Step 5 – Live like a college student for as long as possible

The best advice I ever received was to live like a college student for as long as possible. I am not talking about hosting keg parties on Tuesday nights or pulling a Van Wilder. Some habits should fade over time.

Many increase their spending over time. They get their first job and run off to get a new car. A year or two later they earn a promotion and decide to buy a fancy condo. This pattern continues on repeat. Eventually, many will find their lifestyle costs more than their paycheck supports.

This is commonly known as lifestyle inflation. Avoiding lifestyle inflation will set you up for financial success. Instead of spending raises on stuff, consider banking at least half of your extra income. Better yet, invest the extra income. Keeping your cost of living in check is important. Avoid consumer debt from credit cards. Don’t buy things you don’t need to impress people you don’t like. Avoid that car payment. Live in a modest place. Better yet, live with roommates and save on rent.

Most people lived on a “‘spaghetti” budget and were broke in college. There is no reason to develop a “caviar lifestyle” now that you have a job. Keep your spending in check and treat yourself occasionally. Most people tend to spend more money as their income goes up. This is often called lifestyle inflation and will keep you in the poorhouse. I myself have done quite the opposite. Whenever my income goes up I try and cut down an expense or spend less in some areas and invest more. It takes very strict personal discipline but once you get into the habit it’s a great thing to have.

If we remember how we used to live, it makes it much easier to avoid the lure of upgrading to a fancy apartment. Remember, it doesn’t matter how much you make if it all goes out the door for rent.  I see too many people forget that early on in their careers.  People tell themselves that they need the fancy apartment when they were doing fine living the way they did in college just a few years before.

Remember That We Choose How We Live

I always get a little annoyed when I hear people who make a good money complain that they feel like they’re barely making it.  This type of thinking ignores the vast majority of people in the United States making much less money.  If someone making six figures a year says they can’t make it in a big city in the United States, then what’s happening to all of the other people who live there too?

In my opinion, what these people really mean to say is that they’re barely able to make it based on the way they want to live in that city.  No one tells us we have to live in a certain way. Ultimately, we choose how we want to live.

Take my own example for instance.  Coming out of graduate school, I avoided the lure of the luxury apartment, instead, opting to live in what I’d call “normal” apartment building renting a master bed room and had two other roommates.  My colleagues chose the opposite route, choosing to live in new luxury apartments.  That was a choice they made.  In essence, they chose to pay for their apartment, rather than pay down their debt.

Even today, I still rent a small room in an apartment, sacrificing a little bit of my privacy in exchange for having the extra money to pay down debt. It’s a choice I made.

College students understand these choices when it comes to living arrangements.  We all made the same choices when we were in school too.  Since most of us have lived this way before, it seems like most of us should be able to choose to live in basically the same way – at least for a little bit,

You Don’t Need To Upgrade Your Life Right Away

That brings me to my final point. You don’t need to upgrade your life right away.  Take some time early on in your career and maintain the status quo. Live like a student now while you’re still used to it.

I know a couple that’s really doing everything right when it comes to their money. They’re both accountants, easily making close to $200k a year as a household. And amazingly, they both got out of school with no debt.

Even with what appears to be a huge amount of money at their disposal, they’ve never fallen into the luxury apartment lifestyle. Instead, they live in a normal, one bedroom apartment paying $800 or $900 a month. I’m sure one day, they’ll buy a house and upgrade their life. But they’re only three or four years out of school. They understand that they don’t need to rush into upgrading their life – not yet anyway.

If you want to start yourself on the right financial footing, take the time early in your career to live like a student. Find an affordable place to live. Get a roommate if you need to. Just think back to your college days and remember how you lived back then. If you keep that perspective, it makes it much easier to live like a student and ignore the folks around you immediately spending all of their paychecks on luxury apartment living.

 

“Never spend your money before you have earned it.”
– Thomas Jefferson –

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