Life Hack: Get Smart About Your Money

In your college and early post-college days, it's not exactly super easy to do any kind of savings. Between students loans, the occasional dates, weekend trips and obviously going out with friends, it can seem like there's no  way to live other than paycheck to paycheck. And that's okay, but there's a better way. 

The way I see it, diets don't work. You're going to eat a few less calories per day for a few weeks and lose a few pounds, but once you get back from Spring Break in PCB, you'll go back to your default and gain all the weight back again. This life hack isn't the financial diet you force yourself into to keep from over-drafting until payday on Friday. This is the lifestyle change that allows you to enjoy pizza and beer (spend money) while still living a healthy lifestyle and not turn into the Chunk from the goonies (save money) at the same time.

A friend of mine and I came up with a plan that will help you (and really anyone) save more by acting as your own financial parent. 

Figure out how much you cost. 

Start out with the baseline costs that occur every month. What do you cost each month? This will include Spotify, gym memberships and anything else you're responsible for. Being financially independent, that means health insurance, car insurance, rent and utilities, loans payments, phone bills etc. You can decide if you want to include gas and groceries here or not — I choose to take that out of my weekly or bi-weekly allowance, which we'll talk about later.

Find out how what you can spend. 

Now that you know how much you cost per month at a very base level, subtract that number from what you get paid each month — you can make it bi-weekly if that's how you roll. Now you know what your net profit is. From here, depending on whether you make the same amount of money each paycheck (salary) or not, you can estimate how much of your net profit, post-baseline costs you can save and how much you can spend on booze, food and weekend trips. Savings might be as high as a couple hundred bucks or could be as low as $10 per month. Both are excellent places to start. 

Open two checking accounts.

Let's start with the first checking account, it will essentially be your personal assistant who pays everything on time. Set up your work compensation to direct deposit here. Next, connect all of the bills you pay to automatically withdraw when they are due. Most banks and institutions have automatic bill-pay, if they don't, you should probably switch banks. I would recommend trying to set up payments so half of them fall on one pay period and the other half falls on the other end of the month.

Here's where you act as your own financial parent, essentially you'll be giving yourself an allowance. After you set the minimum dollar amount on the account, set up a second "bill-pay" that will transfer the amount of money you can spend — that number we decided above (post-savings and post-bills) — and have it transfer that amount of money — either each week or every two weeks, depending on what works best for you.

The second card now acts as your "spendable" money account. I recommend keeping at least $50-$100 at all times in the account in case of emergencies. Keep this card with you as your spending money and put away the first card for series emergencies, don't even tempt yourself by keeping it in your wallet. I have mine set up so the two checking accounts are even through two separate banks, just to keep myself honest. 

Keep an eye out for promotions at local and national banks. For example, I applied for a card through a local bank that gifted me $100 just for opening a checking account. 

Automate.

Now you have a completely automated bill-pay system that will automatically accrue savings. It may take a few months of spending a little less money to pad the account enough for the process to work, but I promise it's a game-changer and a life saver. It will start to not matter how much is in your first checking account because you know you're allowing yourself $200 per week  (for example) on your "spendable" card, with the money you have after savings and after your bills, to spend on whatever you want. Everything else is automated, from paying bills to accruing some savings. 

Apply for a credit card.

Be careful here. Do research on how credit cards work and how credit card companies make money. This will help you understand how important it is not to get deep into credit card debt. Having a credit card is an awesome way to build credit and space out payments for big (necessary) purchases when needed; just don't get into the habit of using it all the time. 

Like with the debit card, keep an eye out for promotions and cash-back deals. Chase and Capital One often have cards with a low barrier of entry, low APR, awesome cash-back rewards at grocery stores and gas stations and typically have a new member cash back reward after spending a certain amount of money. Discover also has some good entry-level cards with awesome rewards. Check out NerdWallet to figure out which card works best for you.

A note about savings.

It's a bit harder when you're in the thick of college, but transitioning into the real world, saving is so extremely important and you should budget for savings as soon as possible, no matter how much debt you may be in. A good goal to have (which will take several months) is to have enough savings that if you lost your job, you could make ends meet (all the essential costs we talked about in the first point) for three months, plus about a thousand dollars. 

As a guilty impulse purchaser (that's not a word) and someone who isn't used to having much reserve money, I know this is not an easy task. Setting up boundaries like these is a great way to start disciplining yourself to think with a savings mindset. It's important that you keep track of your accounts to make sure no fraudulent behavior is going on and that you've got enough in your accounts to not overdraft and make all of your payments on time, but the beauty of this process is having your financials out of sight and out of mind, other than your weekly or bi-weekly allowance.