EOT 347- Financial Literacy with Brian Sytsma

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In the episode, finance expert, Brian Sytsma, gives college students advice about saving money and educates them on a wide variety of finical topics including taxes and student loans

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Jeanine Ikekhua 0:21
The views and opinions expressed during Eye on the Triangle do not represent WKNC or NC State student media.

Your dial is currently tuned into Eye on the Triangle on WKNC 88.1 FM HD one. Thanks for listening. Whenever you ask college students what they wish they had learned in high school, most of them are going to talk about something related to finances. Finances are extremely tricky to navigate, and when you're in college, they get even more trickier. That's why I decided to interview Brian Sytsma, who was the financial advisor and college unit director, and Northwestern Mutual Wealth Management Company. In this interview, he's going to talk about how to navigate college finances, specifically how to deal with topics regarding taxes, credit cards, and student loans.

Hi, Mr. Brian Sytsma, thank you so much for coming here. So we can interview for WKNC radio. So I'm gonna go ahead and get started with interview. So my first question for you is, obviously you had your own college experience. And I know that you went through some of the issues with dealing about finances, because it can be extremely hard, especially when you're in college. And I feel like the number one place that people struggle is when it comes to budgeting. Oftentimes, like I've people start to work in college and they get like lost and like how much money they should be saving, and how much they should be spending. So what are some things that people should not waste their money on when they're on a college campus?

Brian Sytsma 1:59
Yeah, it's a great place to start Jeanine, and a great question as well. When it comes to college, temptation can be very easy, because there's so many things to do with your friends, right? Going out to eat, going to parties, you know, having some kind of get together. When it comes to budgeting some of the first places to start is one giving yourself the opportunity to set some structure, right? For most college students that one either aren't working or if they are working are working on somewhat of a part time capacity, because your main focus is school, it's important to determine what are the priorities of things that need to be taken care of, and what are the things that are more of wants and needs. Inevitably, it is okay to spend some money on things that you probably shouldn't, right? We all might go out to eat that one extra time, or go to that one bar and get a drink with some of our friends. But the biggest piece of advice for any student is the consistency part is the biggest challenge for a lot of folks being able to give yourself that moderation effect gives you the opportunity that it's okay to treat yourself, right? We're all here, we're all here to have fun, and it shouldn't be a problem to spend money, we just need to be a bit more strategic on when we're spending it. Because we can't be going out to eat every single day, as well as buying super lavish cars if we're not bringing in any income to actually support it. So moderation is a really big key piece and just being structured, and having a game plan of what you feel like you can do and is feasible, and then from there is just developing and living a lifestyle by design that you have each and every day as well.

Jeanine Ikekhua 3:48
So are there any financial like benefits that college students can receive in order for them to not have to spend as much money on like things like groceries or clothes or something?

Brian Sytsma 4:00
Yes, so there's plenty to go into with college universities, you know, when it comes to you know, governmental aid programs, grants, the opportunity to take out student loans as well. The biggest area for a lot of folks to be able to help these pieces, and one that's just overall helpful for their careers even outside of all those opportunities that NC State where I had my alma mater as well. But also other universities give outside of all of those is really just giving yourself the opportunity to find something that you enjoy doing either on campus or through an internship program. One because it's going to be great experience for you to learn and also be able to see how it is to balance a social life and classes and an internship which can be difficult, but that really gives you a realistic outlook on what it's going to look like full time once you are past college and people are getting married and starting families there. So outside of the normal college age programs like grants, tuition assistance that most universities have, and we help guide our clients too all the time, if you can have the opportunity to work on some sort of part time capacity, not only is a great experience, but it's also a way to generate that extra income there too.

Jeanine Ikekhua 5:19
I know we were talking about splurging, like going out to eat with your friends, which everyone does. Because for me, I feel like it's necessary. It's a good thing to do for yourself. Yeah. For example, if somebody made like $150, every, like two weeks, how much do you think that they shouldn't be spending on like splurging and like taking out time taking out money for themselves?

