Building strong financial habits is a lot like hitting the gym or studying for exams — consistency is key. Just like regular workouts build your muscles and study sessions sharpen your mind, practicing good money management can strengthen your financial future. Commit to healthy money habits now, so you’ll be better prepared to handle your financial life after graduation.
Put Saving on Auto Pilot
If you’ve landed a work-study job or an off-campus gig as a barista, direct deposit and automatic savings plans can make managing your paycheck and your savings balances easier. Many universities and off-campus employers offer direct deposit, which will put your earnings directly into your bank account instead of a physical paycheck that you have to deposit. Often, you can split the deposit, so some goes to checking and some to savings. Or, see if your online banking app has an automatic savings option that will move some money directly from your checking to your savings account every payday to make saving a regular habit.
Do the Math and Make a Monthly Budget
Your roommate is selling an extra ticket to the big game, but should you start planning your tailgate party just yet? Create a monthly budget to see where your money is going and what you can really afford. Include fixed monthly expenses like cell phone bills and car insurance and estimate variable expenses — things like eating out, buying clothes or getting supplies for an art class. Put some funds aside for short- and long-term savings so you know you’ll be able to afford tuition and that sporting event.
Sidestep Credit Card Debt
According to a recent study, nearly 65% of college students have credit cards, and more than half of them say credit debt is the type of debt that concerns them the most. Don’t fall into the debt trap — pay off purchases in full every month whenever possible to minimize the impact on your long-term financial health. For example, if you charge $500 to your card and only make the minimum payment at an 18% annual percentage interest rate, it will take you 47 months to pay off your debt while accumulating nearly $200 in interest! A better strategy is to save up for large purchases and then use your credit card only for items you’re confident that you can pay off in full each month.
Get the Facts on Student Loans
Lots of people pay for college with student loans, considering them a form of “good debt” because of their relatively low interest rates and variety of repayment options — and because it’s seen as “investing in yourself.” But high student loans can make establishing financial independence a lot more difficult once you’re out of school. As you get ready to graduate, consider working with a Financial Professional to figure out what repayment plan is the best match for your financial circumstances and projected income. Be aware of loan forgiveness opportunities like the Public Service Loan Forgiveness (PSLF) program. If you work for a government or not-for-profit employer, like a public school or museum, and make the equivalent of 120 qualifying monthly payments, you might be eligible to have the remainder of your balance forgiven.
Watch Your Pennies — and the Dollars Will Take Care of Themselves
Get a head start on adulting by putting some extra-curricular time toward building good money habits that can be with you throughout your life. Talk to your parents or consider meeting with a qualified Financial Professional about what you need to do now to get your financial future off to a good start.
Sources