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Personal Finance Gurus Fail With First Generation Savers

The struggles of a first generation college student

Join me on a small aside — I promise it relates. An organization called the College Board is responsible for creating the Scholastic Reasoning Test (SAT). This exam is one of two major college entrance tests (the other is the ACT). Score high enough on the SAT, and you could attend almost any university. Likewise, entrance scores can often influence the level of aid given to entering freshmen students.

One variable can influence your SAT score, admission chances, aid opportunities, and much more; it’s called, first generation status. These college students are the first person in direct, immediate family to pursue a secondary education. Essentially, parents of first generation college students must not have attended college themselves. Born and raised in a family without ties to college can directly affect your success in higher levels of academia.

In nearly every category, with decades of data, they’ve found clear differences between first generation and non-first generation college students. College Board researchers have found that first generation college student are less likely to take preparatory courses for the standardized exam, take fewer advanced placement courses (AP) prior to college, and are less likely to take accelerated math courses. These are just a few of the hurdles for these disadvantaged students.

Family role models for academic success can be scarce. Study habits may not have been learned. Monetary support may be nonexistent. First generation students may struggle to connect with peers on campus. All of these factors raise the risk for dissatisfaction in school, higher dropout rates, and mental health concerns. Frankly, it pays to have family ties to education.

Similar status as a first generation saver

Maybe you’re wondering, “What does all this college student talk have to do with personal finance and money, Sam?”

I’m glad you asked.

Similar to college, first generation savers face serious tests — analogous problems exist. Lessons are passed down from generation to generation. Inheritances can be shared and kept within families. Strong principles and techniques for smartly minimizing individual tax responsibilities are taught. (Heck, how do you think Romney only paid about 14.1%?). First generation savers frequently have friends in comparable financial predicaments.

Starting, customizing, and following a monthly budget are learned. It helps if your parents teach you. Additionally, when you can see how they save and manage their money in action, a good cycle can be learned. The first generation saver doesn’t have the opportunity to learn from parents. As the first savers in a family, they’re bucking a pattern of money mismanagement — the waters can be murky, challenging, and lonely.

Jim Cramer Tulane University Photo — *Photo: Jim Cramer at Tulane University (Credit: Tulane Public Relations)*

Is willpower the key ingredient to saving?

Personal finance gurus stress individual power, will, and grit. They propagate unscientific expertise that suggests they have the tools to balance your budget, reduce debt, create emergency funds, and retire with a sizable nest egg. For the most part, their help and advice can really help. Unfortunately, their one-size-fits-all advice isn’t often tailored for first generation savers.

Willpower-based economic education is far too common. It’s the ill-conceived bumper sticker of American personal finance policy: one must have the will and energy to save — that’s all it takes. Otherwise, you’re a lazy failure because you cannot commit to these steps.

I’m afraid that does an injustice to more multicultural groups who don’t necessarily have the same role models and social support for financial success. Frankly, most personal finance advice is distilled and created for a certain population; one that has the means to believe in free will and individual power.

We need more diversity among financial gurus — socioeconomic statuses, races, genders, persons with disabilities, and more. Voices need to come to the table and share their individual experiences. While some advice and feedback may not fit, there’s hope in knowing that more people are out there sharing openly and acknowledging the team effort that’s necessary to come back from tens of thousands in debt.

Find A Roommate And Financial Freedom

By Frugaling 4 Comments

As a student, I feel like a pinball getting smacked around from location to location. I’ve moved about 9 times in my adult life. I’ve lived with significant others, friends, acquaintances, and even by myself. I trekked across campuses, cities, and the country. After two years living alone, I found a roommate and will make my tenth move this summer. Today, I wanted to spend some time reviewing my current and future living situations, a hesitancy regarding roommates, and the effect on my budget.

My Man Cave

Two years ago, when I received my admission to graduate school and decided to move to the Midwest, I was ecstatic, but clueless about housing. I didn’t need much – just a roof over my head and basic utilities. I jumped at an opportunity to live in the university apartments. I hadn’t seen the outside or inside of them, but the price ($435 a month for a one bedroom) was unbeatable.

