“I’m a broke college student.” A phrase most people have heard or have even said themselves. While I’m not here to argue that this is a false statement, I am going to share my opinion that even as a broke college student you can still make smart financial choices. Navigating the financial challenges of college life requires a proactive mindset. Instead of viewing financial stability as a post-graduation goal, you can employ strategies that cultivate responsible financial behavior during your academic journey. Habits established while in college can shape future fiscal responsibility.
Now you are probably thinking, that sounds great, but what can I do while still in college? Well, I asked that exact question to Northwestern alumni, Alan Hulstein ’21, who is a current financial advisor. Here are the three pieces of advice he gives to young adults to set them up for financial success.
The first is to know where your current money is going. This is important because when you eventually have a larger income, more money doesn’t teach you good behavior. Rather you will have the same current financial issues, just on a larger scale. This also doesn’t mean creating a strict budget to follow, but rather simply tracking what you spend money on and how much you bring in. Similar to most things, knowledge is power. So, knowing where your money is going will automatically allow you to make more informed decisions. For example, if you are trying to decide how much you can potential invest, or if you are able to make the payments on a house mortgage. If you are tracking your money, you will be able to make those decisions.
The second piece of advice is understanding that there are three ingredients to investing. It is the amount you invest, your return, and how much time you invest. To increase your return, you can either increase the amount you invest or the length of time you invest. Even if it is not a large amount, if you start when you are young, you can still hit your desired savings level. This allows you to actively work towards those goals without having the rely on being able to just invest a larger amount later in life. Which leads to the third piece of advice.
Simplify and automate your finances so that you can save small over a long time. While this is mundane advice, it is the most tried and true. Investing a small amount right away and automating the amount you put in each month, allows it to be ‘out of sight and out of mind.’ Which minimizes decision-making friction. Ultimately, simplifying the process will make it less overwhelming. Another example of how you can simplify your finances connects to the first piece of advice. It is to use an app that automatically tracks both your income and expenses. This makes it less time-consuming and allows you to always be on top of your finances.
In conclusion, altering the perception that financial literacy is a post-college concern empowers students to establish enduring financial habits. The insights shared offer a blueprint for financial success, showing that even as a broke college student, one can make intelligent financial decisions.