Brian Sytsma 5:41
It's a good point to bring up and you're gonna hate my answer is that it, really, it depends, right? Every person is different. One golden rule we use for a lot of our clients that people find pretty helpful, and it has kind of a ring to it, it's the 60-20-20 rule is that, especially if you're spending a lot of your dollars on bills, and you're you're the main breadwinner, taking care of those 60% of your dollars are inevitably going to have to go to things that you have to spend money on that are non negotiables, rent, food, gas, you know, what is needed for Jeanine and any other person to survive, 20% of it should be saved, whether that's via a savings account retirement, investment, just depending on where somebody's at in their path. Because you'll certainly want to have an emergency fund set up prior to putting in lots of money towards you know, things like stocks and bonds and mutual funds. But then also 20% of that money, we call it fun money, that it doesn't have a job title, right? Oh, that 150 bucks that we're bringing in every two weeks 20% of that you can typically feel pretty safe that if you're doing what you need to do from a saving side, and you're paying your bills, that it's okay not to feel guilty and actually spend that money there, too.

Jeanine Ikekhua 7:03
So you talked about investing, I feel like investing is such a hot topic as people see like how much money you can make from investing. But also feel like on the flip side, a lot of people don't know how to invest. So what would you say is like a good starting point of like how you should get into investing as a college student?

Brian Sytsma 7:22
As a college students, some of the best ways that you can get started in the investment world are one create a feasible goal of something you feel like you can consistently do. One thing we have for a lot of our existing clients, especially ones that are that are bringing in income working full time jobs, which are most people post graduation, one of the biggest things that we advocate for is that you're going to want to set up monthly savings strategies, almost like a bill per se. And there's a lot of psychology behind it, because if you're consistently saving on a monthly, weekly or whatever frequency basis that we want to use, right, we're getting ourselves the opportunity to save consistently, regardless of where it's invested in. Because each and every person has a different risk tolerance, I myself am a relatively risky investor, I love putting a ton of my money in the stock market, but for others, they might value a little bit more safe assets out there. So some of the best pieces you can do are one create a structure, right, have a monthly savings strategy, but also make sure you are fully informed. Jeanine, Google is a blessing and a curse. Right? You can find anything you want on Google, but Google will also tell you that you have cancer or whatever else that you might ask of it depending on what question and how you ask it there, too. It's the same thing with finances is that everybody is going to have an opinion about finances. What I advocate for folks is that you'll you'll typically want to find somebody trusted to talk about with it, have multiple people that speak about even if it's your friends, a financial adviser, a family member that's trusted, that you feel like knows a ton about finances and get their opinion, because each and every person situation is entirely different. It's almost like a puzzle. Each and every puzzle has a different pieces and no puzzle is the same. So getting the opportunity to really learn from all these opinions, but not take these opinions and do everything they say sometimes they might be right but also you've got to judge it based off of your own personal situation and therefore take your informed decision after you've been educated and use that informed decision to make a decision of where you're best.

Jeanine Ikekhua 9:41
When did you start investing?

Brian Sytsma 9:44
That's a great question. And I'm gonna say I'm gonna thank Brian C. Smith Senior for that one. So if he gets a chance to listen or watch this at all shout out to Brian C. Smith Senior. My father had my brother and I was our first investment account. I mean, we had to be maybe six years old, very, very early in our careers and inside of our household money was not a taboo topic, especially in this world. For a lot of families, one of the biggest hurdles out there is that a lot of families just aren't having this open dialogue when it comes to money, it can feel like a taboo topic and, and I, in being in the wealth management space are hoping that we can kind of get out of that over time, but my father did a really great job as kids really helping my brother and I understand the value of the dollar and the value of putting dollars away, especially when it comes to compound interest. But when it comes to investing, your best friend is time, the longer you have the opportunity to put dollars away, the more you're going to have an opportunity to see those dollars grow and compound as you save. So we were started, I mean, it had to be at somewhere between age six to 10, but always had us consistently talking about money, and understanding how it works so that by the time we had the opportunity to pay our own bills and make our own decision, we were lightyears ahead of most of the people in our peered space, when we're able to share that wealth and that knowledge with others around us that perhaps hadn't got that coaching education when they were kids as well.

Jeanine Ikekhua 11:18
So when your father started investing for you now, obviously, times have changed from when, like 10 years ago, or in the past, but um, is are there specific sites that you need to go to in order to to like put your money down to invest? Is there an app that you need to log on to like, what are the specific places where people can put money to invest?

