April is Financial Literacy Month, and as it comes to a close, the USC Career Center offers you a recap of its 2023 Financial Literacy Conference and some student thoughts on what financial literacy means to them. Refer to this post for a brief rundown on noteworthy topics to note moving forward as you become increasingly financially independent! See what a couple Trojans had to say about their conference experience!
Day 1 – Understanding Taxes, Savings, and Investing
Speakers: Max Pashman, CFP & Kathryn Shirley, CPA
View Slides from Presentation
- There are various things you can do with different bank accounts. A checking account allows you to make deposits and withdrawals and may earn a little interest. Credit cards are high-interest loans that allow you to borrow, build credit, and gain rewards. A savings account allows you to make a deposit with cash and earn interest rather than pay bills. Debit cards are funds deducted directly from your checking account. It prevents borrowing, but doesn’t help with credit score.
- To easily organize your income into a budget, follow the 50/30/20 rule. Allocate 50% of your income to your needs, such as rent, groceries, and utilities. Make 30% of your income for your wants, such as dining out or shopping. Finally, put 20% into your savings, debt repayment, and investing for the long-term.
Planned Short-term Funds
- Emergency funds are for unexpected events such as an accident, job loss, or medical bill. A typical rule of thumb to set up an emergency fund is that it will take 3-6 months of expenses. A sinking fund is for planned events such as a vacation, car payment, or down payment. These are more for expenses planned within less than 1-2 years.
- Debt occurs when a bank loans you money, so you pay back the loan to the bank over time as well as pay interest on that loan. Types of debt include auto loans, personal loans, mortgages, student loans, and credit cards. Later on, we will discuss two methods on how to pay down debt.
- Investing is more than just about making money. It is an opportunity for growth. It helps when considering rising costs, taxes, and creating more options for yourself.
- Compound interest is interest earned on money that was previously earned as interest. In contrast to simple interest, compound interest multiplies quickly, meaning that it’s great for your investments and savings, but bad for loans taken out.
- Starting to invest may seem like a daunting task. There are different investment options you could look into. The first is individual stocks, which gives you ownership of a single company. Another one is index funds/ETFs, which are passive investment funds that replicate the performance of a market index. A third option is bonds, a security under which the issuer owes the holder a debt. This provides safe growth and interest. There are automated portfolio managers that can help you put together a simple low-cost investing portfolio, so you don’t have to do all the work alone.
- A brokerage account is an easy way to open a standard investment account to buy and sell stocks, bonds, ETFs, options, mutual funds, and index funds. Access to most investments are available in the public market.
- In a traditional IRA account, the contribution limit is $6500 per year in 2023. Contributions are tax deductible, distributions are taxed, and there are no income limitations for contributions. In a Roth IRA account, the contribution limit stays the same, but contributions are not deductible, distributions are tax-free, and thee are income limitations for contributions.
- A 401k is an employer-sponsored savings plan where both you and the employer can contribute. The employee contribution limit is $22,500 in 2023 and is deductible. It may offer a “match,” or an additional contribution made by employers, which is essentially free money. In a 401k, earnings grow “tax deferred,” meaning it is delayed to later. A 401k may also have a “Roth” option inside, which entails no income limitation, no deduction, and tax-free growth and distribution.
- Automate everything
- You can automate payments like contribution amounts, bank transfers, and reinvesting. This takes a lot of manual work off of your plate.
- Review schedule
- Identify your goals annually. Examine your contribution amounts semi-annually. Take a look at your investments quarterly. Come up with a monthly budgeting plan.
- Determine when you need your money
- If you need it in the short-term, cash it! If it’s more for the long-term, invest.
- Golden Rules to Investing
- Invest long-term, spend time in the market, and keep it simple.
Day 1 – Salary Negotiation Q&A
Speakers: Brandon Bramley & Velera Wilson
Watch Session Recording
Q. Why is it important to negotiate my internship/job salary, and what other benefits and perks can be negotiated?
Velera/Brandon: Salary determines your quality of life. It dictates where and how you live and how soon you retire, and it all hinges upon your ability to negotiate. When negotiating, you get one shot to solidify what you’re going to get paid for the next duration of time. Every time you switch companies, it’s a chance to jump up in compensation! Benefits and perks that can be negotiated include vacation time, work remote flexibility, sign-on bonuses, stipends (for wifi coverage, cell phone coverage, car coverage, etc.), and various packages.
