This is a guest post.
I recently read a blog post that hit pretty close to home on personal finance blog TheWisdomJournal.com titled 5 Financial Lessons Every College Graduate Learns After College. It’s a quick read so I recommend checking it out if you’ve got 10 minutes to burn, but you don’t that’s okay too since I’ll summarize for those that prefer the abridged version.
The gist of the article is there are a lot of college kids making poor financial decisions today that limit their future choices down the line. I can identify with this story since I dug a pretty nice hole of debt for myself over the course of my 5 ½ collegiate years. Fortunately, I realized the error of my ways within a year or two after graduation and made some tough life decisions in an effort to battle back from debt and regain my independence. After a couple years of hard work and more savvy financial decision making, I’m still not completely out of the hole but I am seeing light at the end of the tunnel.
In this post, I’ll share how each of the five financial lessons outlined in the blog post listed above affected me personally. I’m not pulling any punches here and am going to be as honest as one can be in a public forum. Hopefully, this can act as a warning for any current students (or anyone else) enrolling in yet another credit card with a 23.7% interest rate. Although to be completely honest, if I was still in college, I’d open that line of credit and max it out on a couple of keg parties and a few fun nights at the bar. Just saying.
1.) Stay Away from Bad Debt
I’ve read there’s such a thing as “good” debt. Unfortunately, I’ve never had the opportunity to take advantage of this attractive form of liability. The only form I’m familiar with is blood sucking, spiritually draining, and a burden to its host.
For me, bad debt was accumulated in the form of credit cards. What did I buy? It wasn’t the big purchases that brought me down. I could resist the temptation of purchasing a flat-screen television on credit, unlike many of my counterparts. My crutch was the forgettable $20 – $40 charges that caught up with me. Dinner and drinks at Buffalo Wild Wings, a few more drinks at the bar… that’s the sort of really bad debt that eventually brought me down.
2.) Don’t Buy On Impulse
I may as well lump one and two together since they’re so closely related in my experience. As foreshadowed in the above paragraph my weakness was smaller, impulse based purchases. Most of the time they were minor purchases like eating out or putting gas in my car. However, these 3 – 4 forgettable purchases each week swiftly added up over the period of one month.
3.) Buy Strategically
According to my interpretation, buying strategically means only purchasing things that a.) You need or b.) Make your life better. Before you make your next impulse purchase, I encourage you to ask yourself these questions honestly. Obviously, I wasn’t adhering to this advice back in college though. Again, short term kicks on stuff like dinners and booze were the items that filled my expense column.
4.) Earn Money
Like most kids putting in their time at college, I didn’t make much money while I was in school. Fortunately, I did have a part-time job which helped pay for some of my free-wheeling lifestyle. I definitely didn’t save any money as a result of waiting tables, but at least the money made and quickly spent wasn’t being put on credit.
5.) Paying Yourself First
It took me awhile to understand the concept of paying yourself first. Naturally, I didn’t take any of this advice while attending university either. Paying yourself first means investing a certain percentage of the money you work so hard to earn each month in yourself before everyone else like the landlord or cable company. This investment could be in the form of a personal savings account, education, stocks or real estate.
Similar to the majority of college grads these days, I had way less than a penny to my name after graduation. Had I stuck a certain percentage of my tips waiting tables into a savings account each month I would have been a lot better off.
To wrap things up, even if you’ve made financial mistakes in college it’s never too late to begin taking actions that will make your life better in the future. I’ll be the first to tell you this type of change isn’t easy, but I can honestly say it does get easier the longer you do it.
Brett Lindenberg is a recovering user of bad credit. He hasn’t put any new charges on his accounts in the past couple years, which he is darn proud of. If you like this article, visit the blog 500 a Month where you can read even more writing just like this.