Now I’m not setting out here to write this little bit and make anyone feel dumb. Well, not really. This is really more of a confession because man did I do a bunch of dumb things during this past week. In order to save at least a little bit of face, I’ll just highlight a few. Hopefully though, my point will be driven home.

If you haven’t yet read about our recent moving drama, that can give you a sense into what exactly happened — the original bit of snow for my Dumb Snowball.

You’ve probably also heard of the debt snowball by now, where you pay only the minimums on everything but your target debt. When the target debt is paid off, you apply its minimums and any extra you were applying toward target debt number two. You repeat that “snowballing” process until all of your debts are paid off. The secret, of course, is intensity.

Well, this last week I discovered the “Dumb” Snowball. Basically, one thing happens to knock you financially off-balance, and the snowball effect kicks in where you proceed to do one dumb thing after another.

Last Monday our trusty Chevy Prizm died. And thus began my series of dumb mistakes. Being somewhat worried, having my wife and two little boys on the side of the road, I failed to remember that we have roadside service. We pay for that just in case things like this happen. Well, the tow truck cost $200. We can probably get that reimbursed through our insurance, but until we do, we’re out $200.

We rented our car from the airport where they have huge fees. There was one rental company that would let me do a long-distance drive with a car not from the airport but they were a few dollars more expensive. I chose the airport location at a rate of $80 a day. That wasn’t so bad. The mistake came when we failed to switch that car for a cheaper one for several days. That mistake alone probably cost us $150.

I forgot to fill up the $80/day rental before returning it. That cost us $40.

To add insult to injury, there is a gas station literally 30 seconds from the rental drop-off location.

Because I chose to save a few dollars and went with an airport rental I (1) had a harder time getting to the DFW airport to make the switch to a cheaper car and (2) still had to rent from the airport again (with their huge taxes) once I did get the cheaper car. That meant I was paying more and had to drive back to the airport to finally drop it off.

I guess this is more than just a few of my mistakes (but certainly not all of them). These all took place in less than a week.

There are two things that really scare me about the position we were in. I wasn’t worried about us financially because of our emergency fund (for just these types of situations) but I was worried about these two other things:

1. First, it seems that spending breeds spending. Once we forked over the $200 for towing, I noticed a change in my thinking about money. It seems that being in “Emergency Fund” mode gave me a license to spend (case in point, we went to Applebee’s that night instead of to Wal-mart for some food. And we don’t even like Applebee’s.) Being in the eye of an Emergency storm does not give you license to throw all well-groomed spending habits out the window. It was happening though. My wife and I could both feel it.
2. Second, and this is actually much scarier (and more expensive) is the Dumb Snowball. I don’t know what it is, but it seems that these crises seem to keep us from remembering even the easy things (fill up the rental before returning it, don’t forget the gate opener for the apartment complex in the rental that will require a $60 fee if you lose it — we’re trying to get it back). This snowball effect is costly! What was even more worrisome for me was that we were needing to purchase two cars in just this type of mode. We came to grips with the fact that we were paying through the nose daily for our rental, and took our time getting what we feel was a good deal on the cars.

Being in these situations is scary though! Psychologically, you feel as if your financial house is tumbling down around you. Little do you realize that the large bulk of that feeling is purely a figment of your imagination, that things will work out, and that you’ll come out smarter and more savvy. A bit more ready for the next crises.

In the thick of an emergency event? Take a few deep breaths. Go for a run. Lift a few weights. And above all, don’t succumb to the Dumb Snowball. It’s a costly ride!

Read the source article here

We’ll be in the market for our first home in the next year or so. For that reason, my mind has been on credit scores quite a bit lately. I don’t want to pay more than I have to for our mortgage (planning on a 15-year fixed, if you were wondering).

I found this article on MSN direct, and pretty informative and thought I’d pass on a summary of it to YNAB readers.

There are a few things one can easily do to optimize a credit score. However, as I’ve mentioned before, we shouldn’t obsess about it. Time may be better spent reading and learning more, networking, starting a side business, etc.

I found the breakdown of variables in the credit score extremely useful:

As mentioned in the article, it doesn’t matter how much income you make. (Though the amount of credit you’re given does, to an extent, depend on your income. A higher credit limit will lower your utilization and thus, raise your credit score).

It’s smart to monitor your credit score every four months from one of the three bureaus (Equifax, Experian, and Transunion). When you stagger checking your credit report and score, you get to see what it’s looking like over the course of a year, instead of just at one time. This will help protect you further from identity theft, mistakes, etc. You can see the scores that lenders most likely see by going to myfico.

