Personal finance. Two incredibly intimidating words that, if I am to be quite honest, completely escape me. My knowledge of ‘personal financing’ extends to withdrawing and depositing money into my bank account. Beyond that, I’m at a bit of a loss. Which is why, when I learnt Life After Scripps was offering a workshop on personal financing, I immediately hopped on that train. As I was relieved to find out, so did a good portion of the rest of my class.
Professor Dillon—who is the most adorable and hilarious woman—led the crash course to a room full of “desperate seniors.” One of the reasons leaving Scripps feels so daunting is because for the first time in my life, I will be fully responsible for myself. I’ve never simultaneously paid rent, bought a car, managed bills, bought groceries, and 
worked—though that is exactly what the majority of the world is balancing. So while being wealthy does not necessarily fall under my perception of success, being financially independent does. Like most of the other students sitting in that room, I have so many visions and hopes for the future, and almost all of them require me to be in a financially secure position. This workshop was my first introduction to the steps in that life-long, ongoing process. Though I am by no means now an expert, I’ve highlighted a few points that may begin to demystify personal finance for you like it did for me:
Budgeting
A successful budget, also known as a spending plan, is contingent on creating a thorough and accurate cash flow statement.
Cash flow statement (or net income) = total income – total expenses
Total Expenses: As Professor Dillon heavily stressed throughout the hour, the only way to control your financial life and build wealth is to know exactly where your money is going. That means following every, single penny. I’m not careless with my money, but I certainly can’t claim to keep a meticulous record of every late-night Yogurtland trip or spontaneous Target run. All those seemingly small expenditures add up to a significant, and often surprisingly large, amount. There are so many resources and tools available now to simplify the challenge of tracking your money—from online banking, to budget spreadsheets, to personal financing software. Apparently the new rage revolutionizing money management is a free site called mint.com. Valinda at CP&R recently discovered this handy innovation and, in her words, has “never been more excited about personal finance!” 🙂
Total Income: Your total income should be based off your net pay, i.e. your take home income after all taxes and deductions. Retirement savings accounts like a 401(k) or 403(b) are considered pre-tax deductions, meaning that money is deducted from your wages BEFORE taxes and put into your savings account, thereby reducing your taxable wages (that’s a good thing, yay!). You have probably heard this countless times in the past, but saving now means you are multiplying your wealth for later—all because of a magical little trick called compounding interest. Professor Dillon convinced me—‘open a savings account’ was just added to my growing to-do list for the weekend.
On another note, though this wasn’t a focus of the workshop, one line Professor Dillon said that really stuck with me was “Remember, your first job is not your career.” Most of the time, my post-graduation anxiety stems from the fear that I wont find or receive my dream job/internship/fellowship by May and will be forced into an arbitrary position completely unrelated to my passions and plans (shudder). Those are what I like to call my there-is-no-life-after-Scripps attacks. However, when I heard that line, it hit me—in a rare moment of comfort and reassurance—that seldom does a person’s first job define or limit their career path. While I would obviously prefer to be doing something I truly love this time next year, I am slowly coming to terms with the realistic possibility that I may also find myself back home in Texas working locally. Not that I am embracing that option—just understanding that it wouldn’t be permanent or reflective of the future.
P.S. In response to the title of the post, I just did the math (net worth = what you own – what you owe). As it turns out, I have a negative net worth. Awesome.