To the Point: Young alum Farnoosh Torabi answers finance questions

University Park, Pa. -- Farnoosh Torabi, a 2002 Penn State alumna in finance and international business and author of "You're So Money: Live Rich Even When You're Not," recently answered questions about her book and her philosophy about living well without living beyond your means. She also talked about how Penn State influenced her career and offered advice to Penn State students.

In "You're So Money," you seem to avoid using the "b-word" -- budget. Was that a conscious decision?

Torabi: It was absolutely a conscious decision. What an "eye roll" of a word! "You’re So Money" (as the title emotes) had to defy conventional wisdom a bit -- after all, young adults these days are smarter than that. Plus, we’re so tired of hearing that "b" word. Who really actively budgets on a day-to-day basis? Not me. I wish I could, but it’s not that practical. It’s quite difficult and rigid. Instead, I chose to use substitute terms, which sort of allude to the same thing: "managing your money," "being in control of your spending" and "defining your priorities." Those are practical, motivational expressions to which people, especially young adults, can aspire.

You talk a lot about needs, wants and "need-wants" (a.k.a. must-haves). A lot of your advice is based on living sensibly with the consequences of choosing those need-wants, which may be indulgences that greatly improve a person's quality of life but that will require frugality in other decisions to be able to afford. Can you give one or two recent examples from your life of decisions you made to accommodate "need-wants" to illustrate that point?

Torabi: It’s funny. Because I am getting what I want most out of life right now -- it doesn’t even feel like I’m really giving up (or sacrificing) anything in the process. For about six months now, I’ve been on a hyper saving schedule -- putting away more than half my salaried income into an interest-bearing savings account. I babysit and freelance write to supplement some of that squared-away income. That’s one of my "good life" goals -- a nice chunk of cash in the bank before my 30th birthday. It may go towards a new car, a down payment on a house … maybe a wedding? Who knows? Bottom line is I want to prepare for some security down the road, as I enter my 30s.

As a result, right now, I am shrugging off those $150 Pearl Jam tickets, $120 Broadway show tickets and other cultural events that would be so much fun, but not that important to me, not now that I’ve isolated a bigger, more exciting goal in my life, a "need-want," so-to-speak.  Other ways I’ve been living "frugally" -- I’ve been making dinner at home more often in the evenings and am trying to take the bus, instead of the train, to visit my steady who lives in Philadelphia (sometimes a $100 difference). Instead, I can treat myself and afford a few expensive items of clothes here and there (and by expensive I mean a $200 Diane von Furstenberg blouse and $330 Marc Jacobs pumps).

P.S. If you know anyone who is selling Pearl Jam tickets for $50 or less a seat, call me!  

Other than your editor, publicist and Jim Cramer -- your colleague and frequent guest on your show, TV's "Wall Street Confidential" -- have you received any feedback from well-known financial experts we may be familiar with?

Torabi: David Bach, author of "The Automatic Millionaire" and "Start Late, Finish Rich," calls this the "best financial book I’ve read in 10 years." Jim Thomas, dean of the Smeal College of Business, said "You're So Money" is "…a must-read for every college student … a powerful guide for the next phase of their lives and beyond." Marie Claire magazine said, " 'You're So Money' … is full of solid advice wrapped in 'Devil Wears Prada' attitude." And the New York Post said, "Any 24-year-old who can buy her own New York City apartment -- in Manhattan, no less, on a $46,600 a year salary -- deserves to be listened to."

At the heart of your book is the theme of helping people understand the role that money plays in reaching their goals, so it seems important for them to understand what their short-term, long-term and "big" life goals are before they go about using their money for those purposes. What might you suggest to the readers of your book who may not be sure about some of those big-ticket goals?

Torabi: It’s OK to not know exactly what direction you want your life to take. Life is about being spontaneous, too! For those who are trying to figure it all out, I encourage them to recognize their values -- what’s important to you? Chances are our values were instilled in us at a young age. I always thought of myself as married with kids someday, working full-time and having time to travel. Sure enough, those are still priorities for me.

You may not know if you want to buy a house in five years or get married or have kids … but it’s important to save for the unexpected, as I say in the book. Start building a savings for your future, whatever that future involves, by paying yourself first. Invest in a retirement savings vehicle, like a 401(k), and automatically deposit a percentage of your salary into an interest-bearing account.

You give all kinds of money-handling advice, on topics ranging from long-term investments to how to manage your monthly paycheck. For college students or recent graduates, what do you see as the top three money lessons they need to master, and in what order of importance?

Torabi: 1. Pay yourself FIRST. Before it’s all gone, save a percentage, or maybe just $50 a month, into an interest-bearing account. In a year, you’ll have a nice cushion for emergencies, more accumulation or a sweet vacation to reward yourself after a long year of work.

2. Deal with debt. Consolidate your student loans and don’t pile on too many credit cards -- two or three at MOST. That includes store credit cards. Dedicate a portion of your paycheck each month to paying down debt.

3. Don’t give into social pressure. We all want to have fun and be merry. But be smart when you go out on the town. Never take your credit card to the bar -- you’ll spend more than you should. Resist "spotting" your friends when they’re low on cash -- just say you’re broke, too. They’ll surely understand.

What is both entertaining and instructive to read are the many case studies you offer in your book -- your friends' real-life examples as well as hypothetical scenarios. Whatever a young professional's life situation, you seem to try to cover bases so readers can identify with at least one. For those who haven't read the book, how would you describe your approach? In other words, in one or two sentences, what's your best pitch (a la Jim Cramer) to get them to "Buy! Buy! Buy!"?

