Save 10% for retirement. Even if you have just $50/week.
Save 10% for substantive purchases that you might otherwise buy on credit (i.e., a car)
Give 10% to charity.
10% for indulgences (like you coffee or whatever). Feel free to save up for these.
The rest will be consumed by life.
Don’t waste ANY money if you have debt or haven’t saved up for at least 3 months of all your normal expenses.
I did this starting when I was in the IDF as a kid (probably your age now).
I’m not yet grey-haired and have sufficient money that I could screw off for the rest of my life taking vacations, and still have plenty to help my children. (I won’t because I am a workaholic, but it’s nice to know I could.)
I put 10%of my spending budget and earnings (I recently got 2 research assistant jobs) into savings and my parents agreed to match my earnings in a 401k account so I’m really lucky in that sense
I’m still learning the basics of investing so I don’t feel comfortable actually doing it yet
Do you think there’ any value in giving myself rewards (ie indulging in a halo top or setting aside $5 towards a belt) for accomplishments (acing a major exam, winning a major competition etc)
Some trading platforms (E-Trade) offer a paper trading account so you can “practice” without really investing (they’ve also just implemented commission free trading … i.e. it no longer costs money to make a trade). If you’re interested in buying/selling stocks/managing your own portfolio of financial vehicles, this is a good way to understand the ins and outs of it.
Absolutely - if anything it’ll help you with delayed gratification and self-discipline
I was in the investment club in undergrad … we were tasked with managing a portfolio with real money and competed with other schools in the system on return and yield. It was fun. I will say when you’re using your own money, it changes your outlook a bit…but by all means learn all you can through all means available … including by doing it yourself.
Alrighty, so I was in your position a year ago and am now working (just turned 23). My parents helped me out with college expenses, but I also payed for things with my summer work income (so it was a sort of hybrid method).
“Luxury” will depend on the person. It will also depend on your personal beliefs. For example, a monk and a business tycoon might not think about luxury the same way. You might also feel guilty about spending money on things that support companies that harm the environment, people, or animals (like I do). These are all things that tie into your idea of a justified purchase. So with that out of the way, here’s how I personally think about it.
Does this purchase support something I don’t agree with? Do I have enough money (after savings are factored out) to make this purchase? Does this purchase align with my future goals? Is this purchase something that’s actually going to make me happy? (Note: a lot of research indicates that we are really bad at estimating how happy different things make us.)
I don’t ask all of this before I buy groceries every week, but it’s worthwhile to (at least occasionally) think about whether your lifestyle is compatible with your goals.
Like others have said, it’s important to focus on your “job” in college, which is learning things and doing well in classes. If you want a coffee and a snack, I personally wouldn’t feel guilt. If the money you spend makes you happy, then you aren’t wasting it.
Also, I don’t think a 401K is correct for you (although your college may offer it). I suspect you mean an IRA, which is functionally the same thing.
Regardless, especially at your age and probable low tax bracket (which is probably 0), you want a “Roth” 401k or IRA – that is, you put in post tax money as hard and heavy as you are allowed because it will grow and be withdrawn without taxation. Put you years ahead.
Once each of my daughters was 14, I gifted them $1 up to $6,000 they put away each year – each one earned at least that amount in income.
As a result, they each had larger retirement nest egg than the median American by the time they got out of school/mandatory military service.
(Everyone go make fun of us Jews now, but this is how it is done.)
WOW! you’re a good dad! My dad deferred all the responsibility of educating my brother and I to my mom. He loves me very much, but prefers to show his love by spoiling me
LOL! That’s one of the reasons my mom practically worships Jews
If you don’t spend more than you make or have, you’ll be doing better than the majority of college students. If you want to be outstanding, get a part time job and contribute to a Roth IRA. From a purely fiscal standpoint, you are unlikely to save enough money in college to make a meaningful impact on your retirement. If you were to work enough that you could contribute the maximum to a Roth IRA, however, and assuming you have no loans, you could set yourself up to retire years earlier than your peers. But then, your parents may not like the idea of you working.
Part of your concern seems to be inculcating good habits that go beyond the requirements of good fiscal hygiene. There is no shame in enjoying an occasional snack or fancy coffee. Set the limit such that you continue to experience these things as indulgences and luxuries rather than necessities you would be pained to give up. You will be so much the happier for always enjoying them gratefully, and you will not find yourself at a loss if you are compelled to set them aside for a time.
