Part I "I wanna Get My Money Right" for the Broke College Student

The beginning of each semester is the time so many of us are full of various emotions about the upcoming year. While some are anxious to get back in school mode others may be burned out and ready to graduate. One commonality many college students are excited about in the beginning of the semester is receiving that infamous monetary award aka Over Payment (OP) check, Refund check, etcetera. The major difference to keep in mind is if you received your award via loan or not. Often you hear students blurt out “OP’s must have dropped” because you see the result of so many others outlandish purchases. Fresh Polo Ralph Lauren (not USPA), new hand bags, big rims, you see it all. Not to discourage treating yourself as a hardworking college student, but only if there is balance. In this blog I will give you some simple advice to help those who would like to have funds they can use in case of emergencies and get an early start in investing.

The most important rule to follow when it comes to any aspect of your finances is to “PAY YOURSELF FIRST.” I repeat “PAY YOURSELF FIRST.” That's right, you should put at minimum 10% of any money received such as earnings, gifts, and allowance into some type of savings or investment. This money should be put into a savings account until you have at least 3 months of your monthly living expenses built up. Your emergency savings account serves as liquid money that is to be used in emergencies (i.e. car repairs, loss of job, parents cut you off) only. Ideally you want to have at least 6 months expenses into your emergency savings account. For example, if you make $1000 a month and your monthly expenses total up to $750, immediately you should be depositing at least $100 (10% of your $1000) to your savings until you reach between $2,250 and $4,500 (3 to 6 months expenses). Once you have built yourself a cushion for financial emergencies and mastered the habit of saving aka “Paying Yourself First”, it’s time to start investing. The following are simple steps that you can use to get yourself ready to invest in which will be explained more in detail in another part. I used these same steps starting my freshman year in college and continue to follow them. Although I got off to a slow start, I have had no regrets in taking control of my financial future.
Note: It’s never too early to start. The habit of saving and investing regularly is more important than the amount. Case in point, if one cannot invest 10% of a $1000 on a college budget ($100), what makes one think they will invest 10% of a $100,000 salary ($10,000).

1. Get your consumer debts paid down (credit cards, computers, department store cards, etc.) and create a budget to follow.
2. Put at least 10% of your earnings into an emergency savings account until you have 3 to 6 months liquid, “PAY YOURSELF FIRST.”
3. Once your consumer debts are paid down, your emergency account is built up, and you’re able to follow some type of budget, you’re ready to start educating yourself on investing.
4. Educate yourself on investing starting with a simple internet search or books. Here are a few of my favorite sites and books.
a. Investing for Dummies
b. Stock Investing for Dummies
c. Kiplinger’s Guide to Investing Success
d. Internet search “how to invest”
Note: Important concepts to grasp early on include what it means to invest, dollar cost- averaging, mutual funds, Roth IRA’s, and any other aspects you find interesting.

5. My personal suggestion once you have educated yourself on the basics of investing would be to start with an amount you feel comfortable with and won’t need immediately, ideally $500 to $1000. Note: You can start to invest with as little as $50 a month, regardless of what you start with, do not be discouraged.

Keep in mind before you take that plunge into investing you should have a firm foundation. Establishing good habits such as paying yourself first, following a budget, and living below your means are essential. Tricking off money on material things that lose value must be controlled. For those of you with loans, following these simple steps are that much crucial to ensure your able to pay those borrowed funds back once their due. Stay tuned for Part II “I wanna Build My Credit” for the Broke College Student and Part III “I wanna Start Investing” for the Broke College Student. In Parts II and III, I will go further into simple investment strategies you can use as a college student including my favorites and will discuss the importance of credit (life’s report card). Hope this is helpful and enjoy!