*Look at these digs! Perfect for a window air conditioner.*

What I found was both decrepit and lovable. The apartments bubble with rust. A perma-dirty linoleum floor greets my toes when I slide out of bed each morning – you never get used to the cold. The faucets run a yellow/red when they’re not run regularly. My circular thermostat doesn’t account for certain parts of the apartment, which seem to be unprotected from the harsh, Midwestern cold. Cinder blocks are stacked high on the walls, painted over in what can only be assumed to be lead paint. A thick coating of asbestos lines the ceilings.

Despite misgivings, it’s my home, and I love it. Actually, I find it comical how much I don’t want to leave my current apartment, and I’m only leaving because the university is demolishing them.

Forced to move again, while balling on a serious budget with severe time constraints, seemed impossibly difficult. Then, the university notified everyone that new apartments were being built in time for my departure from the old ones. I could just move right into them!

Luxury Living At A Price

Over the last decade or so, the university considered a construction project to repair and rebuild the flood-damaged, aged, asbestos-filled apartments. Year after year seemed to pass without resolution. When I moved in summer 2012, I heard the whisper of change – a private bidder on public lands.

Then, a resolution quickly swept over the university apartment system. New buildings, contractors, and contracts would be drawn. The private company would revitalize this community with opportunity, design, and (supposedly) affordability. Tenants would see a brightened exterior and feature-filled interior. The costs would unfortunately need to increase, but we were assured they’d be manageable.

Something seemed askew about allowing private bidders onto public, university property, but the messages seemed positive. A few months later I found out the price: $875 per month for a one bedroom. In other words, more than 100% what I paid when I first moved!

Despite balling on a budget, I resigned to the fact that my 60-70 hour workweek wouldn’t enable me to tour many places. I would accept whatever they required. I signed a lease last year, much to my dismay and confusion. How could the university charge $875 per month for student housing?

Wake Up And Smell The Budget

Even though the price of rent was steep, I relished my independence, at the expense of my budget. I wanted to be frugal, but not that frugal. This new rent would decimate everything I worked towards over the last 10 months. I balanced my budget and created a tiny surplus for each month. But paying $875 a month would mean losing about $3000-4000 per year, plus student loans with at least 6.8% interest APR. I can’t even calculate the true cost of this decision.

Over the course of this semester, I’ve been working hard at not working. Essentially, I reached burnout, and to counteract these notoriously awful feelings, I decided to spend more time going out with people. Being able to socialize and meet new people has been one of the best experiences of my life. It’s kept me sane amidst my crazy-busy life.

Thankfully, meeting people also meant finding those in similar situations: looking for roommates. Over time I found someone that was excited about living together and could afford to split a two-bedroom apartment. The mental math was easy: rent would be $550 per month.

The challenge for me was realizing my prejudices towards having roommates. In the end, I realized that opting for the expensive rent was a cop-out to finding a roommate and managing my delicate budget. The reality was that I didn’t have independence until I was free from debt. I’m looking forward to having a new roommate, paying off even more student loan debt, and freeing myself from the burden of an unbalanced budget.

What have you done to save on rent, housing, etc.? What do you think about living with roommates? Any recommendations for me?

I Am Jeremy Biberdorf, Founder Of Modest Money, And This Is How I Work

By Frugaling 8 Comments

Recently, I’ve been going around the blogosphere (what an overused word!) and interviewing the top financial bloggers on the net. Two months ago I interviewed the famous J. Money from Budgetsaresexy.com. You can read that interview here. Today, I had the fortunate opportunity to get to know Jeremy Biberdorf, the founder of Modest Money! His site is rapidly growing and currently ranked in the top 35,000 websites worldwide. As a leader in the financial writing world, I wanted to get to know his tips, tricks, and super secrets for success. Here’s my interview with him:

What inspired you to begin ModestMoney.com?

My main inspiration was a major shift in my personal life. After years of coasting through life, I decided it was time to take my long term goals more seriously. Improving my finances was right at the top of that list. I seriously needed to get my act together with how I was blowing my money and not saving enough. When I started Modest Money, my goal was actually focused on using the blog to increase my income. As an internet marketing professional, I knew a thing or two about website marketing and monetization. Little did I realize that jumping into the finance blogging community would teach me so much. The knowledge, lessons, and contacts helped my finances even more than the extra income.

How did people (friends, family, etc.) react when you first started?