Brian Sytsma 11:38
Yeah, that's a that's a fun one because there's a ton out there, right? A lot of the ones that most people will recognize these days and can be really, really user friendly sites can be like a Robin Hood, a Sofi, an Acorn is out there, especially from from the ease of use for individual stock investors. I personally, my father had us utilize a site called E-Trade. But there's a ton of other ones out there. There's Vanguard, there's Fidelity, there's JP Morgan, there's a great selection, and no firm is really better or worse than the other, right? They all have their pros and their cons. But getting the opportunity to find one, maybe two, and really just giving yourself the opportunity to learn and really understand the technology is critical, because then from there, you can determine Okay, is this one really the one for me? Or should I go try a different one, because this one perhaps doesn't either have, you know, the offerings that I may be looking for as an investor or maybe this isn't the type of user friendliness, that I might have liked them as well. But each array was one of the first ones that I use, but that one's it's a little bit older, has been around for quite some time.

Jeanine Ikekhua 12:52
Which one do you currently use? If you don't mind me asking, of course,

Brian Sytsma 12:57
I use a combination of two, I still use E-Trade. I like their platform, you know, being pretty deep into the wealth management space as well. I like the very, very specific data that E-Trade gives individual investors, but also my team, so we operate our independent financial planning practice through Northwestern Mutual, so we leverage their platforms as well and they're an over $500 billion company in the Fortune 100. Very, very user friendly sites and we really like how they use them because they don't have any proprietary product. They don't have a Northwestern Mutual fund or stock. They entirely use other companies just through Northwestern Mutual's platform. So I've invested in companies like American funds, JP Morgan, Fidelity to name a few. But those are the two areas on Northwestern Mutual side and each read still for me. A little old school.

Jeanine Ikekhua 13:54
which is okay, do you think that college students should also use like Northwestern Mutual and E-Trade? Like you've talked about with the combination?

Brian Sytsma 14:04
Yeah, so I shy away from any specific blanket recommendation of like, "Hey, you have to use this site, or you have to use this company", right? Because my experience might entirely be different than a college students, and that is totally okay. If a college student feels much more familiar and comfortable with something like Robin Hood, or TD Ameritrade or Acorn, hey, that's totally okay. My encouragement is that don't let the technology scare you away, something like E-Trade can be a little bit intensive for the eyes, right? So for some folks, that wouldn't always be the first place I'd recommend. It tends to be a little bit more institutionalized investors that have been around for a while. Northwestern Mutual's platforms are pretty clean platform there too. But overall, my recommendation for young folks, is give yourself the opportunity to start. Start with one and see how it feels and then from there, you can certainly move launch the website there as well.

Jeanine Ikekhua 15:02
Would Robin Hood be like the easiest one for like visual stuff?

Brian Sytsma 15:06
Robin Hood tends to be very user friendly.

Jeanine Ikekhua 15:08
So as college students, we obviously have to pay tuition. And some people have to pay that with student loans. So I know that with student loans like over time, you get interest and the interest increases, like how much you have to pay. And I feel like a lot of people are unaware about like the interest and how much they need to pay and like how much it's going to affect their payment over time. So if you could just shed some clarity and light on that issue that was very helpful.

Brian Sytsma 15:37
Of course, there are two key words when it comes to interest when it comes to student loans. And those two words are subsidized and unsubsidized. Subsidized student loans, whether they're private loans or federal loans through the government means that there is no interest accruing while you're in college, this can be a great vehicle for folks, especially if you're going to be in school for four years, eight years. For folks that are being physicians out there, you're going to be in school to your 30, right? It's a great way to be able to have those student loans, but also not be too concerned about the interest building unsubsidized loans mean that interest rates are accruing while you are in college. So a big part of that process is you're selecting what types of student loans is ideally, if we can, we'd like to have the opportunity to use subsidized student loans because interest rates right now can be pretty high when it comes to private student loans specifically. Federal student loans tend to have a little bit lower interest rates, at least from what our team has seen, but the biggest piece to note is that interest isn't necessarily always a problem. For somebody in college, to have the opportunity to have a student loan that only has two or 3% interest can be a great vehicle to leverage versus a student loan that has 12% interest. Because eventually, if we end up able to take 2% down for a student loan, but let's just say we start investing at some point, and we return a rate of return of seven to 8%, well, technically, you've made 6% on your own money by just not overpaying on your student loans too quickly. Student loans can be a very emotional thing to talk about for folks, right? For most people, it's "Hey, I really want to get rid of the student loans as quickly as we can", and really us as advisors try to coach folks is that debt isn't always bad. There are certain types of bad debt out there, like credit cards, like some forms of car notes, but student loans aren't always a bad debt to have, especially if you have a reasonable interest rate. Ideally, that's subsidized during school and then trying to keep those student loans of low late rates, low post school, even if they are higher. There's a lot of different refinancing programs out there that can help lower the student loan interest rates as well.

