Author Topic: I just turned 18, how do i build healthy spending habits?  (Read 2491 times)

Frctl

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I just turned 18, how do i build healthy spending habits?
« on: March 27, 2017, 09:07:18 AM »
I've recently found MMM through a friend. I've been hooked ever since, all of the things the blog touches on is quite alien to me. All i do every morning before getting out of bed is read for around 30 minutes and imagine my life after 20 years of following MMM's example.... Okay but how do i start? I've searched few of the words i do not understand and I have no idea how debts work all tho i would like to never get a loan that's why im going with free education in university. But how do i start following MMM's principles when i just turned 18 and am still living under my parents' roof? Also I'm studying programming if that's of any help. If any of you could point me to the right direction i'd be very greatful!

AlanStache

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Re: I just turned 18, how do i build healthy spending habits?
« Reply #1 on: March 27, 2017, 09:18:18 AM »
Welcome!

Keep reading the blog posts.

Invest in low cost index funds.  Setting up an investment account is easy, and should not at all be a cause of fear.

Debt is not 100% all bad.  Use it smartly.  This can get complicated.

Remember you are not trying to minimize spending, you are trying to maximize happiness - and buying useless crap does not make you happy in the long term. 

Minimizing university spending may not maximize net worth 10 years down the line.  Depending on many specifics it could be best to have small student loans.  ie if 10k in loans can get you a starting salary 10k higher it is probably worth it. 

Do you have a budget?  Are you spending 50% of your income on stupid shit?  What you need to focus on depends on what you are weak at. 

begood

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Re: I just turned 18, how do i build healthy spending habits?
« Reply #2 on: March 27, 2017, 09:24:35 AM »
A few simple steps to follow:

Spend less than you earn and save the difference.
Use the savings to build an emergency fund (anywhere from 3 to 12 months expenses)
Once you've built an emergency fund, start investing in low cost index funds (stocks and bonds - mostly stocks at your age)
Save for big purchases and buy with cash rather than buying on credit
Pay yourself first - that means taking savings "off the top", before you spend on anything discretionary.

caracarn

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Re: I just turned 18, how do i build healthy spending habits?
« Reply #3 on: March 27, 2017, 09:39:31 AM »
Lots of great advice above.   Focus on learning and the most important thing that I've not seen anyone mention is that it really is fairly simple and the "complexity" that the industry tosses out there is just a sales ploy to get you to feel you need to pay someone with "special" knowledge to do what you can just as easily do yourself.

begood has an excellent blue print.  To it, I'd add avoid the hype of the next hot stock tip your friends and co-workers will toss at you.  The latest one here was the group that tried to get me to buy in to Nintendo with them when the Pokemon Go thing was blowing up.  I smiled and said no thanks.  I asked them how they were doing a couple weeks back and they were flat after having gone up for  a few weeks then slowly kept falling for the last 9-12 months.  Now they think the next DS device will make them rich with the stock.  Meanwhile by index funds are up 8-10% over the same time period. 


Frctl

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Re: I just turned 18, how do i build healthy spending habits?
« Reply #4 on: March 27, 2017, 10:34:58 AM »
Welcome!

Keep reading the blog posts.

Invest in low cost index funds.  Setting up an investment account is easy, and should not at all be a cause of fear.

Debt is not 100% all bad.  Use it smartly.  This can get complicated.

Remember you are not trying to minimize spending, you are trying to maximize happiness - and buying useless crap does not make you happy in the long term. 

Minimizing university spending may not maximize net worth 10 years down the line.  Depending on many specifics it could be best to have small student loans.  ie if 10k in loans can get you a starting salary 10k higher it is probably worth it. 

Do you have a budget?  Are you spending 50% of your income on stupid shit?  What you need to focus on depends on what you are weak at.

I don't spend any of my income on anything else but food actually, well i'm getting a dog since i do live alone and i've always wanted a dog but that's about it. And i usually don't spend much since i don't really eat much so i save up at least a good 70% of what i earn so far. But investing is something completely new to me. I only have a debit card set up so i can access my money and never carry it with me. And scholarships go there too so yeah!

