Starting 2023 Strong: Financial Fitness
January 4, 2023
By Mark C. Anderson
Money management can be intimidating.
CSUMB lecturer Aaron Snyder gets it. He teaches the popular financial literacy course BUS 350, a general education course designed for non-business students—which he encourages everyone to take, regardless of major—so it comes up a lot.
One reason for that is its entirely different vernacular, weaving together terms like compounding interest and principle, and myriad acronyms like APR and ABP and ABSS.
“The more you understand the language and structure of your personal money—which could be your bank account, your car loan, credit card or loans, or maybe your 401K—the less scary it is to make decisions about it,” he says. “When you understand how those things work, it's way less intimidating to go into a bank or car dealership, where you'll likely be asked to quickly make several decisions and decide what is right for you.
Simple tools are also helpful, particularly when it comes to spending and saving wisely. They include laying out a basic budget that details what you spend every month on fixed causes (rent, food, car payment) and what he calls “extras” (shopping, Netflix, dinner out). Those can be managed with Excel or Google Sheets, and facilitated with free examples of typical budgets to help get things started.
“You then can use this information to estimate what you’ll be spending next month—so you know if you are going to run into trouble and you can prepare for that!” he says. “It will also let you understand how much money you have to dedicate to something like savings.”
Another handy habit, he adds, is keeping the opportunity cost of any financial decision front of mind.
“All of your decisions regarding your finances have a baked-in cost associated with them based on what you could have spent the money on,” he says.
As an example, he posits a choice between using a month’s surplus of $100 toward credit card debt or a new pair of shoes. Thinking about the extra interest that comes with that debt helps clarify how much you want those shoes.
“Sometimes, that new pair of shoes will be worth paying the additional interest—what if your only pair had a hole?” Snyder says. “Thinking about that cost lets you make the best decisions, even when that decision is hard.”
When it comes to advising college students, he considers the common refrain he hears from friends and colleagues in their 30s and 40s: a wish they started saving sooner.
“The reality is that having a good understanding of your finances empowers you to start making strong financial decisions early—and that may allow you to reduce or avoid the amount of debt you take on, or increase the amount you are saving or investing, or make an excellent decision around that new credit card,” he says. “The earlier you understand and start planning your finances, the more likely it is you’ll be successful in the long run.”
And the new year presents a timely opportunity to do that.