For young people in the US and other developed countries, this advice will apply pretty well most of the way through college, below the age of 20 or so. Note that this is financial advice, not general life advice. Only you can know what will make you happy or unhappy, whether you’ll profit more from taking a trip or watching your investments grow.
Invest in your education
If you’re in high school or a recent high school graduate, you should be planning on attending college or earning a vocational certification of some kind. The best investment you can make is improving your future earnings potential.
· If the costs of college are too high, consider a local community college or a four-year state school. If you intend to transfer from a community college to a four-year university, verify that the credits transfer because this is not guaranteed. You may need to get a part-time job while you attend. Do not go to a for-profit college as they are expensive, generally not well-respected, and credits are very difficult to transfer to an accredited four-year college.
· Make sure the college you choose is accredited and has the following listed on their website:
- Average starting salary of graduates in their chosen field.
- Percent of graduates that receive a job in their chosen field within the first 6 months.
- A great career center that will continually help you find jobs, along with a successful career fair.
· Fill out the Free Application for Federal Student Aid by the end of April of the year you plan to go to college so that you’ll be eligible for grants and federally subsidized student loans. If you aren’t quite ready for college, you can use the FAFSA 4Caster to estimate federal grants and loan approvals.
· Avoid taking on loans that exceed the future earning potential of the degree by too large of a factor. Use the debt/salary wizard to determine the suggested maximum amount of debt you should incur based upon your projected salary or what salary you should be earning based upon your current debt.
· Some people consider military enlistment or ROTC as a way to pay for college. That’s a valid approach, but it is a big commitment. Talk to some people in the military or veterans other than your recruiter before you commit. Also note that dropping out of ROTC can be very expensive so you should probably not enter ROTC if you have any potential medical or mental health issues.
Have a plan for your education
You ideally wouldn’t go out and buy a car without doing a bit of research on what existing owners of that make and model had to say. Why would you get into five (or even six!) figures of debt without doing a similar amount of research? If you’re at all on the fence about going to college, or your chosen major, it makes sense to find someone who’s gone through your prospective degree program, take them to lunch, and get their feedback on how their path has treated them.
- Did their degree path make sense for them?
- If they could do it again, would they?
- What advice would they have for someone considering following in their shoes?
Once you’ve done this, it would behoove you to gather additional data points. Don’t just cherry-pick someone who’s become a breakout success. Try to talk to people in the middle of the pack, or even some folks who went through the program and failed. Consider fallback options as well. If your career plan requires certain things that may not come to pass (such as being accepted into a top ten law school), and your plans are forced to change, what are your options? An undergraduate degree in business or engineering at that point may bear more fruit than a bachelor’s in philosophy.
A lot of noise has been made lately about STEM careers. However, remember that your working career is going to span multiple decades; that’s a very long time to spend doing something you aren’t passionate about– or at least enjoy. Virtually nobody wakes up eager to go to work just because of their paycheck– it’s important to pick something that excites you, because without passion, you’re most likely destined to never be particularly good at your field of study.
Think about your career
If you’re headed to college, think long and hard about getting a degree that won’t pay for itself. For any career, you should talk to several people who work in the field about your education plans and that career path to make sure your plan makes sense.
Don’t buy a car you can’t afford. If you lost your job, would you lose your car? This is a really good time in your life to go without a car, borrow a family member’s car from time to time, or to buy a really cheap used car (i.e., a “beater”).
Get educated on saving and investing
Read one or two books from this reading list.
- Your Money or Your Life by Vicki Robin, especially if you want to change your emotional relationship with money.
- The Millionaire Next Door by Thomas Stanley, especially if you have high expenses.
- The Money Book for the Young, Fabulous & Broke by Suze Orman.
- I Will Teach You to be Rich by Ramit Sethi.
- The Bogleheads’ Guide to Investing and/or The Bogleheads’ Guide to Retirement Planning, both by Larimore et al, which covers most of our investing philosophy.
- A Random Walk Down Wall Street by Burton Malkiel, especially if you aren’t convinced that index-investing is right for you.
- The Four Pillars of Investing by William Bernstein.
- Total Money Makeover by Dave Ramsey, especially if you are in more debt than you want to be.
- The Richest Man in Babylon by George Clason, for timeless advice.
- Additional Authors to Consider: John Bogle, Larry Swedroe, David Swensen and Rick Ferri.
College is often when young adults start building credit via student loans and credit cards, but it’s also when a lot of people start a long relationship with expensive debt. It’s fine to open up a credit card if you are not a natural spender, if you will always pay off your entire balance each month, and if you can be responsible with it, but if any of those are in doubt: just skip it. You can always build credit later when you have a steady income and more experience handling money.