Since I had a history of running financial affiliate websites, nobody was particularly surprised. They probably weren’t expecting me to be so open on my blog though. By opening up I was keeping myself more accountable and ensuring my blog was more personable. My Mom started using my blog as a way to keep up with what was going on in my life. I generally didn’t share my blog with my friends as I wanted to be as open as possible. When I met my fiance and I told her about my blog, I’m sure she was shocked to learn so much about me from my blog. Luckily I didn’t scare her off with all of that public history. Now she is my biggest supporter.

Modest Money Financial Site — *Screenshot of Modest Money*

What was your experience with design, code, web work prior to starting your site?

This is an area where I had an advantage over most finance bloggers. I originally went to college to learn programming and other IT skills. I later transitioned into a website marketing career. Eventually I managed my own websites for several years. So I knew a lot more about the technical and marketing side of blogging than most bloggers do when they first start out. Although I had a lot of those skills, I also knew when it was best to outsource some of that work. Sometimes it’s best to get things done right and without it taking up too much of your own time.

What advice would you give to those thinking about starting their own site?

Do not underestimate the power of networking. At first I didn’t realize how much bloggers are willing to help others within the blogging community. If I had understood this from the beginning I could’ve got off to an even quicker start. Be willing to do lots of favors for bloggers and they’re bound to help you out in some way down the road. Concentrate on networking and marketing as long as you can. The other thing to understand is that blogging is not a get rich quick scheme. Most bloggers don’t make any money at all during their first year, yet they put in a ton of time and effort. Too many of those bloggers do not even get to the point where their blog is making money. To be successful you really have to think long term and be willing to put in countless hours without seeing the fruits of your labor. Work at your own pace and know it will pay off later if you stick with it.

How do you make money from your site?

There are several ways that I make money with my blog. Currently the big money maker is private ads from companies that reach out to me directly. That isn’t a sustainable income source, but it is super easy. So I see it mostly as transitional money while I work to build up other income sources. I also do some contract SEO consulting for people who hire me through my blog. Since I have helped so many fellow bloggers, a lot of them are aware of the website marketing knowledge that I have. I charge them reasonable pricing knowing that it can build up customer testimonials for securing future work. The area that I’m working at building up these days if affiliate income. If I refer enough visitors to relevant products or services I can make decent commission. This is likely going to become my big income source over time, but it takes a while to build up. Lastly I am now getting into staff writing for other blogs. Well it’s only one blog to start, but we’ll see how that goes. The part I really like about staff writing is that it can be a much more stable source of income while also helping market my own blog. If only I weren’t such a slow writer.

What do you think you’ve learned from your readers and fans?

That’s an interesting question because blogging is definitely a two way learning experience. On pretty much all of my posts readers leave comments that I can learn from. I couldn’t possibly list everything I’ve learned. The number one thing is probably how lots of people are going through similar struggles. The financial blogging community isn’t like Facebook where most people are only sharing stuff that they can show off. Instead it’s people being very supportive and sharing their experiences good or bad. Because of that support and understanding, I don’t get as stressed about facing any financial challenges.

How can somebody in lower incomes best overcome financial hurdles and prosper?

The first step is educating yourself about day to day finances. Unfortunately there are lots of areas of personal finance where people with lower income face an uphill battle. Think of how the rich get better interest rates and better credit card rewards. Then lower income people get stuck with high interest and big fees if they can’t keep up with their finances. So to combat these kinds of things, you need to arm yourself with the knowledge about how to get the upper hand on this system. Then get in the mindset that you have the power to change your circumstances. If you’re willing to put in the effort, you can reach your financial goals. Almost everyone can find ways to both reduce their expenses and increase their income. Get researching how to save money and how to earn side income. Take on the challenge and you’ll probably be surprised about what you can achieve.

Who are your financial role models?

My number one would have to my mom. She raised my sister and me as a single parent while overcoming all kinds of obstacles. Not only did she get by, but she did incredibly well. Through hard work she was able to become a successful entrepreneur. My dad played a pretty big role too. He may not make a lot of money or even manage it very well, but he provides a great example of being very happy without needing money. Although I will push to do well financially, I still know I can be perfectly fine even if I don’t become wealthy.

What personal finance sites do you read?

