Class of 2020,
This is no doubt one of the most exciting times in your life. I completely understand because not too long ago I was in your shoes and I began my journey into this whole adulthood thing.
I know you're ready to get out there and live it up, but I want you to take a moment and breathe.
Listen from someone who's been there. These next few years are going to go by really quickly believe it or not, and there are some things you can do that will set you up for success after you've graduated.
I want to impart a few pieces of practical advice regarding money because they don't teach you everything in high school. Also, many adults haven't quite figured this stuff out themselves.
Now that I'm interested in repairing some of my past financial mistakes, I want to pass it forward to make sure some of you don't make the same mistakes I did.
This advice includes some of the things I wish someone would have told me before heading to college. So trust me, if you do this now you'll no doubt be thanking me later.
Without further adieu, let's get into some of these things you should know now that you're ready to handle grown folks business.
1) Your friends are not ballers.
You're such an impressionable group of young people, but don't feel bad about it. We all have our struggles with the Joneses.
Some of us put two middle fingers up to whatever our peers and neighbors are doing. Others try "keeping up" with better cars, iPhones, and over the top parties.
I want you to understand something -- your college friends aren't rich.
Some of them may even be trust fund babies, but they are not rich because of their own doing. They are rich because someone else made them rich. This is why you shouldn't focus on what everyone else has, simply focus on you!
Don't go broke trying to keep up with appearances. It's better for you to look like a broke freshman and have a little money in the bank rather than trying to stay relevant at the expense of your financial future.
2) Learn How To Budget Now!
Do not wait until you graduate! It doesn't matter if you have a simple part-time job on-campus, make sure you're making every hard-earned dollar work for you. I know you want to party, but don't spend your whole paycheck in one weekend.
Create a budget, add in some savings, and manage to attend a party once or twice a month. You get bonus points if you attend free parties or those that allow free entrance before a certain time. There's nothing cute about being a broke party animal.
3) Pay interest on student loans in school.
Do you know how much money you can save over the life of your loan if you pay interest on them while in school? This is one thing I'll always regret! The interest payments are super affordable and they can shave years off your loans.
Let's pretend you have $10,000 in unsubsidized loans with a 6 percent interest rate. If you don't pay interest in school, the total you'll owe is $16,900 versus $13,300. So if you pay the interest while you're in school, you'll save a little over $3,500 in interest! Use this calculator and see how much you can save for yourself.
4) Invest early.
I know you're not thinking about investing now, but hear me out. Consider this scenario. Billy begins investing $5,000 per year at age 25 up until age 35. Meanwhile, Bobby begins investing $5,000 per year at age 35 up until age 65.
Who has the most money in the end? Billy has the most money (over $600,000) after investing the least amount ($50,000). Compare that to Bobby's investment of $150,000 with an ending total of roughly $540,000.
Now do you see why you should start now?
Just imagine how much more money you can have compared to Billy if you started investing early in college. Let that marinade for a sec.
5) Leave the credit cards alone.
If you spend $3,000 on a credit card during your freshman year and it has an interest rate of 22 percent, how long do you think it will take to pay it off making a minimum payment of $60.00?
It will take you 137 months and you will end up paying $5,221 in interest.
Trust me, that $5,221 could be put to much better use in a savings or investment account. Only use credit if you have the means to pay off the entire balance in full each month. If not, leave them alone because they just aren't worth it!
Wrapping Things Up
These will be some of the best years of your life. You'll cry, you'll laugh, you'll stay up all night with your friends -- heck, at times you'll want to throw in the towel. But please remember, no matter how good these years may be, you can't get them back.
Don't make the mistake of taking out ridiculous amounts of debt, thinking you'll pay them back once you've graduated. There's no guarantee you'll have a job after graduation. And regardless of your employment status, those debts will have to be paid.
Build a solid financial foundation right now that you will be proud to look back on once it's all said and done. It's been ten years since I've graduated from college. Those years were indeed some of the best years of my life, but I'll always have a few lingering regrets about the financial choices I made.
Therefore, I encourage you to do your best and learn from someone who has been there. You don't have to be dumb with finances just because you're young. Your choices now can make all the difference in your future.