ICFE eNEWS #17-20 - May 31st 2017
My Three Most Important Financial Tips For Graduates
By Jim Garnett, a/k/a Ask Mr.G, a member of the ICFE's Board of Educational Advisors
I have been given the honor many times of addressing
graduating seniors who soon will exit the sheltered walls of
home and school to enter the real world before them. I want to
tell them something that will really make a practical difference
in the way they think about money and credit over the next few
I have often shared these three simple principles,
which if grasped, will determine their practice in a myriad of
specific situations they will soon encounter.
I call these "My Three Most Important Financial Tips For
- Accessibility is not affordability. In the next couple of
years, graduating seniors will have access to more credit than
they can afford to repay. They desperately need to understand
that "because we have access to buy something, does not mean we
can afford to buy it".
I remember the faces of hundreds
of people who told me, "But why would they let me buy that
car/house unless they knew I could pay for it".
Most people, as will these graduates, tend to look to the
salesman/lender to advise them what they can afford and reason,
"After all, they know more about finances than I do."
High credit scores do not, in themselves, reveal whether people
can actually afford to buy what they are looking to buy. The
credit scores primarily show that the person pays his bills on
time. Unfortunately, this is frequently done by using credit to
pay on credit.
Graduates need to determine what they can
afford to buy before they go shopping, not leave it up to the
salesman to tell them.
- Wants are not needs. If we
received a surprise gift in the mail tomorrow of $1000, most of
us would immediately make a list of the things we need to buy
with that gift.
Isn't it interesting that five minutes
before we knew about the $1000 gift, those items on our list of
needs were just "wants?"
The truth of the matter is that
once we have access to actually have the thing we want, we tend
to see it as a need and no longer as a want.
defense I know against seeing want as needs is a keen
appreciation for the things I presently have. Being grateful for
what I have keeps me from wanting what I don't have. It also
keeps me from cultivating an entitlement attitude that thinks I
deserve to have more.
There is no way to express how
important an attitude of gratitude is. It affects every area of
our lives every day, including finances.
- Credit cards
are not money. Credit cards are as convenient as using cash, so
it seems like we are spending money when we use them. In
reality, we are borrowing money.
A credit card
transaction is very similar to that of taking out a loan at a
bank, and like a loan, the money we "borrow" must be repaid.
This fact would be much easier for us to realize if we
actually went to the bank, filled out a loan application, and
used the money to purchase our items. Credit cards eliminate
those steps, but nonetheless, leave us owing money and creating
debt just like a bank loan would.
If I can somehow convey
this truth to a graduating senior, it will transform the way he
looks at credit cards when he uses them. He will realize he is
borrowing money instead of spending money.
other things I wish I could impart into the minds of these young
people who are graduating because I know that the perspectives
they have will determine the practices they follow.
will be successful (and so will they) if they can grasp any one
of these three simple truths: (1) access does not determine
affordability, (2) wants are not needs, and (3) credit cards
borrow money, not spend money.
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023