Determine the following:
- How much money do you have coming in? Identify all sources of income, including parents, personal earnings, dividends, interest, etc.
- Where is your money going? Keep a spending journal for a week, or even a month, to help you pinpoint just how much money your spending, Be sure to indicate HOW you are paying for your purchases (i.e., credit card, cash, debit).
- What are your Needs vs. Wants? A Need is necessity. Think of it as a fixed expense. An example might be your rent each month. A Want is something you would like to have, but isn't required. For example, the latest video game or coffee on your way to class.
- What types and how much debt are you accumulating? Be aware of how much student loan money you are borrowing and how much debt you are accumulating your credit card(s).
Set goals and priorities
Everyone is unique and a personal budget should reflect these differences. Think about what is important to YOU and create a plan to obtain those goals. Use the following tips:
- Write down each goal, You will be more likely to hold your self to it!
- Assign a cost to each goal. Whether it is $1 or $100... write it down. This is a good place to "overestimate."
- Set dates. Give yourself a specific point to work towards.
- Set all types of goals. Goals come in many shapes and sizes. There are short-term (less than one year away), recurring (perhaps you want to be able to go out to a fancy diner once every month), or long-term (greater than one year away).
Develop a plan
You have all the input you need at this point, it is time to create a budget. This is a good place to ask for help if you haven't done so already. The Student Wellness Center can provide you with everything from an electronic template of a budget, to a one-on-one counseling session to help you create a budget from scratch.
Don't forget to look ahead while you're working on your budget. Give yourself an "emergency cushion" for unforeseen or one-time expenses (i.e., car maintenance, plane tickets, Christmas gifts, etc.). A rule of thumb is to make this equal to 6-9 months worth of expenses in order that you do not need to borrow money for such expenses.
Implement your plan.
Try it out for a month and see how it goes. When working with a budget, it is important to:
- Be flexible.
- Be aware of your actions.
- Stay positive.
- Avoid detours.
Don't give up on your budget the first time you slip up!
Revise your plan.
What is working and what is NOT working? This may be another time where it might be helpful to meet with a financial counselor in the Student Wellness Center.
Don't be afraid to make changes and try it again. Budgets are NEVER perfect and you will learn more every day.
Are you out of money before the end of the 30 days? Do you need help setting a budget? Call the Community Standards and Wellness office 303-566-2444 for help!
Credit Card Selection
With a reported $13 billion in discretionary income, college students represent a huge market for credit card companies (Kara, Kaynak & Kucukemiroglu, 1994). There are many good reasons to have a credit card as a young adult, including emergencies, the ability to rent a car or buy items online, building a credit history, etc. There are also many reasons that are NOT good for obtaining credit, including making impulse purchases more convenient to make, buying items you can't afford, online gambling, etc.
The first step is using credit wisely is selecting the right card. Here are a few questions to ask when selecting a credit card:
- Is there an introductory rate? when, and by how much will it increase.
- Is there an annual fee? How much is it?
- What other fees are attached to the card and how are they assessed? (ex: transaction fees)?
- What is the grace period?
- Is online banking available?
- What is the credit limit?
- Are there any offers or rebates associated with the card(ex: frequent flyer miles)?
Try using this credit card selection worksheet to help your organize the information you find about different cards.
Once you receive your card, there are a few more things to keep in mind. First, be sure to set limits for yourself when using your credit card. Your limits will be unique to you and your goals and priorities. You may want to decide only to use your card for emergencies, or you may just want to use it for necessary items such as textbooks each quarter. Whatever limits you decide on, be sure to hold yourself accountable and stay within them.
Second, always remember that your every move is being tracked by credit reporting agencies. In other words your credit score, which may become very important a few years down the road when you go to buy a home or a car, will be lowered everytime you pay a bill late, or rack up too much debt. You do not want to use more than half of the amount of your credit line as this will make you look desperate on a credit report. Every credit card application you have ever filled out will also appear on your credit report. Make a good decisions now so you can reap the benefits of a high credit score in the future.
Obtaining Credit Reports
Obtaining free credit reports are as easy as clicking the 3 websites listed below!
Do not fall for any other websites these are secure and will give you a safe way of obtaining your free annual credit report.
You are able to obtain a free credit report once every year.
With many expenses on the horizon, such as buying a car, funding a trip abroad, or purchasing books and supplies for school, it is often smart to keep your savings very liquid (accessible) during your time in college. The following describe three commonly used accounts for maintaining easy access to money.
- Little to no risk
- Earn interest (although often very low)
- Typically have a minimum balance requirement of around $200
- Can be maintained online or face-to-face at your bank
- FDIC insured up to $100,000
Money Market Accounts( MMAs)
- Little to no risk
- Earn more than savings accounts (typically double the interest)
- Typically have a minimum balance requirement, sometimes as high as $3,000
- Some are FDIC insured up to $100,000
- Offer high-yield accounts online
Money Market Funds (MMFs)
- Very low risk
- Not FDIC insured
- Earn higher interest than MMAs
- Often have fees associated with withdrawals
- Fees are also included to cover the cost of fund management
- These types of accounts are commonly used by people with brokerage accounts, but can be used to meet short-term goals/build emergency funds
Certificatees of Deposit (CDs)
CDs typically earn higher rates than liquid savings, but you must be willing to put your money away for a longer period of time (i.e. 6 months to 3 years) in order to earn this income. FOr this reason, CDs may not be optimal investment during your college years.
CDs are "hands-off" investments until the CD matures and are FDIC insured up to $100,000. ALthought you may withdraw funds before the maturity date, you will typically pay a high penalty for doing so. Always comparison shop for interest rates to be sure you're earning the highest rate possible before stashing your money away in a CD.
A bond is an interest-bearing certificate issued by a government of business promising to pay the holder a specified sum on a specified date.
Fore more information investing in bonds, check out:Bankrate.com!
Thinking about Retirement
I know retirement seems like a long way off, but thinking about it early-on in your professional career will pay off big time down the road. There are two things you must keep in mind about saving your retirement:
- Put away money EARLY consider this example: Joe and Bob start working at the same company at age 25. Joe begins saving for retirement immediately and puts away $1,000 per year for 10 years. At age 35, he stops putting money away. Bob on hte other hand decides that he has too many other things to spend his money on early in his career and wiats until he's 35 to being saving for retirement. At age 35, he begins to set aside $1,000 pear year and does this until he retires at age 65. When joe and Bob are 65, who will more retirement savings (assumed: 8% return)???? The answer is: joe ( Joe's savings=170k, Bob's= $133K) Althought Joe only invested $10,000 of his own money compared to the $30,000 invested by Bob, Joe started earlier and the power of compound interest was on his side. Time is on your side!
- Put away money Often, As illustrated in the early example, the more you can help your money build on itself, the better. Get in the habit of setting aside money on a montly basis. As the saying goes, pay yourself first! If your emplyer does not offer a retirement investment program, seek out opportunities on your own such as IRAs.