There is nothing more educational than learning from the mistakes from others. 👩🏫
I am happy to present Jalpan Dave from Passive Income Engineering and his article on the important money mistakes he made in university and what he would have done differently. Some really great info here!
My first encounter with the importance of money was back at the age of 13. My Dad’s friend gave him a copy of the book “Rich Dad Poor Dad” Since I was an only child, the only people I could interact with at home where my parents so I’d poke my nose into whatever they were doing.
The timing was perfect – my summer holidays were coming up and there was this nice colourful book in front of me which for all I know was written by a 13 year old just like me who had two fathers, one of whom was rich and the other…not so much.
I spent the entire summer vacation reading the book from 11pm to 5am in the morning. It felt wonderful! The book talked about two little kids who were trying to earn more money and came up with all kinds of weird and wonderful ways to do so including trying to make coins themselves thereby counterfeiting money!
Even though it took me so long to finish the book, it’s key lessons were hard wired into my brain from that point on including:
- The rich learn to make money to work for them
- An asset puts money in your pocket, a liability takes money out of your pocket
- Investing is one of the ways you can build assets and thereby put money in your pocket
The book had such a profound impact on me that I still carry that tattered old book with me. I have relocated several times in my life but I have never lost the book. I still have the copy I read back when I was 13 years old:
Just looking at the book would remind me of the importance of investing so during university, I went to seminars about investing, read some more books and even took part in a stock investing competition in order to hone my skills.
Yet, when I graduated and started working, I had no idea where my money was going every month. Fortunately, I woke up one day and found I had $2,000 – enough money to buy some stocks. But despite all the books I had read and all the competitions I had taken part in, my mind went blank when it came to actually investing my real money.
Lesson learned: Knowledge is NOT power. APPLIED knowledge is power!
I started going to seminars and talks again hoping that someone will give me some “tips.” With the presentations and case studies that were shared at these seminars, I invested in 2 stocks. One of them, I still own to this day and it has paid me good dividends time after time.
The other stock… tanked 90% from the time I bought it! Thankfully, I had done my research so after 4 long years, I sold it back at the same price I bought it and got my money back so that I have to suffer no longer.
Eventually though, I learned the right way to invest and started earning income through investing as I write about on my blog.
However, every now and then, I meet someone who had gotten their act together since their college days. They do all the things that I do today now that I’m a little wiser. And every time I look at them, I think to myself, “I wish I hadn’t made these mistakes back in university.”
It dawned on me that fundamentally, what held me back during college was psychological. Subconsciously, I had been thinking “I’m still a student. I’m not supposed to me earning yet. Investing, earning, all those things are for people who have graduated already.”
Looking back, I wish someone had slapped me and told me to do all the things in university that I do now including:
1. Invest. For real.
Instead of thinking “I’ll invest the moment I get my first paycheck” I would have invested during college. This way, I could have made mistakes with small amounts of money instead of with a $2,000 sum which was far more painful to endure.
Most importantly, I would have been putting knowledge to practice which is more effective than simply gaining more knowledge. One reason why I wish there had been blogs like Financially Mint around is that it makes it much easier for university to get started with investing and sorting out their finances.
Every year you delay investing could mean several thousands of dollars (or pounds) lost over your lifetime. For instance, look at this article which proves that if you start investing at 25 as opposed to 35, all else being equal, you could end up with almost twice as much money later in life. Then pause for a second and think about what is possible if you started investing at 18 or 20 instead.
Imagine how far ahead you’ll be!
2. Start a side hustle.
Again, the main culprit here was my own limiting beliefs. “Adults start businesses. Not college students.”
Looking back, university would have been a perfect time to start a side hustle since there is no penalty for failure. If the business fails, big deal. I’d just get on with my studies and look for other ideas. I have no major bills to pay or a family to support. Moreover, if you ask someone in your university (a professor, your university’s entrepreneurship center etc…) chances are there are grants specifically intended for students to start businesses.
Today of course, you don’t even need much money to begin.
You could start a blog like many other students and working professionals, and if you really don’t want to spend any money you could always create a free account on medium.com and start blogging there.
3. Build good financial habits.
I thought I had learned everything about money. It was a painful realisation that what I had actually learned is how important it is to learn about money! I found myself spending on a whim certain times whilst other times, I would pinch pennies like there was no tomorrow.
Eventually, I learned that the way to build good financial habits is to take 30 mins out on the first of every month to divide your money into different bank accounts.
One bank account for investing, one for long term savings, and yes, one account for having fun!
For instance, say you plan to spend no more than $700 every month. You could leave $400 in your main account for food and other necessities, transfer $100 to another account to save for the long term, $100 to yet another account to invest and then $100 to yet another account for going out with friends, travelling or doing whatever else you love to do.
Your bank may even allow you to hold different debit cards that are tied to these different accounts. So when you go out with friends, you spend using the debit card connected to your “having fun” account. Once you had spent your $100, you card would deny future payments hence ensuring that you never overspend.
Building such habits early on means you are more likely to stick to them for the rest of your life setting you up for a lifetime of financial success.
One of Steve Jobs’ favourite Hindu sayings went something like this – “For the first 30 years of your life, you form your habits. For the rest of your life, your habits form you.”
I’d like to end by saying that in today’s world, anyone can do anything. We can start businesses online with no money down. We can start investing while still in college and get a head start on growing our money. Do not wait until you graduate and “enter the real world” to pursue your dreams and build a better financial future.
You can start building a better future TODAY whilst you are still in university.
Now I’d love for you to tell me in the comments below:
What is one tiny little step or habit you will start today to put yourself in a better financial situation?
I read and respond to every comment!
Financially Mint top takeaways
Top mistakes to avoid in university
1. Not investing: Learn about the magic of compound interest and how to get started.
2. Not side-hustling: Here is a simple 3 step process to start a side hustle.
3. Not implementing good habits: budgeting, saving, investing.
A ton of valuable advice in this article. I really love the tip of having different debit cards for different types of spending. And the great important message: yes you can start anything, even in university. Who’s motivated to get started?!!
Jalpan is a Personal Finance blogger at Passive Income Engineering and an engineer by profession. He loves using analogies to simplify exact step by step investing strategies that generate cash flow and passive income. His goal is to help make your money work for you. Jalpan also writes about investor psychology and discusses why certain investment strategies work for some, but not for others. You can watch over his shoulder and learn two of his strategies by getting his free course here.