You’re off to college. It’s an exciting time filled with firsts — the first time living away from home, the first time you’re on your own for meals and laundry, and the first time you have to manage your own money. All of these firsts can be a little daunting.
It’s important to get off on the right foot with managing your money, because the financial decisions you make now will impact you later. Following are some tips you should start now to build a strong foundation for money management:
Develop a Budget: To create your budget, you can use a spreadsheet or online personal financial management tool. In preparing your budget, you should first make a list of your monthly income sources, including wages, savings, and any allowance from your parents or others. Next, you will want to make a complete list of all of your expenses, including school supplies, laundry, meals outside of your food plan, and personal care items. On a monthly basis, you should track your expenses and add new expenses as you discover them. Hopefully, you will have more income than expenses, but if not, you need to start making decisions about what stays and what goes.
Identify Wants Versus Needs: Part of becoming financially responsible is learning the difference between wants and needs. You will need to determine the amount of money that is absolutely essential to pay your expenses each month. How often do you really need to eat out? Is cable TV really a need? Can you drive your car less and walk more? After a few months, it will become easier to distinguish wants from needs. As you track expenses on your budget, you will be able to ensure the essentials are covered and determine how much you have left over. You should consider delegating a monthly amount for wants, and when it’s gone, it’s gone, until next month.
Set Up Checking and Savings Accounts: Find a bank or credit union on campus to establish a checking and savings account. You will want to make sure they have convenient ATMs on or near campus so you can avoid any out-of-network ATM charges. Most financial institutions offer free checking and savings accounts to students, but you should make sure you understand what fees may be associated with your accounts and any policies that will impact your accounts. For example, most financial institutions have a funds availability policy, which means when you deposit a check, the money may not be available for a few days until the check clears. Use their online banking tools so you can keep close track of your accounts.
Use Credit Cards Wisely: While it can be a double-edged sword, you need to use credit to establish a good credit rating. This will be important when applying for a job, securing an apartment, and buying a car. You should open a credit card and use it to pay for expenses, being sure to pay off the balance each month. By doing this, you are showing you are financially responsible and you are establishing a good credit history. It can be easy to abuse a credit card because it is so easy to use. Use it wisely because you don’t want to be stuck with a large debt that accumulates monthly interest and can also damage your credit rating.
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This newsletter was prepared by Integrated Concepts Group, Inc. The opinions expressed in this newsletter are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by Randall Wealth Management Group or Vanderbilt Financial Group. Material presented is believed to be from reliable sources and PSEC makes no representation as to its accuracy or completeness.