Cooperative Federal is committed to youth financial empowerment. The following "commencement address" was submitted as part of the Nerd Wallet Gen Y Credit Union Contest, and we won second place! The $1,000 award will be used to hold a Savings Challenge this fall, through our Youth CU Program at Henninger, Fowler, and Nottingham Highs.
To the Class of 2013:
My favorite college professor once said that there are two paths to wealth. You can increase your income until you get everything you want, or you can lower your aspirations until you only want what you already have. For most of us, the answer comes from finding a balance between those two extremes.
Of course, it doesn’t take much life experience to know that balance is a skill not easily learned. Financial balance takes not only discipline and practice, but critical thinking and self confidence. You have to understand the difference between what you want and what you need, fight for what you value most, and stand up against the temptations of peer pressure, pop culture, and social expectations. Most of all, you need to know your own self worth.
So. How does a starry-eyed new graduate burst forth from the cocoon, stretch your dewy wings, and face the world as a savvy consumer? There is no one-size-fits-all instruction manual, but no matter where you come from or where you’re going, the first step is knowing exactly where your money goes. Make a budget -– that is, a spending and saving plan -– and honestly track your expenses. That is a fantastic habit that will serve you well your entire life through.
Budgeting may seem simple enough, but it’s an ongoing test of your resolve, your strength of character, and the values that define who you are. With that in mind, here are four principles to help you create that spending plan, evaluate your choices, and cultivate a financially balanced life.
Number 1: Question Everything You Want.
Each time you’re thinking about buying something, start a discussion with yourself. Why do you want that thing? What will it do for you? Will it make your life better? Is the benefit big enough to justify the cost?
Cars, for example, are a tool for getting from point A to point B. But if that was the only criteria for choosing a car, there would be no more than five types of cars on the market. Image, not function, is usually what sells cars –- who you want to "be" in that car; how that car makes you feel about yourself.
Spend some time observing what makes you tick, and then do a reality check. List all of your monthly and yearly expenses, determine what absolutely must be paid and what is optional, and then attach realistic numbers. If those expenses add up to more than your income, you need to make some careful revisions. That’s called balancing your budget. Can you reduce how much you spend on entertainment and clothing? Can you get a roommate to chip in for rent? Once you have a balanced budget, commit to it -– whether it means cooking more of your own meals, picking up a part time gig to pay for your car insurance, or trading in your gas-guzzling SUV for a bicycle.
Number 2: Look Forward.
Once you’ve evaluated your short-term spending priorities and created a budget, decide how much you want to set aside for something in your future. It can be anything, or many things, but they should be things that matter deeply. What do you want your life to be like in two, ten, or even twenty-five years from now? What parts of that vision are most important to you?
For me, it’s security. My top priority is creating a place where my family is safe and comfortable, and investing in things that will meet our future needs: a house; a community of friends that can lean on each other; a garden to grow our own food and maintain harmony with nature; and a retirement account for that far-off day when I won’t want to, or perhaps won’t be able to, work.
For you, standing at the precipice of your life, it might be a cross-country road trip. Saving enough to get you from coast to coast, and not having a job during that time, probably means you’ll have to skip a few trips to the mall or live on noodles and peanut butter sandwiches for a while. You might need to work some extra shifts and miss a blow-out party. The question you need to answer is, will those temporary sacrifices be worth it when you’re cruising over the Golden Gate Bridge, getting smacked by your first-ever face-full of cold Pacific air? When you’re sitting in your office 5 years from now, scrolling through your Instagram archives and longing for the days when you could take the whole summer off?
Do you need that trip? No. It’s OK to want things, and to get the things you want, as long as they’re in balance with your responsibilities. For example, if you financed that road trip with credit cards, the memory of clouds rolling in across the Grand Canyon might just remind you of the debt you’re still caught up in.
Number 3: Value Strong Relationships.
Like that old song says: money can’t buy love. It can’t buy friendship, either. But money can create rifts. Money can also help you know when a relationship is toxic to your well-being.
The bottom line is, what kind of people do you want to surround yourself with? Do you want to be around people who respect who you really are, who are reliable, who care about you? Or do you want to be around people who care about the labels on your clothes and the size of your TV? Look for warning signs before you make new friends, and don’t be afraid to grow away from people who make you feel bad about yourself.
Of course, it’s not always as simple as distancing yourself from a fair-weather friend. Money impacts relationships with people close to your heart and home. Whether you’re dealing with your sister, your roommate, or your partner, it’s important to clearly and respectfully communicate about your financial boundaries. Look for ways to compromise that don’t threaten your security –- like a set of ground rules for making decisions about shared purchases. At the same time, try not to sweat the small stuff. For example, if your best friend is notorious for "forgetting his wallet" every time you go out to the movies, and then never paying you back, you probably don’t need to cut him out of your life altogether. Instead, try having an honest conversation with him, suggest less expensive movie nights at home, or decide to adjust your budget so that you can afford to treat him to a movie once per month.
Number 4: Know Your Place in the World.
This last principle may seem irrelevant to a conversation about budgeting and financial balance, but if you ask me, it’s the most important one of all. This is the part where your daily life can be part of the problem, or part of the solution, for all of humankind. You see, none of us lives in a vacuum. Our lives are shaped by what has come before; our choices—especially our collective economic choices—have a ripple effect that touch people and places a world away.
For starters, put yourself in situations that will make you appreciate what you have, and clarify what’s most important to you. Visit senior homes. Ride the bus. Push the edges of your comfort zone. If nothing else, it will make you feel connected to the world around you; hopefully, it will also teach you humility and respect for other ways of life. It just might make you rethink your wants and needs, and learn not to judge others -– or yourself –- based on your possessions.
Learn from history. Looking just a few generations back can teach us all a thing or two about resourcefulness and tenacity. For example, nine to one odds, your grandparents or great-grandparents knew how to grow vegetables and make their own clothes. That kind of “Do It Yourself” ethic is becoming popular once more, but it’s still so easy for most of us to drive to the supermarket or stroll through the mall. Strive to go against the grain, at least some of the time. Take pride in hard work, and know that you could survive hardship if push comes to shove.
Finally, think about poverty and environmental destruction. Educate yourself about the systems in place that make the rich get richer and the poor get poorer, as natural resources vanish before our eyes. Make no mistake –- that is what is happening in our world today. Decide if being part of those systems feels right to you, and make choices accordingly. That could mean choosing your local credit union over a giant bank, or buying veggies from small farms, or buying sweat-shop free clothing. It could mean dedicating your career to organizations that promote equality or renewable energy. It could mean skipping a smart phone upgrade, and donating the money you would have spent to a soup kitchen. Whatever choice you make, be conscious about the impact it has not only on your future, but on the future of the earth and everything that lives on it.
Our responsibilities, as citizens of the world, can surely be overwhelming at times. You don’t need me to tell you that. But a balanced, honest, and conscious approach to managing your money can take you farther than you would imagine.
Someone once said that you cannot buy happiness -– a wise and timeless truth. Graduates, as you go forth into a world were that truth is too often obscured, I wish you the vision to see through the hype, make the most of whatever you have, and know how to tell the difference between who you are and what you own. With those gifts, you’re sure to find happiness.
By Thomas Dellwo, Financial Education Coordinator, and Meagan Weatherby, Program Sustainability & Outreach Coordinator