What Should a Broke College Student Do with Their Money?

Transcript

I want you guys to talk to our young college students, the young broke college students. Question from Kevin brought this up. He says, “I’m in college, and I’m only making like $60 a week. Does it matter what I do with this money? What should his mindset be in this season of college broke life?”

We can ask you a question because I think it’s so interesting. Your background was not financial planning. We were, like, Brian, now we had the unfair advantage of coming through. I was a financial planning major, so I was studying this stuff while I was doing it. You were an accounting major, so you were studying this stuff while you were doing it. For someone who’s coming through college not studying that, is this a common thought? Like, when you were back in school, were you just thinking, “Oh, I have plenty of time”? Generally, like, my peers, this was not even a thought. So, I do commend him for even being here and asking this question, first of all, because it’s kind of like, “Oh, what? This will let me go and get coffees with my friends or something like that?” That’s honestly kind of the mentality, right?

But I do think that there’s a huge thing that just came to me, or that was in my mind, was just not going into a bunch of student loan debt. Oh, a lot like all my money, credit card, my extra money was going in that direction. I obviously don’t know Kevin’s situation, but that was my first thought about the mentality of being a college student and a financial mutant.

So, one other thing, you know, there’s this thought of, “Okay, well, I don’t really need to think about the future as long as I can just make ends meet right now. I’m okay.” But I didn’t know about the beauty of compounding interest. I didn’t have our wealth multiplier deliverable. Maybe we can throw that up on the screen. So, I am curious to see what you guys will say to him because this is a very unique time of life. But once you are armed with that knowledge of what your money can do for you, how does that change it? Because like, shoot, $60 when you’re 19, that could go a long way.

So now the question to you, Brian. You have a college-age student who you are currently talking to, and like, it’s like when she calls, she says, “Hey Dad, I’ve got 60 bucks. Does it matter what I do with it? What guidance?” I even think there’s a benefit there because she has me as a father.

Whereas I want to take it back to where Kevin’s question is because I was Kevin. I graduated college, I didn’t have student loan debt because I had a lot of scholarships and things like that. However, I didn’t have cash. I think because of all my graduate, I got some graduation checks. When I graduated college, my net worth would have effectively been $1,500. And I used that to put down $2,000 on the Mazda 626. That was my first purchase, the car.

So, I get to the job. So, I had absolutely zero investments. I remember, I still have a friend from college. He’s still a friend. I know it’s not trying to keep up with people, that’s it. He’s so impressed because his father was an accountant. I met him in the accounting program, and I was amazed to find out he had, like, I can’t remember if it was $5,000 or $10,000. I was like, “This kid is rich,” because his family has already got him saving and investing. And I felt so behind because I didn’t know how to do that. I didn’t even know what an internship was. I didn’t even know what that is because nobody in my background had ever been through accounting. I’m shocked I even got into public accounting because my resume wouldn’t have been the one that stood out, because I had, like, “Who cares that you’re a lifeguard at Dancing Waters?” I worked on the ramps at Delta. I was another college job. And that’s why I would encourage Kevin.

I want you to figure out what you actually want to do for a living, and I want you to be very proactive in reaching out to some of those companies, seeing if you can get an internship, see if you can get some type of experience. Because that is going to be even more invaluable. What you can make, what you can become working, is going to be something that’s very valuable to you. Because my jobs, I would build up a thousand or two thousand bucks, none of it went into Roth IRAs. Those didn’t exist, first of all. But they didn’t go into any type of investment because I just didn’t know what to do at that point.

But I put it in this order of operation. Definitely focus on the experience and the opportunity of what college is, because that’s what you’re going to college for. Hopefully, you come out of that four to five years in the future, and you actually have a marketable skill that’s going to create. So let’s prime the pump on that as much as possible by you actually doing something in the summers or in the off-semester to make that happen. Because the money will follow if you do that right.

The next thing is budget. Actually, know what every dollar is, so it has a purpose. The Financial Order of Operations isn’t just for fat cats or after you get out your best job. It’s also for you to make sure every dollar is not left behind. And the fact that, as Ruby said, don’t let student loan debt… I knew so many people in college that were like, “I’ll just go get a student loan,” and then we’d drive. They’d be the one, “I bet Brian, can you drive me to the store?” And we’d go buy a case of beer. And I’m like, “Is this a good student loan proceeds? No, this is a horrible use of this.” They don’t realize, for that beer, just like, “I have this can.” Imagine if this case cost… Yeah, I don’t know what a case of beer even costs these days, but let’s just say it’s $20. I don’t even know. But you can quickly see, running up student loan debt on that is a bad use. Or maybe if you looked at apartments, your housing could have been this. But you’re like, “Man, I like that one because that one had granite or quartz countertops.” You shouldn’t care what the countertops are in your apartment that you’re living in college. That doesn’t matter. Is it safe? Yeah, that you can take into account. But I want you to be very purposeful, avoid the student loan debt now, and then think about how you’re going to live your campus life. And if there’s any money that goes into that budget, that you’re like, “Okay, there is enough squeeze room that I could put $500 into a custodial Roth because I’m working part-time or a regular Roth because you’re over 18.” I was thinking about my daughter. Do it, yes, I love… Because the money maximizer loves young people to invest. But I’m also very, very filled with reality is that a lot of you that are in college who come from humble beginnings, very similar to us, it’s okay if you start from zero when you graduate college. Just don’t waste the opportunity once you get out. Build the experience. Let you become the best version of yourself and make it happen. Because you’re going to find out most people just let life happen to them. They’re thinking in the present. They’re not thinking about the deferred gratification. And that’s why, once again, I’m going to bring it back to all the good behaviors, the things you should be doing. Make them easy, reward them. All the bad behaviors, like using student loan proceeds to go buy cases of beer, that should be make it as difficult as possible. Create whatever safeguards you need to from a discipline standpoint. But be purposeful. Make it happen so you don’t have that regret that so many people seem to have with their college experience these days.”

I would encourage young college students to be proactive in seeking internships and gaining experience in their chosen fields, as this will be invaluable for their future careers. I advise students to prioritize their college experience and acquire marketable skills during their time in school. Additionally, it’s so important to budget and make every dollar count, avoiding unnecessary student loan debt and making wise financial decisions. While it may be okay to start with zero savings upon graduation, he urges students not to waste the opportunities that come their way and to build valuable experience and skills for a successful future. By being purposeful, disciplined, and focusing on good financial behaviors, students can set themselves up for a better financial life beyond college.