The folks over at Credit Card Insider asked me to write a blog with 3 tips for College students, along with at least one personal financial disaster. Credit Card Insider teaches students about student credit cards and how to manage their finances.
This list of three tips isn't your typical "earn, budget, save" list. This one is much more personal, emotional and "human," I wrote it from the heart for students. Managing money is emotional, and we need to have some basic understanding of how our mind, and literally our physiology, affects the way we think about and handle money.
Extensive research has shown our basic money beliefs and underlying habits are formed by the age of seven, so developing good decision making skills and ultimately long-term financial success is something we definitely need to learn about and practice.
1. Clarity – Decide What You Want
Be clear what you want and set a goal you’re passionate about – this will help motivate you to make good decisions with your money and prevent you from blowing it on things you’ll throw out or give away next year. You can’t hit your goal if you don’t have one. This is the most important first step towards being successful in any area of life. A great question to ask yourself when making a decision is, “what will my life be like in five years if I chose this?” This question comes in handy for many different areas of our lives!
When a financial goal is big it may appear unattainable, and thus it could seem justifiable to buy “little” things, thinking you’ll never be able to afford that “big” thing anyway. In fact, that’s just the mindset that will prevent you from ever affording it. Just think, $5.00 a day adds up to $1,825.00 in a year. It’s important to understand that your desire and goal must be compatible with your beliefs in your ability to attain it. Why? Because your subconscious mind is about one million times more powerful than your conscious mind. No matter what your financial situation is now, you absolutely can be financially successful in the future, there are plenty of examples of rags to riches stories to prove it. The results are all about habits, and what you do with your money day in and day out week after week defines your outcome. Step by step you can get where you want to go, believe it and you will be able to do it. Set your clearly defined goal, a timeline for it, and take the first step to get your momentum going.
2. Set Up a Process for Simple Success
One habit that will really help you get where you want to go is to divide up your income – don’t put it all in one bank account, it’s too easy to spend.
The four main purposes high net worth individuals divide their income into are: giving, investing, saving and spending, I call it the “GISS Method” for short. There are many benefits to separating your income into the GISS categories including:
* it prevents overspending
* it allows you to build your savings for your big goals
* you can build your investment bucket bit by bit so you have money to live on when you’re older
* it allows you to give to organizations to change the world in ways that matter to you
The easiest way to set up this process to work for you, and your long-term financial well being, is to set up your bank account with different sub-accounts. Then when you deposit your checks, they can be automatically divided into the different categories. This takes the emotion out of trying to save at the end of the month. You can clearly see the balance in the account your bills are coming out of so you’ll have a better understanding of your cash flow, and enjoy piece of mind knowing that you’re building your savings and investing buckets slowly but surely.
You may be saying, "but I can’t afford to save anything, I’m a starving student!" I totally understand and remember that stage of life like it was yesterday, but it’s all about creating good habits. Your daily habits will define your future financial life. Even if it’s $5 a week, start putting something away in a separate account so you begin to take action in the right direction. This exact habit is how I bought my first home, paid off my student loan, and took a trip to Australia for a month – all in my late twenties.
3. Don’t Sabotage Yourself with Consumer Debt - The Importance of Conscious Consumer Decision Making
Before you buy a “want” (aka something you don’t really need), ensure you take the time to consciously think about whether this item is going to get you closer to your goals, or put you further behind. Think about how many hours it would take to earn this item (after tax) and whether it really carries that much value for you. Marketers want you to spend your money whether it’s good for you and your future or not, that’s one of the many reasons why we have the “convenience” of using plastic and phones to purchase items now instead of cash. It’s proven scientifically that you will spend less if you use cash. This is because it triggers the pain mechanism in your brain, the insula, making it harder to spend. Buying with plastic, or waving your phone doesn’t trigger any pain – so it's easier to spend more.
Going into credit card debt to buy another … (insert your vice here – shoes, purse, tech toy) is not going to get you where you want to be in life, it will get you into severe debt and potentially bankruptcy. Be aware that the exciting feeling of “newness” or “bling” is simply a chemical reaction in your brain and body, and it will go away quite rapidly. If you can't truly afford the product (meaning you have the money in the bank or your wallet), then you’re just left with guilt, disappointment and potentially paying a lot of interest on your credit card debt.
Yes, being on a tight budget isn’t necessarily how you want to be living right now, but the struggle helps motivate you to work for how you do want to live in the future, it provides the “fire” to work hard and create who you want to be. One secret I’ll share is this, most adults who went to college or university look back at those “broke student” days as fantastic memories, - memories of camaraderie, learning, and stretching of their capabilities. You tend to forget about the stress and the exams.
Life tip – always maintain your hope and belief in yourself, even when it’s really challenging. We all make mistakes, lots of them. However people who maintain their self-esteem, visualize the future life they want in detail, and go on to “greatness” in whatever field their passion is, are able to learn from mistakes and not let it destroy their belief in themselves. This one factor will make a huge difference to your success and happiness.
The Incredible Growth that Can Come from “Mis-takes”
My financial kicker came later in life when I walked away from an exciting and challenging six-figure career, one I had worked towards for fifteen years. I left it to spend more time with my baby and toddler. Within a year my life turned upside down and I became a single mom, my career was two thousand miles away and I was in and out of traction for a debilitating and excruciating back injury. This was all happening in 2007 and 2008, during the worst global economic crash since the Great Depression.
I’m not going to say that period was fun, it wasn’t. I questioned my choices and myself a lot. But challenging experiences force you to look at things differently and, if you allow it (and don’t swim in perpetual regret), to grow a lot as a person. It also may just put you on a new life path, one that you appreciate greatly and were truly meant for.
I wouldn’t be writing this blog today if I had stayed on the path I was on, and I wouldn’t be growing as an entrepreneur or helping youth learn financial and life success skills. Most important to my values – I wouldn’t have seen and shared all the incredible moments of my children growing up during their early years – years I could never have gotten back.
Life today is inspiring and meaningful; I’m healthy and very excited about the future. I only wish I could go back and tell my 2008 self that everything is going to be OK, in fact, much better than OK.
Photo of Max and Natasha taken by Kerry Phillips
I hope you have found something within this blog that resonates and inspires you. You really can achieve the life of your dreams, it just may not be the exact path you thought it would be. Basic financial skills along with focus, passion, perseverance, self-control and willingness to learn from your "mis-takes" will allow you to create any type of life you want.
Never stop dreaming.
Please feel free to share your thoughts or comments here or on the facebook page, the Zela Wela Way.
If you are looking for a resource to define your values, goals and begin to learn key financial life skills, check out the Steps to Success Teen Guide, 25 Financial and Life Success Lessons to Help You Achieve Your Dreams.
Nancy Phillips is the mother of two children, has a Bachelor of Science degree in Kinesiology and a Master of Business Administration. She is the creator of the values-based Zela Wela Way financial resources and author of the Steps to Success Teen Guide, 25 Financial and Life Success Tips to Help You Achieve Your Dreams.