-: You may think that college is too early
to understand the basics of financial literacy.
The truth is, waiting until after college would be too late.
Developing good financial habits in college will set you
up for physically responsible living in the future.
Here are some basic best practices to implement right away.
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Step one, create a budget.
A great way to start is
by making a categorized list of income and expenses.
This can be done
by using a budgeting template from an Excel-type program
or by choosing from a variety
of free online budgeting tools and apps.
Committing to use cash for certain purchases,
such as takeout or entertainment, is a proven way
to prevent overspending.
With a new budget in place, try
to set aside an emergency fund that can ideally cover two
to three months of living expenses.
Give yourself the peace of mind to know
that an unexpected car repair doesn't equal instant ramen
for the next six months.
Step two, start to build credit.
Your credit is your financial lifeline
that unlocks future opportunities, such as qualifying
for student loans, renting an apartment, or buying a home.
There are credit cards
that offer student-specific rewards and discounts.
Keep in mind that a positive payment history is essential
to building credit and can be affected
by anything with your name on it.
Therefore do not co-sign for any friends.
Make sure that all
of your bills are paid on time
and limit the use of your credit to small purchases
that can be paid off each month
to avoid paying any interest.
Step three, build up your savings.
As you start
to build your savings, choose a high interest savings
account with no fees.
No matter how small the contributions, start adding to it.
People with not so great impulse control might benefit from
this being an automatic transfer each month.
With a basic savings plan
in place, consider looking towards your future,
by contributing to a retirement account, either
through an employer offered 401k
or an IRA, an individual retirement account.
Identify where you can cut expenses while still in school.
Selling back textbooks, utilizing your meal plan
to the fullest and cooking
at home more often, are great ways
to cut back on spending.
And don't forget to investigate all
of the discounts available with your student credentials.
Any savings plan is better than nothing
and today is the perfect time to start.
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