Jeanine Ikekhua 18:02
And what are like the best student loan companies to have your student loan with? Because I know there's multiple like, there's Naviance, and there's a couple of others, so which one do you think is like the best when it comes to helping students like actually get through their debt?

Brian Sytsma 18:17
Yeah, that's a great question and admittedly, I'm not the best person to answer it. And the reason why I say that is I didn't have student loans while I was in college, my parents did a really, really great job saving for us, and it paid for out of state tuition for myself, which was huge, giving me the opportunity to really focus on saving for my own goals outside of tackling student loans post college, I would refer a lot of the times to the type of interest, or excuse me, the type of loan versus the actual company. With so many companies changing all the time, the company isn't necessarily as relevant as whether or not it is a federal student loan or a private student loan, because typically those federal student loans are going to have lower interest rates. But there's a ton of different companies out there, Sallie Mae, Fannie Mae, there's a ton of different ones to look through. There's no better or worse one, it's just a matter of really what those interest rates look like, and how these how these student loans are designed for somebody while they're in college, but also post college as well.

Jeanine Ikekhua 19:25
So you said that credit card debt is like one of like the worst debts to have and I feel like a lot of people in college like they get into that very, very easily. So I want you to first of all define like, what a debit and a credit card is.

Brian Sytsma 19:39
Yeah, so a debit card is essentially an extension of your bank account. Meaning that let's just say Jeanine you have $1,000 in your bank account well, you can use your debit card, to take the money out of your bank account without actually having to physically go to the bank and pull out you know, those ugly bills right to have in your wallet. A credit card is a way for you to leverage money that you actually don't have for you to pay off within a certain period of time. So, for example, um, let's just say somebody's at Wells Fargo and they have a credit card with a $2,000 limit. Well, that means every month, they can spend up to $2,000 on the credit card, and the credit card company is going to give them the opportunity that, hey, if you can pay off the $2,000, by the end of the month, you're not going to accrue any interest. So that's the big difference between debit and credit cards is the ability to leverage cash, because credit cards give you the opportunity to spend money that you might not even actually have in your bank account there as well.

Jeanine Ikekhua 20:43
So what happens if you spend the money? Like if I have a $2000, limited set? And I spent like $4000, what happens like, how do I pay the rest of that money back?

Brian Sytsma 20:55
Well, when it comes to the $4,000 piece, you can't go over the limits, you would have to either open up a new credit card, or utilize what's called a cash transfer program through some credit card companies, where you can get some types of loans in which you can use to pay down those credit cards. The biggest challenge is if you are approaching those interest rates, and if you can't pay the cash within a month so one of the biggest misconceptions out there are folks that see their credit card limit and feel like if they just make the minimum payments or just pay off like $100 a month that they're not going to build any credit, or excuse me any credit card interest and that is not the case and in and it is not a good rumor to have out there. And there's a lot of people that believe that is that just how you pay down credit cards. To be clear, that is not how you pay down credit cards at all. The way you pay down credit cards is giving yourself the opportunity to pay off that full balance by the end of the month and not build interest because if you leave that balance on for the next month and just make minimum payments, typically credit cards had anywhere between 20 to 25% interest rates we can get which get you in a very, very tough spot to be able to get out of that debt hole as well.

Jeanine Ikekhua 22:11
Wow, that is a very high interest rate. Oh, wow.