Q. Some states mandate that the salary range be posted on all open positions. How can I research the correct compensation range?
Brandon: Compensation can widely vary across roles. Usually, the range of postings for open positions is the base salary. It doesn’t account for total compensation, which could include a one-time sign-on bonus, equity, and yearly bonuses. When negotiating, increasing the entire piece of the pie is essential rather than just one component. Don’t focus only on the guaranteed compensation but also on other monetary incentives! When you research, look specifically into that role, company, and location on a base salary and total compensation basis. Sites like Payscale, Glassdoor, Comparably, and Levels.fyi (tech) can be helpful tools for researching and comparing salaries. We recommend that you use an average of at least three resources to check that role’s low, mid, and high-end.
Q. How can I negotiate compensation to the highest range?
Velera: To negotiate compensation to the highest range, it is important to determine what you bring to the table specifically and present justifiable reasons for your proposition.
Q. What are the most common questions employers ask when negotiating salary?
Velera/Brandon: Employers may ask about your salary expectations or what you’re making at your current position. Rather than revealing every detail and reducing your potential leverage, it’s best to turn it back on the hiring team and flip the question back onto them, even if they pressure you. For instance, you could say, “To be candid, I have been focusing on interviewing for this role, and I am not necessarily sure what an appropriate compensation rate would be. I’d love to learn from you what the salary range is for this position!”
Q. If I have another offer, should I present that to the company I’m negotiating with?
Velera/Brandon: Don’t share specifics about your other offers right off the bat. Although it’s nice to seem like a hot commodity, sometimes companies don’t want to get in bidding wars. They might be disinclined to negotiate because they think you might simply accept the other offer. Don’t lie and say you don’t have any other offers though. You could say something like, “Several recruiters and opportunities have come my way recently, but based off the current interview, this company is where I would like to make my next move.”
Q. What is the biggest mistake that I should avoid when negotiating salaries?
Velera/Brandon:The biggest problem in negotiation is not having the right mindset and perspective. You should walk into the negotiation knowing that you have just as much leverage as they do; employers and employees serve mutual benefits!
Q. Does negotiating look different with big versus small companies?
Brandon:The strategies themselves don’t look too far different. There are similar negotiation frameworks for most companies. The first step in any negotiation is understanding the components of your job offer by identifying benefits and total compensation (base salary, yearly bonus, sign-on bonus, equity, etc.). The second step is asking the right questions. The third is sending the counteroffer, and the fourth is handling any objections and ensuring that the employers actually take your concerns back to the hiring team.
Q. Are any benefits easier to negotiate than others?
Brandon:This really depends on the size of the company; some bigger companies aren’t going to be flexible on too many things because their processes are quite standardized. You can mostly negotiate extra vacation time, and as of recently, work remote flexibility.
Q. How can I negotiate salary if I’m already at my job?
Velera/Brandon: Everything starts with compensation research and presenting your reasons justifiably. Also, remember that negotiations aren’t aggressive; they’re more like cooperative discussions! Engage in a win-win conversation with your employer, asking the questions: how do I continue to add value here, and how can my compensation reflect that value?
Q, Is there anything in our everyday lives we can do just to hone the skill of negotiating?
Velera/Brandon: Remember the power of asking questions. Try to handle objections and figure out how to turn a “No” into an “I’ll take another look.” Finally, just do it many times, and get lots of practice!
Q. Are there some careers I can’t negotiate for?
Velera/Brandon: Pretty much every role is negotiable. If not base salary, you can still aim to negotiate some other benefits.
Day 2 – Budgeting & Credit Score
Speakers: Ben Markley & Ryan McDonald
Watch Session Recording
Money management is simply how you decide to spend your money. Here are four major rules to managing your money:
- Give every dollar a job
- Your balance tells you how much money you have, not what your money needs to do. Lack of clarity on the purpose of your money leads to stress. On the other hand, clarity gives you control, and control gives you confidence. So, decide where your money is going before you actually spend it! You will have categories in your budget plan and assign a set amount of money to go toward that category for that month. You don’t assign money to those envelopes until you have it.
- Embrace your true expenses
- Not all of your expenses are happen monthly; a lot of them are infrequent or unexpected. You can take those unexpected expenses and treat them like they’re monthly. Divide foreseeable expenses into a regular monthly budget so you are saving for those infrequent occasions over months.