Torabi: You want a book that makes you laugh on every page? You want a book that makes you feel good about yourself, that inspires and instills hope? What if this book -- as an added bonus -- showed you how to be financially savvy, too? To enjoy life on any income and learn how to manage your money on your own terms? Is that worth $14.95? (or better yet $10 on "You’re So Money" has it all. Buy! Buy! Buy!

You are not only savvy with money but also with your career, having found a very successful way to combine your education and interests in both journalism and finance. You contribute to AM New York and have a long list of titles among your credits of published work, and have found your way among several notable media outlets, including your current job at TV, where you host "Wall Street Confidential" with Cramer as a frequent guest. What would you say are your successful attributes that you have that have helped you reach the position you are today?

Torabi: 1. I’d like to think of myself as ambitious. (My dad may call it being impatient.) Whatever the adjective, I am constantly on the lookout for the next opportunity. And if I don’t see that it readily exists, I try to create it.

2. I don’t need that much sleep. I nap sometimes in the evening, but I tend to stay up pretty late working.

3. I’m way honest. I’m the worst at telling lies. Just ask my mom.

Regardless of their financial status, what could every college student or young professional do right now to make steps to improve their financial future, even if they don't have a vision of what that future might be? What about a couple who get married right out of college?

Torabi: The underlying philosophy of "You’re So Money" -- which is that money is best managed when you have a clear sense of direction and sense of self -- is applicable to all people from every ZIP code and status in life. To speak specifically to the Penn State student, my biggest piece of advice would be -- get your financial life in order before graduating. Be aware of your financial obligations on day No. 1 of entering the real world (student loans, car payments, rent, etc.) and figure out ways to make money while you’re in school. Education should be the No. 1 priority, but if you have some time left over, work part-time. The Diner is 24 hours, right? Nittany Notes is an easy way to make money just for going to class. Maybe you want to consider selling your text books and saving that money (instead of reserving a table at Café 210). What about paid internships and co-ops? There are ways to get a head start on your financial life, while you’re in college.

For a married couple out of college -- I hope they have already had some deep money conversations before tying the knot. If both partners work, I encourage keeping a joint account and a separate account for each spouse. I advocate designating one person as the bookkeeper who pays and keeps track of the bills. Most importantly, couples need to get in the habit of discussing their finances on a regular basis –- just to make sure they’re on the same page. So, say, if spouse No. 1 comes home with a $2,000 plasma TV, spouse No. 2 won’t want to tackle him (in a bad way).

What is the one good tip that most people in their 20s either neglect or forget to take advantage of, and what is its overlooked benefit?

Torabi: Create your own financial opportunities. Nothing is set in stone. Sure, there are rules for everything, but as a consumer, you have a right to choose. From negotiating your rent to asking for a discount at the clothing store, calling up your credit card company and asking for a lower APR, refusing to pay for bad service -- you have the power to save money. Also, as an income earner, you have more opportunities than you think you do. Don’t just limit yourself to slaving away at your 9-to-5, if you don’t think you’re being rightfully compensated. Tutor. Babysit. Freelance write. Bartend. Pick up a shift here and there at the local diner. There’s no shame in working your butt off in your 20s -- use your energy and your interests to create extra money for yourself before life gets even more busy.

You mention Penn State a lot in your book. How much did your college experience here influence what your financial profile looks like today? And what were three of those influences? (i.e., have any anecdotes that our current students can relate to?)

Torabi: Penn State offered a wealth of great influences. The first I can think of was my Finance 406 professor Tim Simin (I make a reference to him in the shopping chapter in the book). He used to tell us before every exam, “Rich people dress good!” He meant that if we studied hard and aced the test, we’d be further along the way to a fancy Wall Street job and a cool-sized salary -- and the nice clothes would follow. He made finance fun and relatable. Even though I knew I would never ever have to recite the formula for CAPM, I studied hard for those exams and enjoyed his class. He made the class personable and fun. That’s the direction I wanted to take with this book.

Second, my friends were great influences. Senior year, our house of five roommates would habitually cut coupons before our weekly trip to Giant to buy food for the house. And we knew what restaurants offered the best, cheapest eats. Monday nights was 25-cent wings at the Sports Bar. And Chili’s had all-you-can-eat nachos and $1 margaritas on Wednesdays. (Not the most nutritious -- but so tasty!). My freshman year roommate also kept a jar of coins on her desk -- helpful for trips on the Loop or laundry. Today, I also keep a jar of random coins on my desk -- convenient for afternoon vending machine trips and last-minute stamps. The rest we take to CoinStar!

Which of your "need-wants" at Penn State do you miss the most now that you're in New York?

Torabi: Staying fit. I miss my $20-a-semester campus gym pass. It’s probably a bit more expensive now for students, but it can’t possibly be more than my $100-a-month pass to Equinox in NYC.

Good eats. I miss the chocolate chip cookies from the dining hall in West.

Cheap living. I miss paying only $300 a month in rent senior year.

What is the most honest and/or useful advice -- financial, career, personal --  you would give to the more than 8,300 undergraduates who are about to complete their degrees at Penn State?

Torabi: There’s no such thing as "you can’t." You can create opportunities for yourself. You can be the youngest and first to do something you set your sights on. You can live it up in your 20s. You can have it all -- maybe not all at once -- but certainly throughout your lifetime. If I had listened to everyone who doubted my perseverance, my ambitions and my goals -- I’d still be a glorified intern making $18 an hour (before taxes).

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Last Updated November 18, 2010