Personal Finance For Young Adults In 416 Words

Personal finance is so simple, writes Brett Arends, that everything you really need to know on the subject "fits into less than 1,000 words—no more than three to four minutes." Arends' main audience appears to be people in their prime earning years. Anyone could benefit from the quick read, but some of what Arends says probably won't mean much to a starving college student.

For those in the younger crowd that are still wending their way toward the prime earning stage of their career, I'd offer the following simple rules.

Focus on needs rather than wants. You don't need a hot car. You do need education, food, shelter, clothing, transportation, and even some entertainment. But staying on the needs end of the spectrum in each of these areas will mean a better life when your career starts rolling. You can reward yourself in the future when you actually have the means to do so.

Use available benefits. You can reduce expenses by getting grants and scholarships, working internships, etc. All of these things take legwork and paperwork that's tedious and no fun. But the investment will pay off big in the long run.

Be debt smart. Avoid debt. But if you must incur debt, only use it to make a reasonable investment in your future, and only incur as much debt as you can rapidly repay with interest. Going into debt to enhance lifestyle is a bad investment. One study found that the average college student blows about $9,000 annually on lifestyle choices — take out food, alcohol, cable TV, other entertainment, nice apartment, nice car — and that they use debt to cover these expenses. Don't be one of those average students.

Begin real retirement savings as soon as you can. Yeah, retirement is so far away that it's inconceivable. But you need to start dumping a chunk of your paycheck into tax advantaged retirement investments as soon as you have a real job. The dollars you invest during the first decade of your career will produce more value than the dollars you invest during the entire remainder of your career. If you begin with 10% of your gross pay and stick with it, you will never miss it and you'll have a handy nest egg when you reach your senior years.

Re-read and follow Arends' article when you begin your career. By then most of what Arends says will become more real to you. His advice can carry you through the rest of your life.