magine that day—the day you don your graduation gown and receive that piece of paper certifying that you have spent four or more years of your life going through a seemingly endless cycle of study, assignments, and exams!
Imagine the joy, happiness, and pride your friends and family will share with you!
Imagine when you start work at your first postcollege job—perhaps your dream job—and actually begin earning a proper paycheck!
Imagine the first car, the first apartment, and the financial freedom that you’re enjoying since you’ve stopped living the existence of a poor, struggling student!
Then imagine that day when you open your mailbox and realize it’s filled with bills and loan repayment notices and that you are waist high in debt that will take you the rest of your life to pay off.
The picture isn’t quite that rosy anymore, is it?
Dealing with the burden of debt is a global issue. USA Today reported two years ago that nearly two thirds of twentysomethings in America have some debt, and those with debt have taken on more in the past five years.1
Last year in Australia, credit-reference company Veda Advantage revealed that 18- to 27-year-olds were responsible for a third of all defaults on credit obligations listed with the company. The figures also show that of the record 3.7 million new credit card applications in 2006, almost a third of those were from that same age group.2
It’s extremely easy to get into debt when you are young and fresh out of college. In fact, debt often begins at college when that student loan is taken out to pay for tuition, books, and daily expenses.
Graduation and the first job out of college do not necessarily mean immediate financial freedom. The knowledge that moths are not the only things living in our wallets or bank accounts makes it extremely tempting to give ourselves more treats and buy luxury items we could not have purchased when we were students.
All too soon, the student loan remains unpaid, the credit card bills start to skyrocket, and the moths move back in. Suddenly, we’re back where we began: poor—and in even greater debt than before.
While it’s true that “whoever loves money never has money enough; whoever loves wealth is never satisfied with his income” (Eccl. 5:10), we should also remember Jesus’ parable of the talents (Matt. 25:14-30). God gives us certain talents and possessions so we can be faithful and responsible with them, not simply squander or waste them.
So, how are we supposed to handle our finances, and what do we do when we are in financial trouble? The following eight suggestions can provide some helpful guidance.
1. Open a bank account
If you don’t already have a bank account, get one now. In fact, while you’re at it, see if you can get two—one for your daily transactions, and another dedicated specifically for savings. Transfer a fixed amount of money to the dedicated savings account every month, and don’t use that for anything else but to repay your current loan or loans. If you don’t have a current loan (lucky you!), limit yourself to using money from that account only on “rainy days.”
2. Shop
But not for clothes or electronic items. Shop around for a bank. Don’t simply sign up with one that’s giving away the best freebie, unless that freebie is $10,000 (without any catch). Banks have varying rates of account and administrative charges as well as varying interest rates. Choose a bank that will suit your situation, keeping in mind that you probably want an account that will earn you higher interest when it comes to your dedicated savings account. See if you can get an account that has minimum or no administrative charges.
3. Put money aside
This is different from your dedicated savings account. Get a rough estimate of how much your regular bills are, and when you get your paycheck, put money aside into this account to pay these bills. Regular bills include rent, food, gas, phone, and so forth. The amount spent on these should not vary too much from month to month. If you are unsure, err on the generous side and put more money aside. And don’t spend that money except to pay for what it has been set aside for.
4. Write it down
Know exactly how much money you have spent in a day and how much money you have left. Unnecessary spending will be significantly reduced when you realize how little money you have to last you to the end of the month.
5. Needs versus wants
When you see something that you want to buy, especially a big-ticket item, ask yourself if you really need it. Do you really need an extra blouse or shirt? An Xbox? Pay off your debt first, then consider spending on nonessentials. If you must buy an item, save up for it; don’t borrow.
6. Do you need a credit card?
Seriously, do you? If you do, use your credit card as you would a debit card. Spend only what money you actually have. Pay your credit card bill in full and on time, because interest charges for overdue payments are generally atrociously high.
7. Choose friends wisely
In Proverbs 12:26 it says, “A righteous man is cautious in friendship, but the way of the wicked leads them astray.” No matter how resistant you believe you are to peer pressure, you will give in if your friends are not cautious with their money. It’s almost a “given.” Friends who spend big, friends who have parents with deep pockets, and friends who habitually get into debt will influence the way you spend.
8. Get financial advice
If it really becomes all too much to handle, seek professional help. Financial advisers can help you get back on track again. But you have to make the first move.
As Jesus said, “Ask and it will be given to you; seek and you will find; knock and the door will be opened to you. For everyone who asks receives; he who seeks finds; and to him who knocks, the door will be opened” (Luke 11:9, 10).
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Melody Tan is public relations officer for the South Pacific Division and a perennial writer at http://melodytan.blogspot.com This article was published May 13, 2010.