A few simple steps to follow:

Spend less than you earn and save the difference.
Use the savings to build an emergency fund (anywhere from 3 to 12 months expenses)
Once you've built an emergency fund, start investing in low cost index funds (stocks and bonds - mostly stocks at your age)
Save for big purchases and buy with cash rather than buying on credit
Pay yourself first - that means taking savings "off the top", before you spend on anything discretionary.

I don't tend to buy bullshit because my family used to be really buried in debt and they taught me not to be a materialistic person since i was a kid. Quite thankful for that now actually!

Lots of great advice above.   Focus on learning and the most important thing that I've not seen anyone mention is that it really is fairly simple and the "complexity" that the industry tosses out there is just a sales ploy to get you to feel you need to pay someone with "special" knowledge to do what you can just as easily do yourself.

begood has an excellent blue print.  To it, I'd add avoid the hype of the next hot stock tip your friends and co-workers will toss at you.  The latest one here was the group that tried to get me to buy in to Nintendo with them when the Pokemon Go thing was blowing up.  I smiled and said no thanks.  I asked them how they were doing a couple weeks back and they were flat after having gone up for  a few weeks then slowly kept falling for the last 9-12 months.  Now they think the next DS device will make them rich with the stock.  Meanwhile by index funds are up 8-10% over the same time period. 



In my circle its more about iphones and skins in games that are free to play but i really don't see how that can make me happy so i just let them keep on talking and they soon find out that it doesn't make them happier after a few weeks so joke's on them!

AlanStache

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Frctl

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Re: I just turned 18, how do i build healthy spending habits?
« Reply #6 on: March 28, 2017, 12:06:27 AM »
http://www.mrmoneymustache.com/2015/09/07/great-news-dog-ownership-is-optional/

Thank you. Also should i read the posts chronologically or do can i follow a list to get the most out of it "faster"?

Linea_Norway

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Re: I just turned 18, how do i build healthy spending habits?
« Reply #7 on: March 28, 2017, 12:42:14 AM »
Just being aware of why it is smart to be frugal and what you can achieve with it, will get you there. Just be aware, every time you want to spend money, if that what you want to spend it on is really worth it.

You are indeed in a great position to invest in low fare index funds. In the long run index funds give a good average savings rate. The younger you start, the more the money will accumulate, rent on rent.

Living at your parent's house, if this doesn't require a long commute, is your cheapest option. Stay there as long as you hold out. Don't be surprised if your parents will require you to pay some "rent". It would be reasonable.

Sometimes it can pay off getting a mortgage to buy property. But only when the housing market is not in a bubble. When the bubble is going to burst we never know. In some cases renting is cheaper, especially when you plan to move within a few years. It is also a lot cheaper to share housing cost with another person, by renting out a room.

dess1313

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Re: I just turned 18, how do i build healthy spending habits?
« Reply #8 on: March 28, 2017, 01:29:58 AM »
try the books the millionaire teacher by andrew hallam.  also the boglehead guide to investing.  very informative and good reading

some debt can be good, such as reasonable schooling costs for a job that will pay well in the future.  if you can work your way through with scholarships that's fantastic. 

if you want to consider a house down the road, you may need a loan.  it sounds like you have good saving instincts.  you could get a small credit card and use it for a routine couple purchases a month to build a history.  it would open options for you in a few years if you choose to use it.

Eucalyptus

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Re: I just turned 18, how do i build healthy spending habits?
« Reply #9 on: March 28, 2017, 04:37:12 AM »
It sounds like you are on a great start! Wish I had discovered MMM when I was 18.

I come from a fairly frugal family (relatively), at least certainly they were very much that way when I was growing up. I was pretty impoverished as a teenager and young adult going through uni, I had to be incredibly stingey, not by choice all the time.