Brian Sytsma 22:16

Jeanine Ikekhua 22:17
For credit cards and debit cards. So I know the credit card should be used more for savings or spending, which one?

Brian Sytsma 22:28
For credit cards specifically, they are not a method of saving. Credit cards are really a way for one for you to build credit to eventually take on loans, ie if you were to buy a car or a house where you can't necessarily pay it all off in cash. A credit card is a really, really great way to build credit so that your interest rates are really really low on other types of loans.

Jeanine Ikekhua 22:52

Brian Sytsma 22:52
So they are specifically leveraged for for cash.

Jeanine Ikekhua 22:56
Okay, so people should not be saving with like credit cards or-

Brian Sytsma 23:00
Not at all.

Jeanine Ikekhua 23:02
Good because I feel like that's like a common misconception that I've heard. So with your savings in your checking is how much money should you be saving every single month?

Brian Sytsma 23:10
So you're gonna love this phrase, but it is a all it depends, right? One of the biggest areas of opportunity for students is being able to give yourself a cushion, especially as you're getting through school. But also as you're getting ready to go into the full workforce. One of the big terms we use for a lot of our clients is keeping at least three to six months worth of your monthly expenses inside of a savings account, IE as your rainy day fund. If you have a flat tire or you have a major medical emergency, you've got a bucket of cash that is available for you to be able to pull at any given time. Now for college students, that one can be a little bit of a harder number to conjure, because your parents might be helping you pay a lot of bills, so your bills aren't as high as if you were working full time. A good place to start is if you were a college student getting started no matter if the dollars are $1 or $10,000 is the best place to start. But ideally, a nice cushion of at least a couple $1,000 while you're in college is a great place to go in which you can start building towards a three to six months worth of expenses as you're bringing an income at the door.

Jeanine Ikekhua 24:27
What are the best places to open a bank account for college students?

Brian Sytsma 24:32
So I'm only going to speak to NC State because there's so many banks there are so many and there's so many great banks and there's not really a ton of bad banks out there, if any. A lot of local ones around here there is a Wells Fargo on Hillsborough street. That's where I personally bank they do a great job there. First Citizens banks a very popular one, JP Morgan is another one as well. The biggest piece that students are gonna want to intake is getting the opportunity to build a relationship with their bank and build that relationship early because this may be a bank that you're working with with for the next 80 years of your life, some people never change banks. So finding somewhere local, ideally that you can also physically visit is very, very helpful, especially from these odd there's a lot of online banks these days, that can be very, very helpful, it just might be a little bit harder to get in touch with somebody versus a physical bank where you can find somebody to help you very, very quickly if you have a lot of questions.

Jeanine Ikekhua 25:33
So I know we've talked about checking and savings accounts earlier, can you just quickly define to us like what is a checking account? And then what is a savings account? And how they should be used.

Brian Sytsma 25:44
So both have great usages, and everybody's going to have a different opinion when it comes to those. So checking accounts are a bank account that does not build any interest. Savings accounts are another type of bank account that does inevitably build interest. Each and every bank is going to have different types of fees related to it, and also how the accounts work. But most professionals have these accounts separated intentionally to have two different usages. There's a lot of psychology behind separating where your money is, you're not going to want to combine your emergency fund with your day to day spending account, because then you end up overspending on accident one month, and then now you no longer have an emergency fund to begin with. So a lot of clients bars and a lot of people out there are using their checking accounts as their normal revolving door of being able to spend money because a lot of banks also have certain purchasing limits for savings accounts where you may be only able to do 10 or 15 purchases before they'll charge some kind of fee. A savings account is typically used as a way to keep that rainy day emergency fund because it does build some interest but also that separation of accounts makes it much harder for us mentally as humans to want to pull from your savings because that account is now labeled as your emergency fund your checking account is labeled as your spending account.

Jeanine Ikekhua 27:12
So I know for savings account that was where like you have like your high yield interest. So could you explain to people what exactly is like a high yield interest savings account?