And finally, from the article, a couple of (fairly obvious) things you can do to make sure your credit score is maximized:

• Pay all bills on time.
• Think twice before closing accounts.
• Minimize credit card applications.
• Keep balances low.

Keep in mind that you should probably not be using credit cards if you can’t answer yes to my six requirements before using a credit card.

Read the whole article here

Please no.

Wayne is asking whether he and his wife should put their 7-year old son on their credit card account as an authorized user…

No…

Dr. Don (who has a slew of letters after his name) does get to the right answer, but does it in a very roundabout way.

The take-away from the answer is here:

The pervasive use of personal credit histories to make inferences on employment, renting and insurance decisions makes managing your credit score an important aspect of financial management, but it’s easy to get too wrapped up in managing your credit score

It’s tough that it can now determine so many things - so you want to make sure it’s solid - but what else could you maybe focus on? Are there things that just might pay higher dividends in the future (and are knowns verses the unknown aspect of ‘managing’ the answer to some equation to which you don’t have access)? These are in no particular order.

1. Budgeting (you had to expect that one, right?)
2. Furthering your education
3. Setting yourself apart at work as a hard-working, honest employee, business owner, etc.
4. Investing (your portfolio is properly allocated along the efficient frontier).
5. Paying off debt.
6. Funding “Junior’s” college.
7. Developing multiple streams of other income.
8. Finding places in the household finances to save money effortlessly.

That’s just a list off the top of my head. But let’s all admit it that it just doesn’t make sense to obsess over your credit score. Sure, get a free credit report every year to make sure everything’s okay, but don’t get too stressed about it. And certainly don’t worry about 7-year old Junior’s credit score.

Sheesh. How’s his t-ball team doing?

Read the entire article here (may require a WSJ membership)

The title of this article in the Wall Street Journal is extremely misleading. You have to love hearing from the creditors’ perspective though. Apparently, in the past when “interest rates crept up…fewer cardholders could afford to pay down balances.” Richard Srednicki, who runs the CC business at J.P. Morgan Chase & Co. had this to say (you’ll love this):

“It is a tougher business if payment rates continue to stay up and consumers continue to pay off more. It’s something we’ve got to understand and work at.” (emphasis added)

You’ve got to love that huh? Straight from the snakes mouth. They need to work on extracting more money from you.

Here’s the disconcerting part about the article though. Consumers aren’t really paying off their balances. They’re just shuffling them:

“Although consumers are using plastic for more of their daily purchases, they are giving card issuers fits by juggling their debts more shrewdly…and in recent years, as real-estate values soared and mortgage rates fell sharply, more consumers wiped out credit-card debts altogether by borrowing against their homes.”

Wonderful. Let’s all just cross our fingers, knock on wood, and pray that those who did consolidate credit card debt with home equity vowed they would never use credit cards irresponsibly again.

The Journal does redeem itself a bit further in the article to give us the real dismal picture of the American consumer’s situation:

“American consumers have not curbed their appetites for borrowing. During the fourth quarter, 13.86% of disposable personal income of Americans was consumed by debt payments of all kinds, up from 12.77% five years earlier.”

If you’ve read much over here at YouNeedABudget.com you’ve realized that I hate credit card debt. Do I hate credit cards? Those inanimate plastic things? No. Do I hate the marketing tactics used by the credit card companies? Yeah. Do I use a credit card? Yep. But only because I follow all five of these rules:

• The balance is paid in full each month.
• You have a fully-funded emergency fund at ING (or some other high-interest savings account).
• You don’t have any debt except your home.
• You are contributing at least 10% pre-tax to retirement.
• You’re actively budgeting your money each month.

So how does a snake cope with falling balances (falling profits)?

“[The Snakes] are trying to replace lost interest revenue by increasing late-payment fees and raising interest rates for customers unable to pay their bills in full.“

Now doesn’t that just make you feel all warm and fuzzy inside? If you’re a customer that’s maybe gotten in over your head, the Snakes are going to raise the interest rate they charge you to make up for the lost interest revenue experienced with other cardholders.

What’s in your wallet? A backstabbing snake.

There was a man who was looking for a stagecoach driver that could transfer his belongings quite a distance. The man had three drivers approach him for the job. He asked only one question of each of the drivers:

“How close can you drive your stagecoach to the edge of a ravine without going over?”

The first man answered confidently, “I can bring the wagon wheel within one foot of the edge, and you will be safe.”

