My Car’s Cooler Than Your Car (When the AC’s Broken)

I didn’t have a car because my mother gave her beater to one of my friends. It appeared her dad could fix cars where mine could only break them. He’d hit deer and decide one fender and headlight was more than enough. That was the car I borrowed to drive myself to the prom. And no, I didn’t have a date.

That friend, who “bought” my car for one dollar (because in order for a legal purchase to take place you need a bill of sale where money exchanges hands) always charged us two dollars for gas money. “Do you have two dollars?” Gas was pretty cheap in those days–lower than 99 cents a gallon.

My best friend’s mom always chastised me. “You should get a car and drive into Hartford to waitress.” I couldn’t do that, because I was broke. It takes money to buy a car. I was going away to college and wouldn’t really need a car. If I could afford a car, it’d be a bad one, which meant I’d need to budget money to fix the car, too. Then, there was the matter of insurance.

I figured it all out mathematically, and it didn’t make make sense for me to buy a car, maintain it, pay for the gas to Hartford, and pay for insurance–I’d be paying to go to work.

My second chance to get a car was in college when my grandfather stopped driving. Old people shouldn’t drive, plain and simple. Every once in a while you meet an old person who is a couple hundred years old and still remembers to turn the stove off, but my grandfather wasn’t that person. The car sat in the garage. When cars sit, things go wrong. There are parts to the car that need to move to be in top shape. Cars that have been sitting have rot in places that shouldn’t be rotting. My grandfather’s car had a mouse or ten that moved in, and repairs that needed to be done. It was decided that my cousin in med school should get the car. I lost again.

This was a painful loss because it relegated me to the bus line. If you take the bus you know what I mean. There are limited jobs on the public transportation line, and unless you live in a commuter friendly city like New York, Boston or San Francisco, you’re basically sentencing yourself to a life of Burger King.

Transportation is a social justice issue. We’ll examine it.

Critical questions: 

Should I buy a car or can I walk?

How much money do people without access to good transportation lose compared to those with reliable transportation?

Should I buy new or used?

What do I need for insurance, and why’s it so #$%#$ expensive?

Skills: 

Evaluate vehicle purchases.

Select an insurance company and policy.

Understand the following: depreciation, state insurance requirements, basic vehicle maintenance requirements, how to choose and work with a mechanic or body shop, how car payments work, how to research value cars, what to do in an accident, the concept of indemnification

A bit of a review…

We’ve had a long week discussing the fact that taxes (boo) are not fun, cash flow needs to be there, and we must attend to our income to expense ratio. There are only two ways to come out ahead–make more money or spend less. We’ll examine two schools of thought on this. One school says save your cash. A penny saved is a penny earned. The second school of thought says this: “A penny’s not much. You need to make more money.”

We’ll discuss both.

Meanwhile, please check your knowledge of this week’s material by taking this short assessment.

Hand Over Your Money…It’s College Time

YOU NEED TO RESEARCH COLLEGE BEFORE YOU GO!

I’m sorry. I don’t like to shout at you. It’s not very polite. One trend I’m seeing in our economics classes is of the people who intend to go to college 80% of you have no idea where or why. It’s like someone said you had to do something after high school but you were never sure what. The first week of class was dedicated to setting SMART goals.

College is one of the most expensive purchases you will make. Yes, that’s right. Purchases. Investments. Emptying of your wallet, depending on your perspective.

The jury’s out on this one, folks. Many economists are conflicted. Some say you should go to college right away because you will have increased earning potential. Others say the thousand plus percent increase in the cost of college over the last decade cancels out that benefit, and entrepreneurship is the way–find a mentor, network, and research to get into your field.

I’m going to stand in the middle on this one. For some of you, college is a must. I don’t want my neurosurgeon apprenticing and googling the answers. Sorry. But then again, there are, in fact, some degrees that are worth more than others. Take a look at this graph. This shows there are many more people than jobs for mathematics and computer science degrees. Sadly, it shows my field as the one with very few jobs and a surplus of degrees.

What does this mean?

1. Research your colleges. In order to do this, you should have a spreadsheet. I made one for you. You can cut and paste this into a working spreadsheet in your google drive, this one’s read-only. Feel free to add or subtract columns for things you value, like clubs or athletics.

2. Know the deadlines. They come up quick. You should be reviewing your spreadsheet for deadlines.

3. Narrow down colleges to a “yes,no,maybe” column. If possible, visit colleges on the likely list.

4. Look at the $$$$ column. Pay attention to scholarships and deadlines for scholarships. There are a ton of scholarships in areas you might not think about–corporate, ethnic, religious, gender, or experience-based scholarships. This requires research, application time, and hard work. It’s a part time job.

5. Fill out your FAFSA. This is the form that goes to colleges telling how much financial need your family has. Do this immediately after your family files their taxes. Some aid is first-come-first served. Being early helps here.

6. Don’t decide based on one factor. You have to be able to pay for the college once all the aid comes in. Sure, I’d like to own a Ferrari, but it doesn’t make sense. I’m broke, and my neighborhood gets snow. Potholes alone rule out the Ferrari. college is not an emotion based decision. IT’S AN ECONOMIC ONE. Sorry. I’m screaming again.

7. Think outside the box. I can’t recommend the Reserve Officer’s Training Corps program enough. The military, if you qualify, will pay for your degree(s) and give you a commission as an officer. In an economy where many qualified people are in debt and underemployed, it’s a reassuring thing to get out of college loan free with a guaranteed job. Again, you’ll need to attend to every detail in the application process, which is coming up quick.

But where does my money go?

You can’t get where you’re going if you don’t have a roadmap. We’ve talked about setting SMART goals (Specific, Measurable, Achievable, Realistic, and Time-oriented) in order to succeed in the future, both financially and in life. 