Brian Sytsma 27:23
So to answer that question, I'm gonna answer the question of what a savings account is not a savings account is not meant to be there as an account that is actively outpacing inflation, getting very, very large rates of returns. There's other types of accounts out there that are designed for that. What is high yield savings account, or even just a regular savings account is it's just giving yourself the opportunity to build any kind of interest inside of a savings account. There are certain types of high yield savings accounts, I think the highest one I've seen is like 1.5%, inflation is over 2% and this year is over actually 5% though, really what the purpose of your savings account is, is to have that account available, not necessarily to grow a ton of your wealth but if that you really really need cash, Jeanine, that you could pull it immediately. While these other types of accounts that you can leverage interest, have some more restrictions in regards to how quickly you can pull the money out, which is how you're able to build interest in the first place.

Jeanine Ikekhua 28:28
Okay, so I'm going to do a quick recap, and you're going to correct me if I'm wrong. So we've talked about checking, savings, and then investing. Checking is where I go, if I want to get immediate money to buy something, like if I go to Chick fil A, I would put my debit card and it would come from my checking.

Brian Sytsma 28:46
You got it.

Jeanine Ikekhua 28:47
Okay. And then savings is like that emergency rainy day fund, and might have like an interest rate, like I think I know, mine has one of like 0.4 and I think that's because it's online, so that is the emergency fund the savings account.

Brian Sytsma 29:00

Jeanine Ikekhua 29:01
And their interest, sorry, not interest. Um, when it comes to investing, investing is where I take money, and I like I have to figure out how much money I can invest in order to still be able to be financially stable, and that is where I would put towards whatever company through. I know for example, I like E-Trade, or Northwestern and that's where I would go to grow my money. And then I would have the paycheck.

Brian Sytsma 29:26
Right and those E-Trade and Northwestern those are just the companies that hold the accounts in which you could go out and you could buy like an Apple stock or a Microsoft stock or at Fidelity mutual fund E-Trade and Northwestern there's areas for you to actually be able to hold your funds to go out and buy those stocks.

Jeanine Ikekhua 29:47
And when I get my paycheck and I talked about the 60-20-20 rule, so when I get my paycheck 60% should be going to where 20% were and the other 20% were just to reiterate so people know.

Brian Sytsma 30:00
Of course, 60% is typically what's needed for most fixed household expenses. So that's the absolute necessities.

Jeanine Ikekhua 30:07
So it goes to your checking?

Brian Sytsma 30:12
Correct, all the money ideally, from your paycheck is going to come to your checking originally, it's just a matter of what you do with it, once it arrives, we typically recommend that you pay yourself first. So if you're going to have that 20%, that you're going to save, before you start paying a bunch of bills, you should take that 20% and automatically put it into a different account, whether it's your savings account, whether it's investing, take it out of there right away so that you never even see the cash come in.

Jeanine Ikekhua 30:39

Brian Sytsma 30:40
Very, very critical. And then the other 20% was fun money, right? Going out to eat having fun with all the money originally comes into checking, it's just a matter of taking that 20% and moving it to another account to pay yourself there as well.

Jeanine Ikekhua 30:56
So, one of the hardest things like specifically when it comes to splurging, I feel like people over splurge and they take like 40-50%, when they should only be taking 20%. And I think that's because it's hard to keep track of like your finances. So what do you think it's the best way to keep track of like the monthly spending that you make and the different areas that you spend money on?

Brian Sytsma 31:15
Yeah, that is a great question. And the best way to answer that question is to come up with a written plan. There is there are a ton of studies out there, especially when it comes to finances, that the people that are most likely to have their financial goals work are the ones that write them down and actively review them. What a lot of families do is they will write down a budget of what they're going to spend money on, and then never look at it again. There's a ton of people out there, especially some of the most successful people in the world, any plan needs to be created, but then also reviewed, right review changes happen, life changes, you have a child and another expense comes on the balance sheet, right? The ideal standpoint, you're gonna want to write down that budget, but also give yourself wiggle room that, hey, there's gonna be months where stuff that we don't know about happens, right? We call those the unexpected dollars and that almost even should be a line item on your overall income of what's coming in the door so that that's a part of your overall spending strategy. It's okay to go over and spend a little bit more, you know, for one month or maybe two months, where the problem comes in is if it's a consistent thing, and we're not paying ourselves or saving anything. Because most humans, what ends up happening is they get to the end of the month and they say, "Well, if I have anything left over, I'll save X amount of dollars". Well, something almost happens every single month, and then this person will literally never save dollars for the next 40 or 50 years of their life. And it's natural, it's not easy, and it's not normal and natural to save, so paying paying yourself from that budget originally, especially as you're getting that paycheck is critical, so that when you make that spending sheet, even if you need to go over a month or two will you've already saved the money that you need to to give yourself a wiggle room here to. Creating that written plan is critical.

