So Many Things, So Little Money!
Unfortunately, managing your money is one subject that students may need the most knowledge in life, but get the least amount of training. I can’t stress to you enough how important it is to take steps now, regardless of your age or where you’re at in life, to learn how to handle money. Money (or the lack of it) can become one of the biggest stresses in life if you’re not careful. So let’s jump into this, and look at six things you have to do if you’re going to learn how to manage your money:
Create a game plan
In order to win with money, you have to know how much you have coming in and how much you have going out. You need to know where your money is going, so it doesn’t just walk out of your wallet, as it may be doing now. In order to do all of this and effectively manage your money, you need a game plan. This is more commonly known as the dreaded “B” word. Not that “B” word, you filthy animal. Get your head out of the gutter. I’m talking about making a budget (cue scary music, screams, lightning, thunder, etc.). I’m going to talk more on the specifics of making a budget in the next chapter, but the idea is this…you have to have one! A budget is essentially a road map for handling your money. If you were going on a road trip, you would take the time to map out on Google or Map Quest where you were going and how you needed to get there. A budget is the same thing for your money. You have to have a game plan, otherwise you’ll always end up with more month than money (figure that out!).
Plan for rainy days
You have to plan for emergencies, because they will happen. It is not a matter of if it is going to rain, but rather when it does rain, do you have an umbrella? In case you haven’t noticed, life happens. That’s just the way it goes. So if you know it is going to rain, and you are going to have emergencies pop up in your life, wouldn’t it just be smart to plan for them? If you plan for life’s surprises, then it’s no longer a big emergency, is it? Now it is more of an inconvenience, which is a pain, but it isn’t that big of a deal. Think of the rainy days that happen in life: your transmission goes out on your car, your college textbooks get stolen, you end up in the hospital for a few days, or your apartment blows up (that’s really bad). Those are the things that you think will never happen to you and yet when they do, you’re up a creek.
For most students, I would recommend having a rainy day/emergency fund of $500 but preferably $1,000. For some of you, that may seem like a million dollars, and for others, you may think that is no big deal. But having $500 in the bank will catch the majority of emergencies that will come up in your world. This money should be put in a savings account, and should never be used unless it is an emergency. Spring Break in Cancun is not an emergency. Christmas is not an emergency. It is always on the same day in December. They don’t move it. If you know it is coming, you should plan for it.
Avoid debt like the plague
I’m talking about all kinds of debt…credit card debt, school loans, car loans, any type of debt…avoid it at all costs. Unfortunately, most Americans accept debt as a way of life. They say, “I’m always going to have a car payment.” Or “I’m always going to have a credit card balance.” That’s stupid. If you can’t pay cash for it, wait and save up until you can. Again, it goes back to that idea of delayed gratification. There’s no sense in going into debt for some electronic gadget, a new outfit, or to go to the movies. Pay cash or don’t get it. If you currently have debt, the only way you’re ever going to get out of debt is to stop borrowing money. Think if you were stuck in a hole. As you tried to get out, you continued to dig down a few more feet, and make the hole just a little bigger. That’s ridiculous. Quit borrowing money!
Save like crazy
We are going to talk about this in the chapter about savings, but you will quickly learn the power of compound interest. Wouldn’t it be great if you started saving now, so you could be stinking rich when you’re 40? What if you were so loaded that you could visit a store in the mall and just buy the entire store? Or maybe even the entire mall. That would be fun, wouldn’t it? But again, that means delaying gratification now, so you can win later.
Think long term
Do you remember the story about the tortoise and the hare? More importantly, do you remember who came out on top? The way I remember it, the tortoise always wins the race. If you learn to make sacrifices today, it will always pay off in the long term. Personal finance is 80% behavior and 20% head knowledge. I can give you the knowledge you need, but it really comes down to changing your behaviors and implementing the things you read in this book to life in the real world.
Give it away
It may sound strange, but one of the best things you can do with money is give it away. Weird, I know. But think about a time when you gave someone a gift, and you knew it really meant a lot to them. You put so much effort and thought into the present that to see their reaction was worth it all. At the risk of sounding like a Hallmark card, you really can’t put a price on that feeling. When you’ve been smart with your money, you then have the ability, the opportunity, and maybe even the responsibility to help others.
I know, I know. You’re thinking all of these ideas look great on paper, but in real life, they are pretty difficult to carry out. It is true that managing your money isn’t that difficult, and many people are convinced they can’t do it. So they come up with excuses about money management, when really they are just lazy! You can do each and every one of these things listed. Is it easy? Not necessarily. Is it worth it? Absolutely!
I can say this because I’ve been on both sides of the coin. Coming out of college, my wife and I had nearly $25,000 in debt. Car debt, credit cards, school loans…you name it, we had it. But we have followed these principles for handling and managing our money and today, we are debt-free except for our house. No more credit card debt. No car payments. No school bills. And do you know how that feels? To say it feels “really good” is a massive understatement. Instead of sending our money to all of these other people in the form of payments, now we get to keep it for ourselves, and do with it as we please. That is a great feeling of freedom, both personally and financially.
By Grant Baldwin