The man let the second driver in.

“How close can you drive your stagecoach to the edge of a ravine without going over?”

The second driver answered confidently, “I can bring the wagon wheel within six inches of the edge, and you will be safe.”

The man let the third driver in.

“How close can you drive your stagecoach to the edge of a ravine without going over?”

The third driver answered confidently, “I don’t know. Whenever I drive a stagecoach, I stay as far from the edge as possible.”

And so it is with…DEBT. Yes, show your sophistication and prowess you man of wit and leverage. Show us how you can maximize your return on equity through sophisticated and complicated borrowings. Show us how to get real estate with no money down. Show us how to get the home of our dreams far before we can truly afford it. Please, show us your wisdom, oh Icon of Interest.

Please don’t.

Be that third driver when it comes to your finances. These are your family finances we’re talking about here. When you take risks, take calculated risks with money you can afford to lose. Sure, be a (calculated) risk-taker, a go-getter, a visionary, but do it with prudence, wisdom, and patience when it comes to the state of your personal finances.

There’s been lots of debate about the best way to pay off your debt. You want to reduce your debt, so you embark on a journey to find the best way to do it. What you find is a bunch of people talking about all of these different approaches to lining up your debts before you begin killing the bloodsuckers off.

The agreed upon method is called the debt snowball by most. You pay your minimums on every debt. On the ‘first’ debt you pay any extra you can. Once the ‘first’ is paid off, it drops off the list and a new ‘first’ is born (a firstborn? no…). You take all of the money you were paying on the first first, and pay it on the second first (this includes the minimum and the extra). Once the second first is paid off, you have a new first, which is the third first, replacing the second first, and first first (twice removed). Your third first is now getting the first and second firsts’ minimums and the extra. Basically it’s getting first³ type treatment. Your third first is picking up steam. Not to be outdone, once your third first is paid off, you apply its extra, along with the first first and second first, to the fourth first. You repeat this process untili your last first is paid off.

Not only have you paid off your debt, you’ve also brought to pass a biblical prophesy:

And the last shall be first, and the first shall be last.

But I know you have a burning question inside. How do I know what the first first is? Well, that’s the debate I mentioned above. How do you order it so you’re out of debt as fast as possible?

Well, silly, of course you take the smallest balance and make it first. Wait - no. Take the highest rate as the first, with the lowest rate being the last to be first. Mathematically that makes perfect sense. Some people have a much more effective (read: complicated) method (whatever works for you works for you) to help them reduce their debt.

Oh, wait. I forgot another method:

this approach is based on the ratio of the outstanding balance to the minimum amount due. Divide the latter into the former, and concentrate your payments on the debt with the lowest resulting value.

The first first is determed by a ratio that gives you full guidance into the most effective debt reduction strategy.

Feel like declaring bankruptcy yet?

The YNAB plan for debt reduction:

(1) Make a plan.
(2) Follow the plan (see #1) with I N T E N S I T Y

If you don’t manage #2, it doesn’t matter how effective #1 is, you’ll never get anywhere.

In the investing world there is a number known as “beta”. Investopedia defines beta as follows:

A measure of a security’s or portfolio’s volatility, or systematic risk, in comparison to the market as a whole. Also known as “beta coefficient.”

Beta is calculated using regression analysis, and you can think of beta as the tendency of a security’s returns to respond to swings in the market. A beta of 1 indicates that the security’s price will move with the market. A beta less than 1 means that the security will be less volatile than the market. A beta greater than 1 indicates that the security’s price will be more volatile than the market. For example, if a stock’s beta is 1.2 it’s theoretically 20% more volatile than the market. (emphasis added)

The other day I was studying something entirely unrelated to personal finance when the concept of beta jumped into my head. Only this time, I wasn’t thinking of beta as relating to a stock, I was thinking of beta as it relates to how to manage your money.

I’m not talking about a fund manager asking himself how to manage your money. I’m talking about you asking yourself that question.

Notice the bolded part of the quote above: “you can think of beta as the tendency of a security’s returns to respond to swings in the market”. Let’s replace a few words and restate it:

You can think of beta as the tendency of your finances to respond to swings in life..

What’s your personal beta?

Nobody (well, almost nobody), wants a personal beta that deviates far from one. It causes stress on the job, at home, in your marriage, family, and other relationships. It can possibly keep you in a job you don’t want, doing something you don’t like, for people who treat you lousy.

