Pay Yourself First

Everyone should have attitude money. No, we're not talking about a personality type here. We're talking about peace of mind. Having a solid financial foundation upon which to build is absolutely vital to anyone's future, and college students are at a point in their life where the decisions they make are amplified enormously by something called a "time horizon." There is no group of people for whom "pay yourself first" is more important.

What exactly does this mean? It's really pretty simple. Out of every paycheck, garage sale profit, gift of money, whatever, take a certain percentage and put it away in some kind of asset. Now, here's the key to making this work: do not, under any circumstances, withdraw these funds. Each and every one of the dollars in that asset, once deposited, are no longer dollars. They are little workers, and their job, 24-hours a day, is to build you a solid financial foundation. They don't want a vacation, and they don't want to go work for anyone else, so keep those workers around.

Now what sort of assets could you put your attitude money in? Well, there are literally thousands of options. One possibility would be an interest-bearing account with no minimum deposit. Many brokerage companies offer money market accounts with their basic brokerage packages. Make absolutely sure whatever it is that it doesn't cost anything to make your deposits, otherwise you'll be running in place. The point here is to build your assets, not pay fees. Be especially careful when it comes to investment accounts, as there are almost always fees associated with the purchase of stock or mutual fund shares.

Why do we call this "attitude" money? That's almost as simple as pay yourself first. When you have money that is yours, and only yours, like the money in your asset account, it gives you peace of mind. That money will never be spent on an electric bill, or a credit card payment, or a car repair. It's something you can consider yours no matter what. It sounds really simple, but that's because it is really simple. When you own something like this, it gives you peace of mind, and as you watch it grow, it helps you set goals and plan for the future.

Something else that goes well with the "pay yourself first" plan is a similar plan for donating. Whether it is time, or money, or both, making frequent donations to a charity or cause of some kind also helps a lot with peace of mind. It can even be incorporated into your savings strategy, perhaps as a percentage of the amount you manage to save every 3-6 months. This way, you're helping others as you help yourself, and, the more you save, the more it benefits the charity you choose to contribute to.

There is one definite fact here: even at just a few dollars a month, the combination of compounding interest, reinvestment of dividends and limiting or eliminating costs associated with an "attitude money" account will add up very quickly and over many years, should provide something of real value.