Just one week after graduating from college, I was on a plane to Amsterdam. Over the next five weeks I spent a grand total of around $6,000, covering everything from lodging and travel to food and museum tickets. A lot of people would discourage spending a large sum of money right after graduating. As you know, and like many of my peers, I have a large amount of student loan debt to pay off. So why would I spend so much on a big trip instead of putting it towards debt or saving it? Looking back on the trip now, I can say it had one of the most positive effects on my financial life to date.
Huh? How can spending thousands of dollars possibly help you? Here’s why:
1. I learned self-control
Saving, especially in college, is difficult. Your environment lends itself to spending with your friends and decisions reeking of instant gratification. On top of that, there is a general lack of income that comes with being a college student. Most students can hold only part-time jobs at best, and have to work for their main portion of income over summer break. Due to these limitations, I was forced to be extra resourceful with the money I came across. I learned that attaching a future goal (my trip) to each little decision made it drastically easier to do what was right. Every spare dollar I came across was saved. I made sacrifices to fund my goal like skipping a night out with friends and putting the money away.
2. I learned behavioral tricks that work for me
In personal finance there are constraints you can place on yourself to force the behavior you want. For my trip I created a separate savings account with strict rules. I was not allowed to make a withdrawal from this account for any reason. This money was untouchable. Then I set a goal of at minimum $5,000 saved for the trip. Making the money untouchable, and setting a goal with a deadline proved to be an effective combo. I actually beat my goal by a few thousand dollars, allowing me some flexibility both during and after the trip.
3. I built the right habits sooner rather than later
I saved for this trip for four years. Coming into college I knew I wanted to go abroad, and it was on me to pay for it. So I saved. The process taught me an invaluable amount about not only saving and managing money, but about myself and how I act financially. Living through this process helped me build the ability make the right financial decisions while I was still in school. Not only did I get to take the trip of a lifetime and feel the reward of funding it myself, but I will reap the benefits going forward.
Maybe you don’t need to save for a big trip to Europe to learn these things. But setting a financial goal and explicitly detailing how you will accomplish it is a great way to build the financial skills necessary for a healthy future. Just make sure you act on it.