Growing up, I had a predetermined path of graduating high school and going to college; which, was set forth by my parents. The advice my parents and college counselor gave me was; find the right college and get good grades. College was a good experience (i met some of my closest friends at freshmen orientation), but I got distracted and ‘fun’ became more of a priority. Thinking back on my younger life, there are some things I wish I would have gotten advice on.
They say hindsight is 20/20. That’s the problem, it’s hindsight. So here is advice I would give my younger self to get a head start on my financial goals:
You’re 18 and getting ready for high school graduation. You’re excited about the freedom and possibilities that college life have to offer. You can’t wait to leave the town you grew up in and start a new life.
Have fun at your high school graduation. Take tons of pictures with your favorite people and family. Thank every teacher, counselor, parent, relative, friend that has helped you get through a difficult adolescence. You will look back at those moments fondly when you’re older. Those teachers, counselors, parents helped mold you into an upstanding citizen. Appreciate all the time, sacrifice, and work that it took to get you there.
You probably want to spend the summer with your friends because it’s the last time you’ll all be together. Once you all move away to school, your new lives start. Don’t fall into the temptation of dedicating all your time to socializing. Life is about balance. Balance your life out by getting a job or starting a business for the summer. Save as much money as you can because you’re going to need it. Life is expensive, so have money tucked away for emergencies.
Open up a checking and savings account to deposit your money into. Preferably with a bank that you can easily access wherever you’re moving to. Low fees are a major plus because fees can eat into your savings.
Apply for a low limit credit card (they’re probably not going to give you more than a couple hundred bucks to start with anyway) to start a credit history. Don’t fall into the trap of spending money you don’t have. Pay your credit card bills on time and build a good history. Your credit score can save or cost you a lot of money on: mortgage rates, auto loan rates, student loan rates, etc..
On College and University:
Consider attending a State or Community College to complete your basic (101) elective courses for the first year or two instead of going to a 4 year private college. You can save yourself a lot of money on student loans by doing so. You can easily transfer to any school after a couple years with good grades.
Look for opportunities to study abroad for a year. Get outside of your comfort zone and learn how other people live and see life. This may be one of the most formative journeys of your life to expand your mind and develop new ideas. Diversity in thought leads to better critical thinking skills.
Learn the language when you’re abroad. It makes you smarter and will give you another useful life skill that you can also put on your resume. More importantly, how can you date in another country if you can’t communicate?
Back stateside; if you are going to live in a dorm or an apartment, consider taking out a loan to buy a 2 bedroom condo to live in. Get a roommate to pay rent towards the mortgage. You will need a co-signer to do so. Hopefully you have a great relationship with your parents that they would cosign. Why pay someone else rent when you have the opportunity to keep that money in real estate equity?
At school, seek out groups and clubs that focus on activities you enjoy. Donate your time to a charity you believe in or join a business club. Don’t be afraid to branch out and spend time with different groups of people. (Diversity in thought)
If you are majoring in a trade or liberal arts; double major in business so you learn how to make money off of that trade or liberal arts degree. Don’t forget, life costs money…
You may need to go to grad school if you want to be a doctor or lawyer. Some of you may want to get a MBA. Whatever you choose, my advice is to get practical experience also. Real world experience will help you understand and apply the theoretical concepts you will learn.
The other benefit of working while going to school is having an “in” for when you graduate. I had a couple friends who co-oped while in undergrad and ended up working there after graduation.
Consider taking a little time off to travel. It’s cliche but you probably won’t have the same freedom again. I started with 2 weeks of vacation per year when I started working.
At work, max out your 401k contribution right away. Most companies will match a portion of your retirement contribution. Don’t leave money on the table.
If you need a car, buy a certified pre-owned model with 20-30k miles on it (to avoid depreciation). Make sure that it’s a reliable model. Use the 20/4/10 rule. Put 20% down, be able to pay the loan off in 4 years, and the monthly payment shouldn’t be more than 10% of your income.
If you plan on becoming a home owner, start saving money for a downpayment. You will qualify for a FHA loan (first time home buyer) where you don’t have to put down a full 20%.
Instead of buying a condo or small home, consider ‘house-hacking’ by purchasing a 2-3 family property that you will also live in. Have tenants pay down your mortgage and limit your housing cost. This will be a great income generating asset to have in your portfolio for a long time. Real estate investing isn’t for everyone but many people have generated great wealth through it. It’s worth considering..
I hope this advice helps you the way I know it would have helped me. Anyone who follows this will achieve financial security much faster than I did. Let me know what you think in the comments below.