The best way to move your personal beta toward one is to set up a personal budget. A budget reduces risk in your personal finances. It smoothes your income and expenses, and decreases the height of the crest and depth of the trough in the financial waves that may bear down upon you.

A budget is a benevolent dictator when it comes to how to manage your money. It is firm when it feels its power being taken from it, but it will also give you some slack - when asked politely.

Did you notice the term “systematic risk” in the definition above? Let’s go into that a bit deeper with another definition:

The risk inherent to the entire market or entire market segment. Also known as “un-diversifiable risk” or “market risk.”

In order to apply this to your personal finance situation, we’ll alter the definition again slightly:

The risk inherent to your finances or entire life. Also known as “un-budgetable risk” or “uncontrollable risk.”

This is a fancy way of saying its the risk of living day to day. It’s the risk that will always be there no matter what you do. You’ll notice as you learn how to manage your money better and better that your personal beta does go down - it gets pretty darn close to one if you really work on it. You’ll notice an improvement from your former, volatile self. This is the unsystematic risk that has declined. It is also sometimes called “specific risk”. And it’s something particular to you, that can be taken care of if you learn how to manage your money a little better - bring things in a little tighter - pay a bit of heed to that benevolent dictator.

However, even the best money managers cannot get rid of risk entirely. No matter how you manage your money, you will still be subjected to the systematic risk of life. You cannot reduce it. You cannot ignore it.

Before you get down on yourself, or maybe even feel a bit depressed about this supposed risky situation that you live in, let me assure you of one thing: Unsystematic risk makes up the large, large, bulk of the stress you may feel when you’ve slacked on your money management. The systematic risk inherent in life is small - tiny - minute. When your personal beta is one, you are feeling good! Life is good! The grass is green! The sky is blue! On your side of the fence!

The budget will show you how to manage your money. It will show you how to reduce your unsystematic risk to nothing. It will get your personal beta down to one. It is the solution to money management stress and worry.

What’s your personal beta?

I recognize that this can be a very, very emotionally-charged issue at times. My writing style is direct (read: blunt). I will be blunt here. But I want all readers to know this:

If you are having financial difficulty, and are possibly contemplating personal bankruptcy, that does not mean in any way you are a bad person. It happens to the very finest of people. It is not a reflection of your character. You are still of immeasurable worth.

I’ve outlined below 7 ways to avoid personal bankruptcy. These are most likely the same suggestions I would give anyone having financial difficulties. If you are considering filing for personal bankruptcy then you certainly should read on. It just may be that you can avoid filing bankruptcy all together.

Get on a Written Budget
One way to avoid personal bankruptcy is to immediately get on a written budget. You will need to get absolutely intense about your money. Money that is told what to do prior to it landing in your wallet will work harder, last longer, and keep your finances stronger than any other financial move you can make.

The simplest budget may work best for you: pencil & paper. Others enjoy the use of excel spreadsheets or fancy software packages. The key is not in what you use, but that you use it. You can take a look at this article on setting up a personal budget. We won’t go into the details here.

Just know that the #1 way you can avoid personal bankruptcy is to get on a written budget.

Sell, Sell, Sell Your Ball and Chain
What is causing this extreme financial pressure? Have you purchased too much home? Is your house payment representing 40% of your take-home pay (that’s too much)? Do you owe money on any vehicles? Many times personal bankruptcy can be avoided by people just taking a good, hard look at what they owe and why they owe it. While it’s true that most bankruptcies have been caused by health-related costs, we still need to analyze why a medical bill caused the ultimate pressure that led someone to want or need to file personal bankruptcy.

Not only do you need to assess what types of ball-and-chains you have lying around, you also need to see what type of junk you can sell quickly to cover any month-to-month cash shortages you may be experiencing. Do you have a ton of books or CDs that you could sell? Any hobby items you no longer use or need? Freeing up this cash can go a long way in giving you a clear head about your finances. It will give you breathing room - which will allow you to think clearer about other ways to avoid personal bankruptcy.

Cut Up Your Credit Cards
In no way - under any circumstances - should you be using a credit card. Destroy them. Cut them up. Even the one for “emergencies”. We’re talking about ways to avoid personal bankruptcy, not walk right into it.

But Jesse, I don’t have the cash right now to be able to handle any emergencies. And life is surely going to happen! I’ll just use it for emergencies.

That may be true. You might just use it for emergencies. But I guarantee that your definition of an emergency will become much stricter if you don’t have the ability to charge anything in the first place. All of a sudden having the air conditioner going out in the car isn’t an emergency. Why? Because you can’t afford (right now) to repair it.

