Principles for Building a Financial Foundation
Poor financial habits set a weak foundation for your future because, whether you like it or not, money is integral to survive and thrive. Adopting and adhering to the basic principles listed in this article will create a financial foundation for yourself.
By Ryan Adams — February 13, 2023
Benjamin Franklin, as many of the founding fathers, valued freedom above all. This sentiment led these men to revolt against what they considered to be a tyrannical government. His opinions regarding liberty were not limited to political freedom but also extended to financialnfreedom. "Disdain the chain," Franklin once wrote, "Be frugal and free." In order to maintain one's personal freedom, one must be vigilant against the accrual of debt through the exercise of poor financial habits.
Poor financial habits set a weak foundation for your future because, whether you like it or not, money is integral to survive and thrive. Basic tenets of financial wellness include living below your means, budgeting, building multiple streams of income, and investing. Adopting and adhering to these basic principles will protect you against debt, which is in essence indentured servitude to lenders when taking into account compounding interest, and help facilitate achieving the future you want by leaving you with more assets to utilize.
Live below your means
Frugality comes easier to some than others, whether due to temperament or the way you were raised, but like any habit, the best day to start is today. To live below your means can be most simply understood as spending less than your income on necessities and spending sparingly on luxuries. Practically speaking, look at your income and look at your expenses. If at the end of a given month or payment period you have spent the entirety of your income (sans the sum Uncle Sam demands every April) and no more, that's a better start than spending more than what you earn. Spending more than you can afford, typically on a credit card, will lead to having to pay off inte rest which becomes another expense that could have been avoided.
Optimally, you should aim to have more than zero left in your bank account each month for two reasons. First, having a "rainy day fund," which refers to available cash you can use on an unforeseen expense, such as a parking ticket, an emergency trip to the vet, or a shattered phone screen. It ensures you can pay for what you may not have included in your budget without going into debt. Second, extra cash means being able to invest. This could either be financial investments such as stocks, index funds, etc. or an asset that improves your school or work performance like a better laptop. Living below your means cuts down on your regular spending in the short term so you have more to work with in the long term. It may mean something as small as skipping a regular Starbucks lattè to something as big as renting a lower-priced apartment with fewer amenities for the short term. As your means grow, you will slowly be able to raise your own standard of living, but once you develop a taste for luxuries it's difficult to go back.
Budget/Prioritize
One thing I wish I had done better in college was creating a monthly budget for myself. Knowing how much you expect to spend every month, or even every week helps keep yourself accountable and gives you a good idea of where your money goes. Ideally you have few expenses in your first year in college, but every time you make a change, whether moving from a dorm to an apartment or purchasing a car to drive to class instead of biking, your expenses grow. Creating a budget helps you manage those expenses.
Prioritizing your expenses is a helpful first step, and one that I did exercise in college. Knowing that quality food was an asset to athletic performance, I portioned more money toward that than anything else. My grocery bill was, and is, high, but because I spent less on regular changes in wardrobe or entertainment, I was able to afford that bill. Listing your expenses from most necessary like living expenses, loans, or debt, to least necessary like eating out, shopping, or entertainment will protect against missing a payment because you thought you had enough to spare on going to a concert.
Build multiple streams of income
Eventually, you will have a primary regular income from your job. Finding side-hustles will expand your capacity and allow you to save and invest more. Practicing this in college is difficult while juggling obligations to classes, extracurricular activities, and social life, but there are ways to optimize your free time. My go-to when I had a credit card payment coming up was Doordashing for a couple hours on weekends. It wasn't a ton of money, but it's only expense was gas (which it covered), and after a couple hours I could fully pay off anything left on my card. These service activities, which include Instacart, Uber/Lyft, Postmates, etc. are great side-hustles, especially if you have free time that would otherwise be spent scrolling or streaming. If you're more creative, offering services to design by commission is an option. The idea is to build assets that could be invested in furthering your career so you can invest bigger in the future and eventually enjoy the fruits of your labor.
Enjoy
King Solomon wrote, "I commend joy, for man has nothing better under the sun but to eat and drink and be joyful, for this will go with him in his toil through the days of his life that God has given him under the sun." (Ecclesiastes 8:10). Reading this article might be discouraging because it sounds stingy or miserly, but living below your means and budgeting typically means you have some money left over to enjoy life with friends. The goal isn't really to have the highest number possible in your checking account or a ten-figure net worth (though that would be nice), but to give you financial security so you're able to enjoy your life without being indebted to financial institutions, which is not so enjoyable. It allows you to eventually own assets rather than always renting which gives you further security and freedom to enjoy the fruit of your labor.
It's true that these principles can be taken to the extreme, but while you're getting started err on the side of saving more than spending. Incorporating these principles early will help them become habit and routine, which will pay dividends when you do eventually get a job. Once you have more to play with, you can take more risks or simply enjoy a little more. Either way, you will be creating a solid foundation for yourself, and your dollar will go further when you're free from the chains of debt.
Ryan Adams
Ryan Adams is a professional runner currently based in Atlanta, Georgia. He graduated from Furman University in 2021 earning a bachelor's degree in Spanish Literature and Politics & International Studies, with an interdisciplinary minor in Latin American Studies.
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