Jeanine Ikekhua 33:20
So I know we talked about bills, and I know one of the things that um, every human has to pay his taxes. But I want you to talk about specifically what is taxes?

Brian Sytsma 33:31
So there's a ton of types of taxes out there.

Jeanine Ikekhua 33:35
Wow, I did not know that.

Brian Sytsma 33:37
The one that really for most folks to interpret and to understand is how their income is taxed. Jeanine, I've got some bad news for you.


When you start working full time, they're going to tax you a lot of your money and you might get that first job and you're making $60,000 and you're like, "Hey, Brian, why am I not making $5,000 a month?"right, $60,000 divided by 12? Well, a good portion of your $5,000 is going to be taxed, so after taxes and contributions to your medical insurance and benefits of that $60,000 You might only end up bringing in $3200 or $3300 a month. So we've lost $1,700 a month to either taxes or benefits. So for most folks, one of the first things that you can look into when it comes to taxes and understanding how federal and how state income taxes work, because you should project that a good bit of your paychecks are going to be going back to the federal government in which they use to either fund new properties, new types of skills for the community, that's where a lot of your tax money is going there too. But understanding that that salary amount that you see on the sheet is not actually what you're gonna be bringing in the door there too.

Jeanine Ikekhua 34:58
So when you apply for a job They have like the $60,000 a year is how much you're gonna make. That's not how much you're actually gonna make?

Brian Sytsma 35:05
That is that is legally how much you're gonna make but that's not how much you're actually going to your bank account. Correct.

Jeanine Ikekhua 35:11
Okay, that is good to know. Okay, so with taxes? And are you talking about like federal and state taxes?

Brian Sytsma 35:19

Jeanine Ikekhua 35:20
Can you explain like the difference? And specifically like where that actually would play out? Because I know we have taxes that like are on when you buy things, and then you talked about your income tax. So can you talk more about that?

Brian Sytsma 35:31
Yeah. So there's, we could go and talk all day long when it comes to taxes, because there's a ton. And it seems like, you know, for most people, right, everything's taxed, right? And there's some truth to that, because there's a lot of stuff that is taxed out there. So I'll focus in on much more of how your income is taxed specifically. So federal income taxes, everybody has to pay, it does not matter what state that you live in, that is set up by the federal government of the United States in which you have to pay a certain percentage of your salary every single year, back to the federal government in the form of taxes. State income taxes are dependent on the state, each state is able to change the amount of state income tax that they have, I believe North Carolina's I believe it's like 5.25%, but I believe last year was 5.4%. There are some states that don't have state income tax, ie like Texas, like Florida, so it's good to know how your income is taxed because just because your state income tax is not there, well, your property taxes might be higher, or your food taxes might be higher, there might be something else that's making up for that state income tax not being there. But from an income standpoint, the difference is federal government's taxes, everybody has to pay state income taxes, every state is different and also some states don't have state income tax.

Jeanine Ikekhua 36:58
So when should you know like when you start paying taxes?

Brian Sytsma 37:02
You start paying taxes from the moment you start making money. Even if it is $1, all the way up to a million billion, we could go all day long when it comes to those. So if you're bringing in any form of income, typically that form of income is going to have to be taxed,

Jeanine Ikekhua 37:21
Even if like your work, so for example, like I work a part time job at WKNC, would I still have to pay taxes off of my WKNC money?

Brian Sytsma 37:31
So your WKNC money is actually being taxed before you even receive it, so you never even see the taxes come out. You are what's called a W-2 worker, meaning that you are employed as a statutory employee through WKNC, they are pulling your taxes for you so that you don't have to go out and go on the online websites in North Carolina and pay the taxes on your own. You are paying taxes, albeit at a much smaller scale, working part time at WKNC, and they're already pulling those taxes for you.