Please don’t fall for that line of thinking. Until your finances are completely under control, you shouldn’t be using credit cards.

Negotiate or Surf to Lower Interest Rates
That’s right. After telling you to cut up your credit cards, I’m now telling you to surf high-interest-rate balances to new cards. But that doesn’t mean you actually keep the card - it’s cut up. You do want to take advantage of any low-interest offers you receive (take a look at the 50 you get each week for starters).

Your object in doing this is to create some short-term positive cash flow. Getting down to a lower interest-rate will bring you that much closer to avoiding personal bankruptcy. True, you won’t be getting out of debt any faster, but you will be freeing up some cash you might need to get by month to month. Not only will the extra cash help out there, but you’ll feel better, a little calmer, knowing you’ve got a bit of wriggle room.

Increase Your Income
While this might seem a bit obvious, it’s overlooked very often. You shouldn’t just look at cutting expenses. What can you do to increase the other end of the equation? The income side? Can you work overtime, get a second job delivering pizzas? Work for UPS? Can you mow lawns, trim hedges, paint houses, wash windows, flip burgers, etc.? A part-time job that brings in just $500 extra per month will do wonders for your monthly budget.

This is not a time to be prideful. You need money. You’ll need to work for it. You might even need to do less-than-glamorous things (I listed some above), but you’re doing this for a short amount of time so you can avoid a long-lasting curse: personal bankruptcy. Avoiding this financial pitfall by gutting it out for the short-term will bring you long-term benefit.

Avoid CONsolidation
Nine times out of ten this leads you to personal bankprutcy - it doesn’t help you avoid it. Do not fall prey to predatory companies that hunt the weak, desperate, and vulnerable for customers. CONsolidation will free up your monthly cash flow (which is a good thing) but it does this by extending the length of time you will be in debt (this is not a good thing) and hurts your credit badly (this is also not a good thing). Please, avoid the illusion of debt consolidation. Focus on increasing your income, cutting your expenses, lowering your rates, selling your junk, getting rid of any ball-and-chains (new car?) and getting on a written budget.

Maintain Your Perspecive
Times are most likely very emotional for you right now. Your marriage is probably stressed to the max, and you think about your money problems constantly. This is not a time to jump into any crazy ideas. You need to gain the advantage of many minds and consult with trusted friends and family. Consult before you decide to make any financial moves. Above all, remember that your worth is not tied to your net worth. You are not a bad person for being in this situation. While I do not completely write-off your contribution to this predicament (we’d have to talk one-on-one for that) I do recognize that life happens - sometimes in a very harsh way.

I admire your desire to look for ways to avoid personal bankpruptcy, instead of just filing and not taking responsibilty for your financial life. If you need free personal counseling or advice, please don’t hesitate to contact me directly.

No doubt, if you’re here, you’ve probably made some mistakes financially. That’s okay, there’s no adult walking the earth that hasn’t. You can certainly be sure of that.

I truly enjoy helping people get their finances under control. It really does bring me a lot of satisfaction. One thing I do to make sure I stay abreast of new financail crises is to watch message boards. Many times people will join a message board and post something along these lines:

Help me get out of credit card debt!
I really need someone’s help. My spouse and I have made some mistakes financially and now we’re really in a bind. We’re barely making ends meet. I’ve even taken on a part-time job. It just seems there isn’t enough money at the end of the month. No matter how hard we try, it seems there’s always something that comes up that keeps us from saving anything! Please, help us get out of credit card debt. We’re drowning!

Small details in these situations change, but the answer is almost always the same. If you find yourself in a similar situation, think long and hard about what you are about to read, then commit yourself to doing it.

Three steps to help you get out of credit card debt:
1: Cut up your credit cards and close your accounts. I don’t care about your FICO. I don’t care about “emergencies”. You need to stop borrowing money. You can’t dig yourself out of a hole - you need to climb out. Cut up your credit cards and close your accounts. This step might take a lot of faith on your part. It maybe sent an uneasy feeling to the bottom of your stomach. That’s okay though - that’s just because you have gotten so used to that comforting plastic that you’re going through a bit of withdrawal. Take a deep breath and destroy your credit cards.

