This time, four years ago, I was in your shoes, feeling like there were no opportunities due to my inexperience in the workforce and lack of financial education. It felt like I had no free time, no money, and certainly very little work experience. Yet, I found the resources to start educating myself financially and became a landlord just a few weeks after earning my bachelor’s degree.  

How is this possible? I’ll share the five things I learned as a full-time student to help kick off my path to financial freedom.

1. Start Building or Improve Your Credit Score

Having a credit card is great—if you use it wisely! Please do not be one of those people confused by your credit balance and limit. 

It is crucial to think about either starting your credit score on the right foot or how to build and improve your existing credit score. At such a young age in your credit life, you’re more at risk of your credit score going down if you decide to spend without thinking. 

Chances are you will not be approved for a massive credit limit on your first card, and understanding the potential downside of overleveraging your credit utilization will be crucial. It is typically preferred that you use no more than 30% of the total revolving credit available to you. If you are approved for a credit card with a $1,000 limit, I would not look to have a credit balance greater than $300. Once you are over the 30% threshold, you will likely begin to see your credit score deteriorate. 

So why does your credit score matter? Lenders look at your credit score to determine your eligibility for loans, such as mortgages, auto loans, credit cards, etc. A higher credit score increases your chances of getting approved.

Here are other ways your credit score affects your financial future.

Lower interest rates

A higher credit score can lead to lower interest rates and better rewards programs on credit cards. I can’t stress enough how important your credit score is in determining your loan interest rates. 

Here’s one way to look at it:

• If you borrow $400,000 and have an interest rate of 7.5%, your monthly payment will be $2,797. 
• If you borrow $400,000 and have an interest rate of 6.5%, your monthly payment will be $2,529.

Looking at this, 1% may not sound like a lot—heck, $268 a month may not sound like a lot to you. But if you break this down over 30 years, you will be kicking yourself knowing that a 1% difference in that time adds up to a $96,690.94 difference. Do not leave almost $100,000 on the table due to poor personal finance habits!

Renting an apartment

Landlords often check credit scores to assess the risk of renting to you. A good credit score will affect your ability to rent from most landlords, and I typically see landlords requiring a minimum credit score between 600 and 700.

2. Start Budgeting

There are a million and one ways software products and advisors will tell you how to budget, but to keep it simple out of the gate, I would recommend the following: 

Track your net income

If you are working part-time, have a paid internship, or have other sources of income, it is crucial to know what you bring in monthly.

Make a list of your expenses

• Start with your fixed expenses: These include rent, groceries, school supplies, utilities, gas, phone/internet bills, a car loan (if you have one), and other necessary items.
• Move into your variable expenses: These include entertainment, dining out, food delivery, travel, and other wants.

Estimate the monthly cost of your expenses

1. For your fixed expenses, this should be pretty straightforward since the amount will be taken out of your income at a consistent rate.
2. For variable expenses, look back at your last three months of credit card and bank statements to get an average cost of each category. You will certainly find a few categories you did not anticipate were this expensive. 
3. Make changes. Are you net positive? Negative? Breakeven? If you have more income than you expected, move on to the next step! If your expenses outweigh your income, I would take a further look at your variable (want) expenses and find areas that you can either cut back on or eliminate entirely. Additionally, there is no shame in picking up an extra shift from your part-time gig, internship, or summer job! 

3. Open an IRA

An IRA, or individual retirement account, offers special tax advantages over regular brokerage accounts. These can be a great opportunity to build your savings and curate good habits. You can select between two options:

• With a traditional IRA, you don’t pay taxes on your contributions or gains. But in retirement, you pay taxes on all qualified withdrawals.
• With a Roth IRA, you pay taxes before you contribute. When you retire, you can make qualified withdrawals completely tax-free.

How do I open an IRA?

IRAs are extremely easy to set up, and you can find a plethora of platforms offering these services. You might be asking yourself, “How do I open an IRA?” 

1. Choose a provider: IRAs can be opened at banks, credit unions, brokerage firms, or mutual fund companies.
2. Complete an application: Fill out the application form, providing necessary personal and financial information. You will be asked to provide your Social Security number.
3. Fund the account: Make your initial deposit, either as a one-time deposit or through regular deposits.
4. Select investments: Choose how to invest your contributions, typically among stocks, bonds, mutual funds, ETFs, or other investment options offered by your provider.

I cannot recommend enough that you consider mutual funds or ETFs. Picking individual stocks trying to “beat the market” is a risky tactic that may work out, but chances are that as a first-time investor, it will only expose you to unnecessary risk. 

4. Start Absorbing Financial Education Material 

You’d be surprised how far you can get without a formal education in financial planning, and many investors I know today do not have an MBA or finance degree, or may have not even attended a university/college. 

At BiggerPockets, we offer the Money podcast for those seeking financial advice. If you are looking for more resources, I would check out Spotify, Apple’s Podcast, or YouTube for top personal finance podcasts to round out your education. Understanding different metrics, sharpening your vocabulary, and listening to investors who are in a position you aspire to attain will help you go miles further than you could imagine.  

You will hear many investors talk about the first book they read that sparked their interest in investing, and I bet you 99% of the investors in our community will tell you to read Rich Dad Poor Dad by Robert Kiyosaki. This book is extremely eye-opening for those not exposed to many financial conversations or resources, and I completely agree that you should read it. 

My personal favorite is Think and Grow Rich by Napoleon Hill. It was written in 1937, yet is considered one of the best pieces written in the personal development space and has been widely influential in shaping the way people think about success and wealth. 

5. Talk to a Financial Advisor

After you have a light understanding of different investment options, a mild grasp on financial terms, and read steps one through four, I cannot recommend enough that you talk to a financial advisor. I am by no means a financial advisor; just an average person who decided to listen to my advisor and start taking these steps to achieve financial success. 

I sat down with an advisor for the first time when I was 18, and those early conversations we had went completely over my head. But every quarter, we’d continue to meet, and he would assign me homework in the form of reading books, listening to podcasts, and using numerous calculations to analyze hypothetical future outcomes of investing my capital. I would come back with a much better understanding every single time, and our conversations went from educational to tactical in a short time span.

I even remember him suggesting purchasing my apartment in college and rent it out to my roommates to start off my real estate career. I did not listen, ultimately telling him that I was never going to be the person that would receive a phone call at 2 a.m. to unclog a toilet. As an active investor, I can honestly say that I have never received those calls. 

Turns out three years after receiving that advice, I had finally found BiggerPockets, and the term house hacking stuck with me, which kicked off my real estate journey. 

Final Thoughts

There is so much that you will learn in your years as a college student, but financial literacy is not in your curriculum—unless you seek it! 

I promise you that at times talking about your finances will not be the most sexy thing in the world, and you may even get frustrated about your current financial position. You are young. Take a deep breath and know that 99.9% of us were in the same shoes as you and had very little to no money. Having a clear strategy for your finances will pay off in the long haul substantially, and can lead to opportunities you would never imagine. 

I do not believe money leads to happiness. Money leads to freedom, and what you decide to do with that freedom will have one of the biggest impacts on your happiness.

Reach Your Financial Goals, Faster

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.