“For a lot of people, it’s easier to talk about sex than money,” observes chartered financial analyst Karin Bonding with a wry smile. Luckily, her popular Commerce School class instructs undergraduates in the personal finance facts of life. The course is designed for the numbers-challenged—indeed, only non-commerce majors can enroll—and Bonding deals in aphorisms and extended metaphors instead of figures. “My class is not about numbers. It’s about concepts,” says Bonding, and she believes that a little know-how will benefit students in their postcollege years.
Understanding the tools and techniques of personal money management is a demonstrably valuable skill, but one that appears to be rare among college students. Bonding concurs with recent studies suggesting that the general level of financial savvy among students is low. Each student in her class must create a budget that includes all of their expenses—from tuition and rent to clothing and alcohol—and the results come as a surprise. “It’s a shock to see how much they are spending and on what,” says Bonding. “Even if they intuitively know that they are spending too much, it can be unpleasant to see it in black and white.”
Bonding remembers an in-state student who budgeted $88,000 for 12 months, including $2,000 per month for clothes. Even among the less affluent, students often spend $50 to $100 a week on alcohol. That adds up over a year. “I want my students to realize that all of their decisions have financial consequences,” says Bonding. “Sometimes I think of my class as a cold shower.”
Her students may rise from the ranks of the financially illiterate, but money smarts run in Bonding’s family. Her father worked in mortgage lending in Bonding’s native Denmark. A Fulbright scholarship brought Bonding to the States and a secretarial job in an investment firm attracted her to financial analysis. “I wanted to do what the boys were doing,” she says. Back in 1985, investing was largely dominated by men. “And it still is.”
Bonding is a professor with intimidating money market street cred: she worked for big firms like Merrill Lynch, she worked in “The City”—London’s Wall Street—for seven years, and later for the CFA Institute in Charlottesville. She’s done investment consulting, investment analysis and portfolio management, and administered large pension funds. But, she says, “It turns out that teaching is my calling.” Aside from teaching at UVA, Bonding has been a visiting professor at the China Europe International Business School in Shanghai, China, and at the Institute for Industrial Policy Studies in Seoul, South Korea.
In Bonding’s class, students learn that spending, saving and investing are closely related. Only when one spends money wisely will one save money; only when one saves money can one invest it and make more money. She encourages her students to start small businesses because it’s the best lesson in the value of a dollar. “It makes you realize that each dollar you have costs you time. It makes you appreciate the expense of an envelope, a stamp,” Bonding explains. Like all good money managers and teachers, she balances nitty-gritty advice with visionary principles: “A goal without a plan is but a wish,” she says.
Bonding’s Road to Wealth
Your hand is on the steering wheel and every turn you make affects where you will wind up. Both big decisions (your occupation) and small ones (whether you buy a Starbucks coffee every morning) affect your bank balance.
Live within your means. If your expenses consistently exceed your income, you will veer off the road and end up in the ditch. Always have a road map—read: budget—handy.
Beware of shortcuts that sound too good to be true. Some side roads have dead ends and aren’t always clearly marked. Set a course and stay the course.
Procrastination is like a stop sign. You get to your destination quicker by going 60 mph (saving more) than going 40 mph (saving less). You get to your destination earlier by leaving earlier; so start saving earlier rather than later.
Keep investments simple. Don’t get lost on exotic byways that lead into unmapped and possibly treacherous terrain. Index funds—market funds—are like interstate highways. They will get you where you want to go safely.