Unwise Financial Decisions During the Student Life
Financial Literacy is an oft-ignored topic for many students. I, myself neglected to invest any time during my high school or undergraduate careers into understanding personal finance. Instead, I learned through trial and error. As a result of my naiveté, I have first-hand experience with misguided financial decisions.
Two Types of Regrettable Financial Decisions
Looking back on my financial mistakes, I believe there are two types of financial decisions that students regret the most: being a prisoner of the moment and failing to prepare for the future. At first glance, these two categories may seem like a distinction without a difference. However, I will unpack them to highlight how different they are.
Prisoner of the Moment
Being a prisoner of the moment can affect anyone. The purest example of this is the “kid in the candy store.” In this scenario, the kid uses all of their hard-earned chore money on any and every piece of candy that looks good to them, leaving them with no money and temporary satisfaction.
As a grade-school, and even high-school age student, the repercussions of this are relatively minimal; perhaps the student has to wait a few days to receive their next allowance. College-age students, however, don’t always have that luxury. Take me for example; I wanted a brand-new Lexus IS250 F-Sport as a graduation gift to myself because I felt like I deserved it. Of course, I didn’t wait until I got a few of my first full-time paychecks or even until I graduated. No, I took out a loan to finance my “dream car” about a month before graduation.
I kept the car for a little over two months before I sold it to a dealership and replaced it with a sensible Honda Accord. The amount I received for the car was less than what I owed for it. So that one wrong financial decision caused me to lose one car, and then over-pay for the next one. All because I was a prisoner of the moment.
Failure to Prepare for the Future
Failing to prepare for the future is a mistake that many people make every day. In contrast to being a prisoner of the moment, failing to prepare for the future takes one longer to recognize the mistake they’ve made. There is no buyer’s remorse for failure to open an IRA. This financial oversight is a lack of a decision, as opposed to a poor one. The quintessential embodiment of failing to prepare for the future is the senior citizen that can’t afford to retire. Unfortunately, many high school and college students give this scenario little thought.
I vividly remember the retirement plan presentation I was given during my first internship, between my freshman and sophomore years of college. As the human resources representative explained the different 401k options to us, I was in the back, texting my friends about our plans for the weekend. Little did I know, if I would payed attention to the presentation, and participated in the company’s 401k program, that money could still be growing today. However, I have nothing to show for that internship, other than the experience that I gained.
Neglecting to utilize retirement plans is one example of failing to plan for the future, but there are many others. One other example that comes to mind is not having to plan to hand the cost of college. Many news articles detail the astounding amount of student loan debt that many students and former students now face. Some of those students will be paying for double-digit years, while others may default. If used correctly, loans can be a powerful tool in one’s education.
Think Before Making Financial Decisions
Students who attend a community college for two years and then finish their degree at a four-year institution typically have much less student loan debt. Moreover, they have the opportunity to develop a track record as a strong student, which may open them up scholarship opportunities that they may not have had otherwise. I believe that students who fund their entire college education through student loans, without thinking about how to pay back those loans, regret their decisions because they are failing to plan for the future.
Through experiences of my own, and other examples listed, I believe there are two types of financial decisions that students regret the most: being a prisoner of the moment and failing to prepare for the future. As I can attest, there are opportunities to correct these mistakes, but first, one must take their time when making financial decisions, and always have a plan.