Should you go to the bars tonight?

That depends: do you have $1,000 saved in a checking account? If you couldn’t come up with $1,000 in the event of an emergency (car repair, hospitalization, etc.) you have no business spending money on alcohol at a bar.

In fact, if you don’t have $1,000 you have no business spending money on anything that’s not absolutely necessary. No Starbucks, no new shoes, no movies, no nothing. You should treat this for what it is: a financial emergency.

Saving $1,000 for an emergency is often considered the first baby step of personal finance.

Baby step two is to pay off your credit cad debt. I’ve written about that here. Don’t have credit card debt? Great. Don’t ever accumulate any.

Baby step three is to save three-to-six months worth of living expenses. If you lost your job this is money you could fall back on while you find a new job. If your parents are funding your college education, say thank you, then skip to baby step four.

Baby step four is to start saving for retirement, and the earlier you start the better. I started my junior year by putting $3,000 into the Vanguard Total Stock Market Index Fund (VTSMX). You can learn all about investing by reading JL Collins’s stock series.

I’m not trying to strip your college experience of fun; I’m just trying to show you that fun and happiness are two different things. A secure financial life is a baseline requirement for happiness.

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