- Roll with the punches
- Sometimes, the plans you make with your money won’t work out perfectly. In that case, you must be flexible and ready for change! It is completely okay to change your plan to match your shifting priorities month by month.
- Age your money
- Many people live paycheck to paycheck, and their paycheck gives them just enough to make it to their next payday. To become more stable, it is important to build a buffer between your income for the month and your spending for the month. If you have your entire budget plan for the month and still have money left over, you can put it to the next month. Keep on doing this as you establish a cycle. Eventually, the income from one month will cover the next month entirely. Overall, money that sticks around for longer means more flexibility, which leads to better spending decisions.
- Before getting aggressive about debt, make sure your non-monthly expenses are covered (remember Rule 2). Otherwise, they will pull you right back into debt, which you don’t want. Make sure your minimum debt payments are accounted for in your spending plan. Then, automate them to avoid potential late fees. It’s also helpful to use your credit card like a debit hard, but make sure to spend according to your plan, not your credit limit. Pay off your card regularly to avoid racking up interest and build your credit score!
- Debt Snowball Method
- A great method for paying off your debt is the debt snowball method. First, arrange your debt from order of smallest to largest minimum payments. Figure out how much extra you want to throw at your debt, and add that amount to the minimum payment of your smallest debt. When that debt is knocked out, you can shift that entire payment to the next biggest debt, and continue the process until you’ve paid everything off. After knocking out a loan, you can also pause to ask yourself: What do I want this extra money to do? Constantly reassess where your money goes and know your priorities!
- Debt Avalanche Method
- The debt avalanche method of combating debt works essentially the same as the snowball method, but instead of arranging your debt from smallest to biggest balance, arrange your loans in order of highest to lowest interest rate to save more money in the long run.
- Credit is crucial for many different reasons. It will help you get a loan when you need it, rent or buy your own place, and appeal to people who may be looking at your credit, such as employers and insurance companies. In understanding credit, you should know that credit scores range from 300 o 850. You should aim for 740+ to put yourself in a great position.
- Your score is determined by different factors, which are weighed differently.
- 35%: Payment history
- 30%: amounts owed/use of available credit
- 15%: length of credit history
- 10%: types of credit used/credit mix
- 10%: new credit
Five Tips for Improving Your Credit Score
- Make payments on time
- This is the most important thing to do! A late payment can drop your score by 80+ points.
- Keep your credit card balances low
- Know your credit limit, and keep your balance at 30% or less of the limit. Have a plan to pay down balances, and stop using the accounts you are trying to pay down.
- Think twice before removing a credit card
- It’s actually beneficial to have multiple credit cards. Review your credit report to determine the length of your accounts, and choose the correct accounts to close. Try to avoid closing older accounts. You can keep accounts active by, for instance, changing a subscription to be charged to your inactive card over your active ones.
- Have different types of accounts
- Have a combination of revolving accounts and installment loans. This demonstrates your ability to responsibly handle different types of loans. A revolving account entails something like a credit card, while installment loans include auto loans, student loans, home loans, etc.
- Do not apply for too many loans ar once
- Opening a new loan/credit card can cause a slight dip in your credit score. It is important to handle new accounts responsibly to avoid more significant impact to your credit!
Remember, building and managing credit isn’t done over a short period of time. It requires consistent upkeep and effort, but it can be manageable as long as you know what you’re doing.
Protecting your credit
- Extended fraud alert lets you have access to your credit report as long as companies take steps to verify your identity. They are free to place and remove if someone stole your identity, guaranteed by federal law, and last for seven years. In protecting your credit, there’s also credit freeze, which stops all access to your credit report unless you lift/remove the freeze. The cost and availability of credit freeze depend on your state law. There might be a small fee for placing, lifting, and removing, but it will last until you lift or remove the freeze. You can cccess your credit report and monitor your credit at www.annualcreditreport.com.
Day 2 – Building Financial Wealth & Independence
Speakers: Jeremy Schneider
Watch Session Recording
- The Two Rules to Build Wealth
- Live below your means
- Invest early and often
- What is the best stock to buy?
- The efficient market: The sum total of public human knowledge is constantly and instantly being priced into every stock in the market
As college students, it can be difficult to figure out finances while also navigating the everyday hurdles of being a student. Yet, with proper knowledge, becoming financially independent and responsible will be much easier. For more detailed information from the conference, you can check out the Career Center’s session recordings and presentation slides of the panels here.