Planning Ahead: Finance 101
Saturday, November 10th, Pratt Institute welcomed the New York Creative Internsand a variety of creative professionals onto it’s campus for the Find and Follow Your Passion conference (#findpassion). In a joint effort with Pratt’s Center for Career and Professional Development (CCPD), NY Creative Interns provided Pratt Students with a full day of discussion and hands on workshops with some of the coolest creatives and companies in New York City. Here, students were able to learn about different industries and network with professionals and peers, all in order to build a foundation for creative success. Now that the networking is done, however, what does one do with the information gathered? Making connections is just the first step towards pursuing one’s goals, now comes the time for real world application. Thankfully, this is exactly what the workshops NY Creative Interns helped us figure out. We at Peer to Peer have compiled a quick rundown of the panels we found helpful, in hopes that the information will be of service to those who were unable to attend the day long conference.
Planning Ahead: Finance 101 Reviewed by Christina Bull There is nothing more daunting than the thought of managing one’s money. From understanding the confusing terms, to cutting expenses, to the process of doing math itself, financial responsibility can often seem like a total drag. However, despite popular opinion, managing one’s money really isn’t as complicated as it sounds. It literally pays to understand one’s financial benefits as early on as possible in life! During session three of the Find & Follow your Passion Conference, attendees had the opportunity to listen to the helpful financial advice of Rebecca Rooney– financial advisor at JP Morgan. On a daily basis, Rooney works with high net worth individuals and their families, non-profits, foundations, and family offices. Last weekend, she applied her financial knowledge towards helping conference-goers understand their financial needs and how to achieve their wealth planning objectives. The mere word “finance” has the ability to make art and design students quiver in fear. Let’s face it, not all of us are the best with numbers. Despite this, Rooney was able to skillfully break down the intimidating world of personal finance, strip it of complicated lingo, and tell us all the simple facts. It all starts with running a credit report to know your credit score. A credit score is a 3 digit number generated from one’s credit history. Credit scores are a simple way to express one’s financial responsibility, (For example, a good score can help you qualify for an apartment rental and even help you get utilities connected without a deposit). Every citizen is entitled to one free credit check a year. Freecreditscore.com is a credible example of a website where one can obtain their credit score. And here in CCPD we recommend students use Credit Karma. Good credit may not seem of much consequence to the average college student yet, but it’s imperative to build good credit before you need it. Unlike in school, where everyone begins with sterling grades they must try to uphold, a good credit score must be developed over time. Therefore, it’s important to start in on this task as early as possible. One simple thing students can do to help themselves begin to establish credit is getting a credit card. This card should be used sparingly for small purchases, as to not encourage excessive spending, and then paid off in full each month. NOTE: credit cards will offer you a minimum payment option. Despite the lure of this, make an effort to always pay the full bill! It will positively impact your credit score. There are also a bunch of things to avoid when trying to establish good credit. Defaulting on a student loan takes a big toll on your credit credit, making it really difficult to take out any more loans. After getting better acquainted with one’s credit score, make a budget. This is a clear account of your expenses. No budget is the same from person to person, so it’s important to take the time to really analyze where one’s money is going. This requires a degree of discipline, but the rewards are great. The first step in setting up an effective budget is categorizing one’s expenses into “essentials” and “extras”. This seems like a bit of a no-brainer, but it’s important to be very thoughtful when categorizing these expenses. Often the definition of “essentials” can get a little hazy. One’s essentials are fixed crucial payments that one can’t survive without making. Believe it or not, even if you believe that you’ll perish without that coffee you buy every morning, it still falls under the “extras” category. Extras are variable expenses, meaning they often change from month to month. This category is important to look at when making adjustments. Despite the inherently fluctuating nature of these expenses, try to estimate about how much money is spent on this category of purchases per month, and account for that amount in the budget. In a budget, necessities are necessities. This is where the majority of one’s money goes. Be sure to set a monetary cushion and use that to build up savings. This allows for preparation to counteract the unexpected, and especially important for the expenses of the “extra” category. Now that the budget is in place, a lot of time can be saved by setting up all one’s essential expense bills on autopay. This means that each of these bills will automatically draw from one’s savings each month. Not only does this save time, but it also keeps one from spending money they don’t really have, and helps avoid late payments that effect your credit score. Now more on student loans: let me repeat, they should always be a priority in expenses. One important point to know is that federal loans are better than private loans, as they have lower interest rates and are therefore cheaper in the long run. It is similarly imperative to know whether one’s student loan is fixed or floating. Fixed loans have a constant rate of interest that remains for the duration of the loan, whereas floating loans have an interest rate that is constantly fluctuating according to conditions in the national economy. One can call their college to find this information regarding their own loans, as well as find out what can be done to change their status to one loan type or the other. On another note, there’s always retirement to keep in mind. As a sophomore in college this is hard for me to believe, but one day we’re all going to be old. No matter how totally awesome our jobs after college are going to be, there will inevitably come a day where we all want to have a little bit more time to just sit around, reminisce about our glory days at Pratt Institute, and enjoy not working. For this to be possible one needs a retirement fund! A 401K is an employer-sponsored retirement vehicle. Essentially, with a little bit of care and attention now, this can become free money for you later on. To get started, one needs to understand how much money they can realistically contribute to their plan. Any amount, no matter how seemingly small, can become a big help later. It’s important to aim reasonably with this number, as you can’t touch this money once it’s deposited into the plan. On the surface, a 401K sounds like a saving account with a fancy name. In actuality, the benefit of a 401K is far greater. The money retains a tax deferred status unless withdrawn, and compounds. Compounding occurs when your investment earnings or savings account interest is added to your principal, forming a larger base on which future earnings may accumulate. As your investment base gets larger, it has the potential to grow faster. And the longer your money is invested, the more you stand to gain from compounding. But what about all the hard-working freelancers out there? Shouldn’t they be allowed to sit around and enjoy their elderly years, too? An I.R.A (individual retirement account) is a self-employed alternative to a 401K. Though it certainly seems scary now, financial responsibility is especially important for those involved in creative fields. It’s a competitive world for artists and designers, and we are all going to have some point in our careers where things aren’t going well as we would like. We all feel the pains of funds being tight, but being responsible could be the difference between snagging that studio space you’ve been dreaming of, or having to make it wait until later (if ever). We all want to pursue our dreams, and financial responsibility opens up a lot of doors. Yeah, yeah. I know. Planning for one’s future through investments and retirement funds might not be the most exciting aspect of being a creative professional. Nonetheless, it’s certainly one of the most important! After all, with all of the thought and effort that you put into developing your practice, wouldn’t it be nice to have some peace of mind that you’re not going to end up broke and unable to create your work? Answer: Yes, it would, and there are tons of things college students can do while they are still in school to begin setting up a secure financial future for themselves.