2: Get on a written budget. What does this mean? You write down everything you spend and you sit down at the beginning of the month and budget your money. Experience (mine and thousands of others) has shown that when you begin budgeting your money by having a plan and sticking to that plan, you experience a raise. And usually it isn’t the 3-4% raise you’re used to. We’re talking 10-20% - even 30% at times. When you plan and budget your money you are not constricting yourself, you are telling your money what you want it to do. Once you do that, get out of its way and let it do what you told it to! Once you’re on a written budget you’ll see where you can easily cut back on unnecessary expenses while not even experiencing a change in your lifestyle (which wouldn’t be the end of your world, if you’re having credit card debt issues). Once you have a budget in place, you’ll see where the extra money can come from - enter step three.

3: Snowball your debt. This final step will be the final blow to your credit cards. Do you want to know what will really help you get out of credit card debt? Big, fat payments on the principal that you owe the credit card companies. That’s right, you will not be shifting the debt around, pretending to actually be doing something. You will be paying down your credit card debt one step at a time.

Let’s do a quick recap on what will help you get out of credit card debt: (1) Cut up your credit cards and close the accounts. Never use them again. (2) Get on a written budget. You tell your money what to do - not the other way around. (3) Snowball your debts into absolute oblivion.

In parousing BankRate.com, I found this article about college students, debt, and bankruptcy. It’s pretty alarming:

Gen Xers yearn to carve a new direction for society. Unfortunately, the direction appears to be straight into debt. Americans between the ages of 25 and 34 now boast the second-highest rate of bankruptcy, just behind the 35-44 group. The average credit card debt for this group increased by 55 percent between 1992 and 2001, with the average young adult household now spending approximately 24 percent of its income on debt payments.

Let me warn you right now that I might come across a bit harsh in this article. I want to arouse some strong feelings in you about the absolute disaster that is taking place with my generation (at the time of writing this, I’m a wise 24 - there goes my credibility).

Let’s talk about why college students go into debt. Remember this: I live on student family housing at a private university. I have been going to Brigham Young University since April of 2002. Virtually all of my friends are college students. Because we are all broke, we can talk about personal finances with little inhibition. What I mean by all of this is that I am privy to very real information from real college students.

At times, we hear an initially sad story from a college student. Their car breaks down and all of a sudden they’re in need of some cash. So they charge the repairs to the credit card. If you aren’t careful, your first instinct might be: Well, that poor college student. How could they have known their car would break down? It’s unfortunate.

Yes, it’s unfortunate the student’s car broke down. And no, of course they couldn’t know the car was going to need some major repairs any time soon. But this is the crucial issue:

What transactions took place before the unfortunate event?

In my experience, usually you can find the following transactions: a ski pass they just had to have, multiple transactions that took place at any number of fast-food chains, a gym membership that’s a “necessity”, wireless internet, new software/games for a computer, and a few new DVDs for the apartment’s collection. This is just an example and I am not exaggerating. I’m speaking from direct experience here.

Is it bad to purchase these things? Of course not. I merely want to make a point. The college student is strapped for cash come car-repair time not because they do not have any money, it is because they already spent their money. That is a critical difference.

With undergraduates holding average credit card balances above $3,000, we really shouldn’t look at what they purchased with the credit card, because often-times we’ll see that those purchases, at first pass, appear legitimate. You’ll see a charge for textbooks, tuition, car repairs, etc. And you think, well, these things can’t be helped. But look at the previous purchases. Where did the money go before these credit card transactions “needed” to happen? That is the key.

I can think of no demographic that is in more need of a budget than the college student demographic. Budgeting certainly does not sound cool. You don’t talk about it on your way up to the slopes. If you really do budget, you probably keep it to yourself. You’re a nerd, and you don’t want people to know about it.

But the college student population, with all of their supposed wisdom and street smarts, apparently doesn’t know how to live within their means. Those car repairs did not necessitate use of a credit card - your overspending prior to that unfortunate event is what necessitated the use of that card. Your lack of planning is what gave that credit card transaction its supposed blessing.

College students: budgeting is hip. It’s cool. I’m one of you, but I budget. I don’t owe anybody anything. I’m a graduate student with money socked away come time to drop my several thousand dollars each semester to pay for some (hopefully) great wisdom. Where did the money come from? I earned it, and didn’t subsequently spend it. Has my car broken down? Yes. Did I charge it? No. Where did the money come from? I earned it, and didn’t subsequently spend it.

Please don’t see this as a bragging session, but allow me to be even more open. I am married with a little boy and my part-time income is the sole source of cash for our family. I do not make a lot of money. How do I make each dollar work so hard? I tell it where to go, and it does what I say, because at the beginning of the month, I sit down with my wife and we plan.

Budgeting is in.