The only advice about money that college seniors need to read:
Today I’m going to answer someone’s email publicly of course I will keep them anonymous. I believe that many people have the same situation as the reader and so I wanted to help multiple people at once. If you have a question you can email me at email@example.com or ask me on askfm here.
I want to get better about my finances, but I’m not sure how exactly, looking at different options online is overwhelming.
My budget- My life’s necessities fluctuate, so I don’t really know what my exact budget is or how to even set one up or stick to it.
My debt- As of right now the only debt I know of are my credit card and student loans, but besides that I don’t know.
Investing- I don’t even know where to start, potential losses and my poor budgeting scares me.
Wow you’re ahead of the game if you’re still in college and thinking about getting your money organized. So Congrats! You’re ahead of me already.
Money mindset is so important.
You have to shift your mindset before you shift your habits. Mindset comes first results come second. If I’m giving tactical advice to someone who has the wrong perspective they’re going to go right back to the wrong habits. – Peter Voogd
The things I’m about to say to you may sound very simple, yet there are people who still haven’t grasped these simple concepts and have ended up in lots of trouble. (Like the 22 year old college student that blew her 90,000 college fund on a Europe trip and shopping for example.)
My advice if you choose to accept it:
If you’re anything like me there isn’t a college fund for you to fall back on. Maybe you’re even the first one in your family to go to college. That means that your mom and dad still need money to live on back home, so they may not be able to bail you out of every financial situation you have. So it’s important to keep track and budget your money.
Don’t think of this budget as something that will restrict you. When think this way, it will be harder for you to stick to it. Think of it as something that’s going to guide you closer to your goals. I want you to think of your budget as a promotion. If you stick with it will promote you to where you want to be.
Even if your money each month fluctuates try to write out a list of how much money you need for all your bills each month. You can do this in excel, a word doc, or download my free budget template. Once you know how much money you need for all of your bills each month you know how much money you will need to cover those bills.
Ex: Sprint bill:$85
Money to put in savings: $75
Total needed to cover bills at the end of the month: $310
Also your girl/boy friend should not be an extra bill each month. In fact you should avoid people that don’t know the value of money and just spend it frivolously without a care in the world. After they’ve spent their money they will come to you and try to spend all of yours too. Being in a relationship with someone who sucks up all of your money faster than a vacuum sucks up dirt will set you back. I know I’ve been there, but that’s a post for another day lol
2 posts you may find helpful:
- Six questions to ask before running through the 6 with my woes
- Are your friends sabotaging money goals?
Build a Fallback fund (some call this an emergency fund) Whether you need extra money to fall back on because your car broke down or you want to tell your boss one-day to fall back so you can pursue your own dreams.
The goal is for you to first save $1000 into this fund. (As time goes on save 3-6 months of your monthly expenses) I would suggest an online high interest bank like Capitalone360 the interest here is higher than a Bank Of America and you can create sub saving accounts for free with different names. Ex you could name one savings account emergency fund, another one for vacations. etc.
The only draw back about an online bank is that is usually takes about 2 days for your money to transfer into your checking account. So if a real emergency were to arrive you would have to wait a few days for the money to transfer.
I’d start off with getting a free credit report each year from credit karma. They will be able to tell you any accounts that you have, the date you opened the account, your credit limit or loan amount.
You want to avoid as much debt as possible because having debt will keep you from doing the real things you want to be doing with your money (Saving, investing, traveling, starting your own business etc). I know it may not seem normal because we live in a world where everyone suffers from consumer-itis. It’s a vicious disease that can strike anyone at anytime. It doesn’t care if you are rich, poor, black or white. Consumeritis can be deadly to your pockets, if you aren’t careful.
Credit card debt
List out your credit card debt and keep track of it in an excel sheet. If you have two cards and one has a $300 balance and the other has a $500 one you can create a small win for yourself by paying off the $300 one first (putting extra towards this debt) while paying the min. amount on the $500 one.
Once the $300 one is paid off now you can use any money you would use to pay off that debt and put it towards the $500 one. This is also known as the snowball method.
Your goal once you pay off your credit card debt is to pay the balance off in full each month that way you don’t get hit with a bunch of interest charges.
You’re still in school so you won’t have to pay your student loans back until 6 months after your graduation. One of my friends started paying off her student loans while she was in school. I really wish I were paying interest on my loans while I was still in school. It would of helped lower my balance in the long run.
Also once you graduate even though you won’t have to pay back your student loans until 6 months it’s a good idea to get into the habit of putting money aside specifically for your loans. That way it’s not a complete shock when you have to fork over $400 once your student loan bill comes. Don’t get use to that extra money plan ahead. Live within your means.
Investing can be scary, first let’s focus on your budget, savings, and credit card debt for now. If I give you too many tasks it’s easy to get overwhelmed and not complete any of them. Once you’re at a point where you’re regularly putting money aside to save, sticking to your budget and your credit card debt is paid off you will have more money to put aside to invest. Any money you put into investing you want to make sure that you won’t need this money anytime soon, which is why it’s important that you build your fallback fund.
Potential losses can be scary, but the real risk is not investing at all. The stock market is just like life. Some days will be good others will be bad, but on the bad days just think of stocks being on sale and buy more. I talk more about this in my Young Urban Investor’s e-book.
I’m glad that you’ve chosen to invest in yourself and your education, thank you for reaching out to me, keep me updated on your progress!
Are there any other money tips that I left out? I’d love to know your money advice. Don’t forget you can download my free budget template here.