One thing that is super common though, even amongst stingey uni students (I am a young Uni employee now at 32 so see this a lot), is that people go through an impoverished phase through Uni. They are often quite good at getting by on not too much. Then they graduate, get full-time jobs, etc. Their salary increases. But they end up not saving much more. They don't notice it, but their lifestyle inflates in all sorts of ways to consume that new income. Its not necessarily intentional; it wasn't for me. But I noticed it after a while. It can be really hard not to inflate your spending with new income, especially when you've had to be so careful as a student, and often go without stuff that you shouldn't eg healthcare, fixing your car, etc. Some things you should inflate for. But be conscious that this is an easy mental trap that people fall into, even the most frugal ones. I think awareness of this phenomenon will make a huge difference in how much you can save. I think you can train for it now, also. You might not be able to save much perhaps, but perhaps you can save 5%, or 10%. Excellent. Do it. Let yourself have an emergency fund (I think this is a time when its ok to have one, eg you don't have a Credit Card or Mortagage offset to use as an emergency fund, reliable job that you know will reduce your risks, etc) of a couple of grand or so first, then, index fund away.

The benefit of the few percent saved in index funds won't make much difference perhaps on your FI date in itself. But I think the lessons learned, the extra tightness on yourself now, the learning about the funds, tax, managing them, etc, will be FAR more valuable.

Like I said I wish I had discovered this stuff 14 years ago at 18. The above is what I would have done. I've given some of that advice lately to some postgrads that care to listen, I'll give it again and again.

Comp Sci/Programming... I'm sure you'll have fun using your skills to help you manage your Moustachianism :-)

Also, excellent field to get into for FI. Plenty of threads on this, but, lots of programmers out there semi-retire early, or live overseas in cheap places (increasing their savings rates) working remotely on contracts etc. Its a good field for that. Plenty of seasoned hands on MMM and indeed other places online that have done that to learn from :-)

Best of luck!

AlanStache

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Re: I just turned 18, how do i build healthy spending habits?
« Reply #10 on: March 28, 2017, 06:25:36 AM »
http://www.mrmoneymustache.com/2015/09/07/great-news-dog-ownership-is-optional/

Thank you. Also should i read the posts chronologically or do can i follow a list to get the most out of it "faster"?

There are not that many posts, when I was new I read them more or less chronologically.  For a first pass I might suggest reading them all but only scanning over some the ones that are less relevant to your life, just get a feel for what is in them.

Shout out to Adelaide!!!

Laura33

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Re: I just turned 18, how do i build healthy spending habits?
« Reply #11 on: March 28, 2017, 07:06:54 AM »
Two specific suggestions:

1.  Read this one to see how your savings rate drives your ability to retire early:  http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

2.  Read "The Millionaire Next Door" (Stanley/Danko) to see what makes a "real" millionaire and what the "millionaire lifestyle" really is.

I get the impression you are pretty much wired in ways that will be good for your future financial independence.  This site and these other references will give you some knowledge and tools that you can apply to get you where you want to be -- and your early start puts you in an awesome place.  Good luck!

prognastat

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Re: I just turned 18, how do i build healthy spending habits?
« Reply #12 on: March 28, 2017, 07:58:38 AM »
1. Curb lifestyle inflation, when you finally start making money and getting raises whenever that happens try to minimize your lifestyle inflation as much as you can. This will be the biggest way to achieve a high savings rate and speed up your time to FIRE(Financial Independence/Retire Early).
2. Work hard to finish your degree with good grades, plenty of experience and while minimizing the debt you acquire for it through things like qualifying for as many scholarships as you can, living in a cheap place and curbing your spending. Living with your parents if it is close to campus is best, if not find a shared house/apartment with low rent. If you have the time at all and you are still needing student loans after the former and you find you still have free time possibly working a part time job/side gig is worthwhile. Even better if it is related to the field of your degree since it is extra experience on your resume.
3. Eat out very little and prep your own breakfasts, lunches and dinners. You can live well off $5 in food a day easily if you don't eat out and instead do grocery shopping and find ways to make frugal meals. This might mean spending some time learning the basics of cooking if you haven't already.
4. Read the MMM blog.
5. Read http://jlcollinsnh.com/stock-series/ for a good start on index investment advice.
6. When you find a partner pay attention to how spendy they are, they don't have to be on your level of frugalness. However money can definitely be a big point of contention and if you differ too far on your view of finances this can lead to lots of friction.