, income-driven repayment options, and forgiveness programs
Private Loans
  • 🔀 Variable rates & terms based on creditworthiness
  • May require a co-signer & credit check
  • Less flexible repayment options compared to federal
Consider when federal loan limits are reached or for supplemental funding
Student Loan Debt Management
Minimize
  • 💰 Borrow Smart:
  • Only borrow what’s absolutely needed
  • Explore scholarships & grants early on
  • 🔍 Compare Options:
  • Research multiple lenders for best terms
  • Leverage online tools to forecast repayment
Scheduling
  • 📈 Plan Ahead:
  • Set up a budget to manage expenses
  • Consider income-driven repayment plans
  • 🔄 Refinancing:
  • Refinance when beneficial—but weigh federal benefits vs. private risks
Student Loan Repayment Options
Repayment Plans:
  • Standard, Graduated, & Income-Driven options available
  • Auto-debit discounts can lower interest rates
Loan Forgiveness:
  • Public Service Loan Forgiveness (PSLF)
  • Teacher Loan Forgiveness & other targeted programs
Consolidation:
  • Consider loan consolidation to simplify repayment
Non-Dischargeable: Unlike credit card or medical debt, student loans are nearly impossible to wipe out in bankruptcy without meeting the strict "undue hardship" test, but <5% result in discharge
Building Good Credit
Secured Credit Cards
A good starting point for building credit, as they require a deposit.
Authorized User
Becoming an authorized user on a parent's card can help you build credit history.
Low Credit Utilization
Aim for below 30% of your available credit
Long Credit History
Keep older accounts open, put them on ice - literally
Warning Signs of
Credit Card Misuse
1
Minimum Payments Trap
Only paying the minimum payment can lead to accumulating debt due to high interest
2
Compounding Interest
Interest on interest can accumulate quickly over time, resulting in significant debt
3
Balance Transfer
Moving unpaid balance to new cards to avoid high interest rates
4
Having more than one Credit card and one Debit card
Keep it simple to avoid impulse buying
  • use one credit card for planned recurring needs
  • use one debit card for occasional wants
  • Use Dave Ramsey's cash envelope system
"Gratitude turns what we have into enough." – Anonymous
The FIRE Movement: Financial Independence Retire Early
1
Fast FIRE: A more aggressive approach, aiming for early retirement within a few years.
2
Slow FIRE: A less aggressive approach, focusing on a comfortable retirement within a longer timeframe.
3
Coast FIRE: A blend of the two, where you save enough for retirement while pursuing a lower cost of living.
"The happiest people don’t have the best of everything; they make the best of everything." – Unknown
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