To be completely honest I don’t have much time for reading financial sites these days. When I first got into financial blogging I read so many finance blogs that I might have overwhelmed myself. There are only so many times you can read about certain topics that keep getting repeated. That’s not to say there aren’t awesome finance blogs out there that manage to take a unique approach, but I’ve been too busy to keep up with them. I do wish I had the time to keep learning and keep up with all the great blogs.

What else would you care to share with the readers of Frugaling?

First of all, thank you very much for inviting me to do this interview Sam. You’re doing an awesome job with Frugaling and I expect to see you around for a long time to come. For the readers of Frugaling.org, remember that personal finance is personal. You’ll read all kinds of advice and tips on finance blogs, but it’s up to you to find what ultimately works best for you. Everyone’s situation is unique. You can’t always fit a square peg into a round hole. So keep that in mind when reading finance blogs. Take what you can from that advice, but don’t expect to be able to apply all of it to your own finances just as successfully. What you do learn can still help tremendously.

Want to read more interviews like this one? Read the entire interview series here!

Becoming A Runner Saved My Budget

By Frugaling 8 Comments

Kali Hawlk is a freelance writer and blogger with a passion for helping twentysomethings learn to manage their money and live well on less. When she’s not out on a run, she blogs about personal finance and more at CommonSenseMillennial.com.

Although I hate to admit it now, the truth is I used to be far from frugal. I frequently gave in to the desire to accumulate more stuff, material things, clutter, and junk. Remarkably, I never went into debt, but I certainly didn’t have anything left over at the end of each month to save. I coveted what other people had that I couldn’t afford.

Kali running article — *Photo: Kali with husband*

I was miserable without what I thought I had to have, but even when I went on a shopping spree, the happiness was quick to fade. Before the day was done, I would be back to being bored, sad that I didn’t have what someone else had, or feeling bad about the way I looked and wondering when I’d have enough clothes to make me feel good about myself.

I used shopping and spending as a cure for boredom, a way to relieve stress, and to improve my mood and confidence. Unfortunately, at the time I didn’t understand that I was choosing a really bad coping mechanism for dealing with my problems.

I wish I had some sort of financial epiphany that made me see the error of my ways (it would be a fitting story for a financial blogger with ideas about what twentysomethings should know about money). But what turned my spending around – and what ultimately saved my budget from being annihilated every month – was a habit I gained: Running.

It was this simple activity – something that we’re all born to do – that allowed me to kick the comparison habit, stop wanting what I didn’t have (to start appreciating everything I already had), and helped me develop a greater self-confidence. Running gave me a purpose I didn’t have before.

Suddenly, every afternoon I had a task to complete; I went for a run, cross-trained, did strength training, or took a rest day and went for a walk instead. A less-than-stellar season on the high school track team that ended in multiple injuries and embarrassing showings during competition left me feeling as though I had something to prove, so I was extremely motivated to work hard and succeed.

Becoming a runner made me healthier in every way: physically, mentally, and fiscally. Though the physical benefits were an obvious plus, I was surprised when I realized I had made positive financial changes, too. I quit going shopping for crap I didn’t need. New clothes didn’t make me feel confident; my belief in myself and what I could do made me feel that way. I started saving all the money I previously would have spent on more stuff that was supposed to make me feel happy, but didn’t.

Before I started running, I’d often feel drained and miserable. Becoming a runner made me feel energized, inspired, and motivated to work hard in every aspect of my life. I realized how much I had the ability to save, and I made a plan to stick with a strict budget and make the most out of my small income. I started setting ambitious goals and then throwing myself into making my dreams into realities. Without a doubt, I wouldn’t have found the drive to start up a blog, pursue a career as a freelance writer, and start making plans to quit my day job to travel full-time if I never found myself as a runner.

Now, when I am bored, I go for a run (or at least a walk) or work out instead of riding in my car to the mall. When I feel sad, I go for a run instead of sitting on my butt in front of the computer for a marathon session of online shopping. When I am stressed, depressed, or confused about something, I go for a run instead of lying in bed, staring at the ceiling and moping.

Whenever things are bad or not right, I go for a run and everything is okay.

What do you do to save your budget and reduce your spending?

Personal Finance Gurus Fail With First Generation Savers

The struggles of a first generation college student

Similar status as a first generation saver

Is willpower the key ingredient to saving?