words Al Woods

Getting a college education comes with an exorbitant price-tag. You might expect that for that amount of money you would at least receive some tips on creating a better financial situation for yourself.

In fact, the only lesson you learn, usually the hard way, is that living the dream is too costly. Here are five cash planning lessons that you should take as a minor, with a major impact on your wallet and FICO score. You don’t have to be a finance graduate; the advice also works for those with a BA in Liberal Arts.

Budget

The dull, tedious job that seems right for an old accountant is, in fact, your ticket to city-breaks and having enough cash left to splurge on a present for your significant other or even yourself. Use the in-out method to determine your total income and expenditure. Be sure to divide expenses into basic living (groceries, utilities, housing), retirement and savings (401(k), Roth). Don’t forget about healthcare funds, transportation, insurance and extras like entertainment, new clothes, restaurants, and charity. Next, set some realistic targets regarding debt and savings. Budgeting is like losing weight, everybody gets the logic behind it but has a hard time keeping the healthy routine. Use an app or a paper and pencil method to keep track of everything, at least in the first months.

Live below your means

When you have a generous limit for your credit card is easy to spend a few extra hundreds that are not even yours, to begin with. To get out of this vicious circle, you need to question everything. Do you really need and use your gym membership? Do you need that new iPhone or the most substantial TV package? Of course not. Although it’s none of our business, are you not compensating with stuff some emotional problems? To continue the diet analogy, spending money to feel better is as productive as eating candy to get over a negative moment, you are getting instant gratification with disastrous consequences in the long run.

Watch your credit score more than your GPA

Those bad decisions can be there to haunt you for years to come, up to 7 or 10 to be precise. Your credit score is an indicator of your ability to manage money. It shows if you pay your debts on time, if you have the maturity to spend just as much as you can pay back and if you know how to keep track of your financial obligations. If you thought a high GPA will get you a dream job, well, it’s time to learn that a high FICO score will get you the dream house (and car) at an affordable rate. If you have any suspicion that your score is not accurate, investigate immediately and even think about ways to repair your credit yourself or by delegating this task to a company.

You are not forever young, plan your retirement early on

In your early twenties when not even your parents are retired yet it seems that you have so much time ahead of you to start saving money for your silver days that you prefer to get some Coachella tickets instead of increasing your 401(k). Of course, you can pick this duty later in life, but it will be harder and more expensive. Just look at this example from businessinsider which shows that starting only 10 years later can have a significant impact on the final amount due to composed interest.

Never keep up with the Joneses (or the Kardashians)

The most straightforward recipe to become broke fast is to compete with your peers or to try and mimic the lifestyle of stars. Shoes, expensive coffee or the latest sports attire are not priorities, and low-cost options exist. You need to ask yourself is it a necessity or a luxury and avoid falling into the trap of conspicuous consumption, which is buying just for the sake of showing off or fitting in.

Which of these lessons is the hardest to fulfill? Do you have an inspiring story on living your dream on a budget?