As 2014 commences, it is a time many think about finances in preparation for creating strategies for the upcoming year. It is also a time for many students to pack their bags and head back to their last semester, or for those recent grads, transition into a new post-college life. The time of transition is one in which we must focus energy to create strategy for the next chapter. As a recent grad myself, I’m interested in how grads adjust to the working world and begin to put theory into practice. Here are five important tips I’ve learned regarding finances for grads heading towards or amidst transition.
1. As a rule of thumb, don’t take out anymore in loans then you expect to earn your first year of your career when you graduate. Keeping this in mind can give you an idea of the manageability of your loans. There may be those whose loans exceed this amount for the average salary in their industry already, such as those who may be putting themselves through college. As a plan B, students in this situation may want to consider Income based repayment plans for federal loans. Check out Finaid.org for more information on how to get that taken car of.
2. “Know what you owe” you may have several loans from different places, such as federal loans and private loans. Federal loans include Perkins Loans, Stafford loans, Direct loans, and etc. You may even have private loans (watch out for that girl Sallie Mae). A great resource to check out is nslds.ed.gov to get a measurable amount of what you owe.
3. Prioritize. You may not know what to pay back first when you graduate. As another quick tip, it is best to focus on paying off those private loans first mainly because of the high, fluctuating interest rates. You may even want to make a few smalls payments during the grace period if you want to save more down the road on interest. At this point in time, as briefly discussed in the next tip, it is important to hit the ground running when it comes to investing early.
4. Time is money. One of the most valuable things you have as a graduate other than your education is time. The power of compounding in your twenties is great. Put money into your 401k as soon as you are employed with that first great gig. You can even set it so that it automatically deducts from your account. It’s simple yet powerful.
5. Don’t forget to give. The stress of finances can be overwhelming and the antidote is balance. Don’t focus too much on repayment and finances that you neglect giving. Having an unbalanced view of finances can have a negative impact and build stress. Ironically, you can release some of that stress through giving to others. According to the New York Times, giving helps strengthen bonds between friends and family and is an important part of the human interaction. You may not have much to give now but good habits start early. You can give time by volunteering for a worthy cause or an organization that you are passionate about.
It’s a funny little word with potent meaning. It means to expose or excoriate (a claim, assertion, sentiment, etc.) as being pretentious, false, or exaggerated. It’s not until we debunk old myths and misconceptions that we can begin to create effective strategies.
I’m a big supporter of continuous learning and one of the most important things that has been ingrained in me in my undergrad time was the power of modern research to back up a statement. I’ve learned the value of databases, scholarly articles, and publications. With these resources for modern research as a strong foundation, we can begin to reveal misconceptions that we may have regarding strategy, leadership, innovation, and etc.
I have recently finished reading a book that did just that and it’s one that made me rethink the way I view creativity and innovation. This book is called The Myths of Creativity by author and scholar David Burkus. It is “the truth about how innovative companies and people generate great ideas.” This book is about using modern research and stories to debunk myths and misconceptions…debunk it did. One of the most surprising myths to me was the “Eureka Myth”. This is the myth that ideas pop out of nowhere and the hard work is the next step. The revealing of this untruth, to me, explains why it is important to step away from a problem solving endeavor in order to let my thoughts “incubate” (more about that concept is explained in the book).
Another myth is one that gives me hope when debunked. This is the “breed myth”. My perception of a creative person has been just like the book explains; a long haired artist, or in the business world, one of those marketing folks. A management major with interests in finance isn’t one we view as creative which meant I was spit out of luck. With research from the University of Berkeley California explained in Myths the falsity of this assumption. I shan’t give away anymore of the myths in the book but there are 10 myths in total that, when revealed and applied, have the ability to generate a competitive advantage in the way we create, innovate, and lead.
I would recommend this book to anyone, not just business people and innovative people, but to anyone whom creativity applies in your work and daily life (which is all of us). I found this book similar to Hard Facts, Dangerous Half-Truths & Total Nonsense; Profiting From Evidence-Based Management by Jeffery Pfeffer and Robert I. Sutton. It is anther debunking book that uses strong research to reveal half-truths in the business world and show we can profit from evidence.
The Myths of Creativity will be sure to debunk the misconceptions regarding creativity and innovation and set us straight in a way that we can profit from.
The number on the street before the weekend began was 4.1% and that’s a positive increase. The Bureau of Economic Analysis released the final revised real GDP number for the 3rd quarter. This number is supposed to wow us all especially since the last estimate for the third quarter real GDP was 3.6%. Real Gross Domestic Product by definition is the monetary value of all finished goods and services produced within a country’s borders in a year. This number is then adjusted for inflation. Real GDP is arguably an indicator of the health of the economy of a nation and even said to be a gauge of a country’s standard of living. To obtain a better understanding, it can be broken down into the following oversimplified formula:
GDP= C + G + I + NX
GDP is consumer spending + government spending + inventories + net exports
But hold on a minute there.
Further analysis of this number may keep us from celebrating a fantastic outlook just yet. A couple fundamental questions must be asked first. One: What component of the real GDP formula contributed to this positive number? And two: Is this contribution sustainable? The major contributor to this number is inventories which added a whopping 1.7%. Private sector businesses boosted their inventories from July to September of this year (hopefully not because they couldn’t sell their products. heh).
Seems dandy but there’s a catch; inventories are a one-shot deal. If inventories were a big contributor for this quarter, it is highly likely this number will be low the next quarter. Already, analysts have decreased their estimates for the third quarter with this piece of information. Other important contributors were consumer spending on healthcare and business intellectual property. Personally, I’m a little concerned regarding the sustainability of these numbers (not to be a Debby downer).
I can’t dog on this number without some balance.On a positive note, the boost in consumer spending is a big plus to the US economy. Proof is in the steady stock market and housing numbers (see my last blog post).
It is true that 4.1% is a good lead-in for a press conference as proof of economic recovery Mr. President, but with a little more analysis and critical thinking it might not be all it’s cracked up to be.
Number of the day: 22.7
What is it? That’s the percentage of the rise of housing starts in November. It is a number that is released by the United States Commerce Department around the seventeenth of each month and it’s a number that economists have their eye on. This number is one especially to draw attention to. This is the largest increase in housing starts since 2008. (Remember the housing crisis? Bubble? Anyone?…)
But what is a housing start? A housing start is a new residential construction project that is began during the month. It includes building permits, housing starts, and housing completion data. These numbers are seasonally adjusted using statistical formulas because they can be affected by weather. That means how many neighbors were rudely awakened by hammering and pounding of the construction of the new house next door.
What is the meaning of this?!?!*
Data with knowledge of its implications becomes information which can then become a resource. I am a strong believer that when you know the world around you, you create for yourself a competitive advantage to take it on. (Knowledge is power.) My growing interest in these economic statistics pulls me to find meaning in numbers such as these. And yes, seemingly gibberish combinations of data and jargon that are released by the government have significance. These are numbers that are indicators of the state of the economy and are important tools to knowing your business. Analysis of this percentage increase in housing starts indicates that demand for housing is growing despite the similar growth in mortgage rates. More people are choosing to build new houses during this time since five years. The predictions made by organizations such as Bloomberg were nowhere near. Though this is only a snapshot, it could be a sign of a better outlook for the economy of 2014.
More neighbors rudely awakened but possibly a better economy to come.
*Punctuation added for dramatic effect