Jeanine Ikekhua 38:04
Are these off, so would that also apply to student jobs on campus? Is that how it works?

Brian Sytsma 38:10
Any jobs that are bringing in income you will be taxed on that income.

Jeanine Ikekhua 38:14
Okay, so if I wasn't, if I was working at like another radio station outside of NC State's institution, I would still get taxed the same way before I get my actual paycheck?

Brian Sytsma 38:24
Correct. There are some forms of income that are non taxable types of income. That typically only tends to be for types of employees that are either working for the federal government or working very, very closely with the state, but they are very rare. 99% of professionals are paying taxes from the day they start working, whether it's from a part time capacity or full time at most occupations.

Jeanine Ikekhua 38:47
Okay, so if the taxes are already taken out of our account, because I know like from my mom, she still has to pay like she still has to submit her income information every single month. So when college students graduate like, and also when they're in college, do we still have to submit that information the way like someone outside of college would have to submit their information?

Brian Sytsma 39:08
The answer to that question is yes, but it is a big "it depends" because it depends on how your family structured, and so how a lot of families work is that while you're in college, you are typically still a dependent of your parents so your parents can file your tax return for you in which you don't actually have to do anything as the student. That being said, there are some students that choose to file as an independent tax filer in which you would have to file your own taxes. One great website a lot of do it yourselfers like to use is TurboTax. It tends to be a very, very helpful user friendly area to be able to report your taxes whether you're a student or in the full time work field, but if you're independent of your parents, your parents would actually file your taxes for you.

Jeanine Ikekhua 39:54
So we're gonna switch gears and ask the general question I'm gonna ask a general question.

Brian Sytsma 39:58
Oh please do.

Jeanine Ikekhua 39:59
What is the best financial advice you got when you were in college?

Brian Sytsma 40:05
That's, that's a tough one. The best financial advice I got to college. The best financial advice I got in college was to start saving. As simple as that sounds, I remember when I started saving, and I didn't start, I got a little bit of a late start in college, my father done a great job putting away money for us. But I didn't start really saving in college until late junior year, early senior year my own personal money from jobs that I was working, but somebody told me one day, and it was actually my good friend, Josh Powell, if he ever gets a chance to listen to this, and saying just put away $100 a month and see how it feels into me putting away $100 a month seemed like it was the hardest task ever, because it wasn't making a whole lot of money. I had a whole lot of expenses, but it forced me mentally to figure out a way to save $100 bucks a month. And so when we went from saving 100 bucks a month to now, you know, there are months where my fiance and I say well into the five digits, if not higher, getting yourself started, makes it so that you can take those simple wins. No person has ever gone from saving $0 to saving $100,000 a month, going from 0 to 100,000. That person also likely started from going from $0 to $100 to $200 to $500 and making those slow and monumental increases. That was the best advice somebody could have ever gave me and Josh Powell if you're out there, I really appreciate you having me do that because as hard as it was, and it was really, really hard as a student it made it so much easily easier mentally to get over that hurdle of finding a way to save.

Jeanine Ikekhua 41:55
Okay, so you're saying start small, so even if like you're making, I don't know, $150 every two weeks, like even just starting small. It's like okay, save $50.

Brian Sytsma 42:05
Even if it's $5 a month, anything getting started is the hardest thing. It's a good comparison, Jeanine, the hardest day at the gym is what day?

The first day.

First day, because it is really hard to get in there that first time right? It can be a little bit self conscious, right? You feel out of shape, you feel super tired. But then the second day gets a little bit easier, the third day gets a little bit easier than by the time you look up, you're three months in and you're active. Right? That first day is really hard. But once you get started when it comes to saving, it's significantly easier to keep going.

Jeanine Ikekhua 42:45
Thank you so much. You have been a pleasure to interview and you have dropped so much wisdom on us that we are going to keep on using and practicing.

Music in this episode has been Newsroom provided by Kevin Mack Lloyd. This has been Jeanine Ikekhua for WKNC Radio. Thank you for listening. You can listen to more episodes at wknc.org/podcast and you can also tune in every Sunday at 6pm to hear new Eye on the Triangle episodes.

Transcribed by https://otter.ai

EOT 347- Financial Literacy with Brian Sytsma
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