Every RedPiller will agree - finances matter. A lot. You can't be happy without a certain level of financial stability. No matter your age, you should work towards financial freedom.
Recently I wrote a tutorial on how to handle money as a college student (and not only). For the post with links and pictures Click Here.
TL;DR budget properly, build your credit score, get rewards, build emergency fund, start investing early
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So you are a young adult who doesn’t know how to handle money?
Been there, done that.
And I know how hard it is to think of the future, when you are wild, young and free.
Unfortunately, you do have to think about it (at least to a certain extent). Unless you want to be in your mid 30s > and living at your parent’s basement begging them for favors and money.
It sounds pathetic, doesn’t it? I feel disgusted even by thinking of it.
Having a certain level of financial stability is a prerequisite to living a happy life.

Worrying about paying the debt and living from paycheck to paycheck is not fun, as many of you probably now.

Even researchers proved that money does bring happiness. However, they shouldn’t be your end goal, rather means to meet your goals and live comfortably.

But that’s enough. Let’s get to the core of the problem.

There are only two ways you can improve your finances. You can either start spending less or earning more. Obviously you can do both of those at the same time, thus getting even better results.

Everything starts with a plan
Nowadays, it’s easier than ever before to analyze your spendings.

With the free tools like Mint, you can track all of your expenses hands off. The only thing you have to do is synchronize your bank accounts and credit cards during registration.

The program tracks all your expenses and credits automatically. After logging into your account, you are welcomed with such a chart showing your spendings:

Most of the spendings are automatically categorized, so you can quickly see where most of your money goes.

It’s an eye opening experience to realize how much money you spend on things you would be perfectly fine without.

As soon as you see it, you can focus on cutting your spendings in particular areas and sticking to the plan.

So download Mint now and start budgeting properly.

One small decision can save you thousands of dollars.
I’m pretty sure you have heard of credit score – your attractiveness to lenders – before.

To put it simply, the higher your credit score, the more likely you are to get your loan application approved.

However, the benefits do not end here.

Your credit score also dictates what kind of offer you are going to get from your lender.

The better your credit score, the lower your interest rate. And we are talking about $10.000s of dollars potentially saved.

For example, $250.000 mortgage would save you $30.000 in interest payments if you had excellent credit score instead of average.

You can play with this tool on FICO website to find out how much money you can save by improving your credit score.

Here is the graph showing differences in interest rates for a mortgage of $250.000.

differences in interest rates for different credit scores

I hope that now you’re convinced how important the credit score is for your future.

The question you should be asking yourself now is “how can I start building up my credit score?”

The answer is credit card.
They are often demonized, but the criticism comes from the people who either don’t know how to use them or live the lifestyle above their means.

However, if used responsibly they are a great tool to have. Not only will they help you build up your credit, but most of them also offer some type of rewards for every purchase that helps you to generate some extra money.

Some of the credit cards are more picky in accepting applications than the other ones.

If you have no or low credit score, I would recommend to you is Discover.

The main benefits you get from using this card are:

  • 2% cashback on groceries and gas
  • 1% cashback on other purchases
  • Free $20 every semester if your GPA is above 3.0
  • Free $50 if you sign up using this link
  • Cashback match for the first year
  • Free FIBO credit score
  • That means that during your first year with Discover you are going to get free $306*

*Assuming you are a new customer that used the link above to sign up, your GPA is above 3.0, you spend $200 a month on groceries and gas, $500 a month on different purchases (p.e. rent)

Things to keep in mind:

Try to use less than 30-35% of your credit line each month, so if your monthly credit line is $1000, try to spend less than $350 a month. Always pay your credit on time
Don’t apply for another credit card until next year. Applying too often, results in a lower credit score.
I have a budget and credit card. What’s next?
This is where the fun begins.

Now you can think of ways to save on your spendings and multiply your wealth.

There are some cool apps and tools that I use daily to save some extra money.

The first one would be Paribus.

As you probably know, most of online retailers offer 14 days price guarantee.

That is, if price of product drops within 14 days of your purchase, you are eligible for the refund equal to the difference in prices.

For example, if you bought Mastery by Robert Greene for $20 on June 1st, and the price drops to $15 on June 7nd, Amazon is willing to refund $5 if you submit the claim.

What Paribus does, is exactly this – they scan your mailbox for purchases and start tracking your recent purchases. Whenever prices drops, they sent an e-mail in your name to claim the refund.

They do all the job for you. The only thing you have to do is sign up.

The service doesn’t have a monthly fee or anything like that. However, they will charge you part of the refunds successfully claimed.

The base fee is 25% of successful claim (20% if you use this link). However, the fee will decrease by 5% for every friend you invite. So, if you end up using my link and inviting 4 friends, you get 100% of your money back.

Let’s say that you spend $1000 online a year (very conservative) and didn’t invite any friends. On average, Paribus helped me to save 3% on my purchases.

That means, you would end up saving $24 in a year ($30 – $6 in fees). Keep in mind it was a conservative estimate. If you are like me, you do most of your shopping online, which in my case is probably around $6-7k a year. Consequently, Paribus helps saves me more than $150 yearly with no effort whatsoever.

Give it a shot, you will not regret it.

Building up an emergency fund
You wrecked your car. Your crazy ex stole your laptop. Or any other random shit happens.

There are just some things we don’t have impact on and when the shit gets real, you better be prepared!

Having some money at your disposal when shit happens is crucial. Normally, it is recommended to have 3 times your monthly income at your emergency disposal. However, since this post is aimed at young adults/students. Let’s be real, $1500 is a good place to start.

If you end up putting $100 a month into your savings and using the other tips mentioned before. You can reach the goal of $1500 in less than a year.

To earn extra $100 a month it’s enough to work extra 14 hours at a minimal wage. If you are at a university, I would recommend you to start working at a library during the night. It’s extra quiet, most of the time there is nothing to do and you can study/listen to audiobooks and get paid for it.

The audiobook service, I’ve been using for the last 4 years is Audible by Amazon.Com. Over this time I accumulated 70 titles in my library and finished listening to most of them. They offer great service and vast choice of audiobooks. You can get a free trial using this link.

Bonus – Make Your Change Work for You
If you want to reach your goal even faster, I would recommend installing an app called Acorns.

The app makes your change work for you – you link a bank account/credit card with the app, and whenever you make any transaction it gets rounded to the nearest $1. As soon as you reach $5 in round ups, it gets transferred into the app and invested in ETFs (investment funds traded on stock exchanges, much like stocks).

For example, if you had 8 transactions for a $4.25, $6 ($0.75*8) will be invested into your account. They buy partial shares of the companies, what allows you to invest small amounts into a portfolio that would normally cost a few thousands of dollars. The app is also free for people younger than 25 or anybody with .edu e-mail address.

Below you can see my stats. I started using the app at the beginning of May and put $150 as an initial deposit.

As you can see, I’ve made so far $3.69, which amounts to roughly 1.4% of my investment (money-weighted return). It’s more than I would get from any saving account in that period of time. If we calculate money-weighted return, the number would be closer to 2.5%, or roughly expected 15% in a year. Obviously, the results are not guaranteed, but now you should get a good idea of how it works like.

Start saving and building your wealth with Acorns today.

If you use this link to download the app, you are going to get $5 completely for free.

What’s next?
I hope that by now you have a good idea of how to start handling money as a student. Hopefully, you learned the benefits of building your credit score, budgeting and using credit cards to your advantage.

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Let me know what you think.
Cheers,
Stoicas