A neighbor, who is currently in college, had an assignment in her journalism class to create a investigative report on financial planning and students at her college. I happily offered some thoughts and suggestions on the piece.
After chatting for awhile, she asked if I would “officially” answer some questions as an expert (I think that term was used liberally). One of her questions was, “Can you give 5 tips or suggestions I can include in my article?”
I started jotting down thoughts beginning with a budget and so on. After a minute or so, I realized the gravity of what I was writing. Here I was limited to five ways a college student could improve his or her financial situation. Thoughts of my college experience started coming back (I’m sorry to everyone that was involved in that duck incident).
So here is my list of the top 5 suggestions for college students
No. 1 – Take responsibility for your money by creating and living by a budget. Sites like Mint.com or MoneyDesktop.com make it very easy to do. Also, remove or reduce as many fixed payments (subscriptions, cable bills, car payments, etc) as possible.
No. 2 – Pay off debt using techniques such as the debt snowball.
No. 3 – Have an emergency fund of at least $1000 and preferably enough to cover 3-6 months worth of expenses.
No. 4 – Start saving for retirement with the goal to save 20% of all your pre-tax income.
No. 5 – Give generously. You will probably receive more dividends from your generosity than any other investment. Also, if you can give when you are poor, it will be easier to give when you are rich.
All of the ideas listed above are widely talked about, but…
I’m not sure many college students fully grasp the fundamental nature of each one.
Let me give you an example. I have a coworker who is a pretty sharp guy. He graduated with a minor in Economics and worked at Goldman Sachs. He can explain credit default swaps and have in-depth macro-economics discussions with you. But he is lost when it comes to simple personal financial planning.
Maybe that’s why Wall Street is having so many problems.
So if you are a college student, take some time to understand how to create and use a budget. Stay out of debt and learn how to put together a portfolio of index funds in a 401k or Roth IRA. If your college offers a financial planning course, take it. I’ll bet you a shiny nickel that you will use that course more than the capstone course in your major.
So what advice would you offer college students?
Good tips! So simple, but very helpful. After college, I took a personal finance course for women at a community college. I remember a lot of the information because it was so applicable to my life. I can't say that about statistics though! :)
LOL. Poor statistics, always picked on.