“This is hard!” you said. Yup. Supposed to be. And it’s supposed to be annoying enough that it sticks in your brain and makes you continue to think, when you make social or economic choices, “Does this help me achieve my goals?” 

Things fall into two categories: productive and not productive. By cutting down on the not productive, you will become amazing. It’s a subtle thing, but it’ll happen. One morning you’ll wake up and realize you’ve reached your destination. 

What then? Touchdown dance perhaps? Nope. Time to set new goals and get there, too. 

Now that you’ve set your goals, you might think, “OMG, these things are expensive.” Yup. 

That’s where the budget comes in. 

You can’t meet your financial goals if your money’s flying out the window. When we discuss budgeting, we’ll talk about two schools of thought–this will be a recurring theme in this course. 

1. The School of Savings. Many leading financial planners will tell you to save. Save money, then you’ll have money. Spend money, and the reverse is true. This is a great strategy, one we’ll work on together. 

2. The School of “Spending money on a coffee today doesn’t matter.” Many leading entrepreneurs say the only way to reach your financial goals is to make money. Saving a dollar on a coffee makes you feel deprived. You should budget your money such that you know what you want out of life (see: our lessons on SMART goals), then enjoy those things and eliminate spending on the junk. 

Challenge: 

During the following week, track all of your spending. You can do this using an app or in your notebook. Keep the information all year. We’ll be working with this to construct budgets next week, though. 

Double Secret Challenge: 

If you choose a budget tracker app, review it for the class. Tell what you used, ease of use, whether it’s free or paid, and whether you felt it gave you more awareness of your budgetary situation. 

 

Resources: 

Best Budget Blogs: Learnist 

How to Set up a Budget: Money for 20’s (this is a sneak preview for next week…bring a calculator!) 

Outline: Chapter 6, text outline 

Know Your Rights

What are your rights as a consumer? We often look at consumer protections in terms of things like the lemon law or product safety, but they go deeper than that.

You will come upon a situation where you need redress. You’ll need to be able to know how to pursue a complaint professionally.  

1. Which agency do I use?

2. What do I really want as far as indemnification (being put back in the position I was in before the situation occurred)?

3. What’s the correct–and kindest–way to get this resolved?

Think of as many situations you know where a product was unsafe, not what you expect, a company didn’t do the right thing, or you found you got the short end of the stick. Sometimes the squeaky wheel gets the grease, but often it’s the smooth operator who gets the job done. 

Research as many government protection agencies as you can, and what they currently handle as far as protecting consumers. Remember, this is what your tax dollars pay for. We’ll discuss their role in society… and oh yeah, taxes, too. You got to pay The Man if you expect to have protections under the government. 

 

Resource: Chapter 1 outline from the official economics book has lists of consumer protection agencies, but these change constantly. Know that you must research to see what divisions and agencies will be handling your complaint. 

 

Game Show: How Dumb Are You When It Comes to Money?

The smartest teens in the world, when it comes to money, are in Shanghai, according to an article posted by Forbes. Take a moment to read the article… I’ll wait…Note where the US scores. It’s pretty ugly, isn’t it. Let’s have someone interpret this graph for us, so we don’t fall at the bottom of the barrel for math and reading, too. This just gets worse as we go along, doesn’t it? What trends are you seeing in world-wide emphasis on financial literacy. Really consider the countries that are scoring high and low.

“A fool and his money will soon be parted.” –Old Proverb. Probably written by the dude who took the fool’s money. 

Critical questions: 

1. How did we get to such a sad state of affairs?

2. How can we reverse these trends?

3. What is the BASELINE knowledge you need to survive? Can you beat the kids in Shanghai, or is it hopeless?

4. What’s the graph trying to tell us as far as our place in world-wide financial literacy education?

 

The moment of truth… Take this quiz, located at the Council for Economic Education’s website. Let’s look for the fool whose money will be taken and the smooth operators who will take the cash. If you’re the fool, don’t worry… a year’s worth of economics and financial education will save you. Get ready for your wake up call… begin! 

 

 

Welcome to Consumer Economics a.k.a. “How Not to Go Broke”

Welcome to Consumer Economics. Let’s think of this class as Financial Literacy and Entrepreneurship.

This class is near and dear to my heart, because, quite honestly, I’ve made every mistake I’m going to teach you not to make. I’m great at messing up. In fact, this class oughta be called “Watch Casey and Do the Opposite.”

Two books I like better than the textbook: 

Book One: 

I Will Teach You to Be Rich by Ramit Sethi.  If you haven’t read his work, Ramit is a successful author/entrepreneur. He’s built his businesses studying effective habits and training others. You can go to his website at iwillteachyoutoberich.com where you’ll get a ton of success habits free. Follow Ramit at @ramit. If you like his work, listen to this podcast with Ramit and author/entrepreneur James Altucher. 

Bonus: Ramit and James are fairly well-known in entrepreneurship circles. Here, they read their hate mail in a four-minute YouTube video that’s worth your time. When you become famous, you’ll want to save your hate mail for something productive.

Book Two: 

The Money Book for the Young, Fabulous, & Broke by Suze Orman. Suze Orman’s a rock star financial advisor. You can see her show on TV where she tells callers who request advice about whether they can make a purchase that they are “DENIED!” This book is interesting and practical. Here’s her website. She’s worth reading and watching.

More Books: The Entrepreneurship Library: 

I have a set of reserve books in the Entrepreneurship Library. Some are hard-core business and others are motivational, relationship-building, career-oriented, or hard-core finance. They would all help you to build success thinking and give yourself the skills you need to succeed after you walk out the doors.

But wait…before you go…

Here’s a lame powerpoint to psych you up. You’re welcome:

Financial Literacy Intro powerpoint

 

 

[Photo credit: Ringling College of Art & Design: Money Matters]