Four Tips for Financial Survival: College Edition

College SavingYour college years are an exciting time—a time to learn more about yourself and about life.  College prepares you for the future.  However, the way you handle your finances now will have a big impact on the rest of your life.

As a 2011 graduate of Baylor, I can attest to the fact that—if you spend (and save) wisely during your college years—you’ll be much better positioned for success once you begin your career.

Here are four financial principles to guide you during your education:

1. Make sure you don’t run out of money.

This seems rather obvious, I know.  College is a transition to your independence, and that includes your finances.  So, it’s critically important to make a financial plan.  Determine your income, fixed expenses (rent, car payment, fraternity/sorority dues, etc.) and variable expenses (gas, food, utilities, etc.).  Once you’ve gathered this information, allocate your money among expense categories and challenge yourself to run out of month, before money.  If you haven’t tracked your spending before, you’ll be surprised how much money you spend on things you don’t need (or even want).

2. Handle your money safely and effectively.

If you haven’t already, you’ll need to set up a checking account prior to arriving on campus.  These days, you don’t necessarily need to choose a bank located in your college town.  Banks can now provide free cash withdrawals at just about any ATM.  Plus, with the advent of Mobile Deposit, you can deposit checks from anywhere using your smart phone.  For college students, Central National Bank provides Mobile Deposit and up to three free ATM withdrawals per month.

Once you’ve opened your account, your parents would likely tell you to “balance your checkbook”.  And yes, that’s probably what you should do.  But to be practical, a good way to take all the hassle out of managing your money is to frequently log into online banking to view your account balance and transaction history.  With online banking, you can also set up “Alerts” to text/email you when your balance gets low, when a transaction posts to your account, etc.  These alerts are a nice way to monitor your account.

3. Save money and achieve your financial goals.

Your ability to save money is very important and will help you achieve financial security and independence.  First, focus on reaching a goal.  Define what you are saving for and be specific about how much you need to save so you can measure your progress.  Second, pay yourself first.  Treat your savings account as one of your expenses.  Third, begin now and save regularly.  It is not how much you save, but how regularly, that counts.  Fourth, deposit your savings in an account where it earns compound interest.  Compound interest means that the interest your money earns also earns interest, which causes your money to grow faster.  And lastly, to keep yourself accountable, automate the savings process.  Set up an automatic savings transfer from your checking account to your savings account—it’s the simplest way to make your savings grow.

4. Use credit wisely.

During college, a lot of people will tell you to steer clear of credit card offers.  And trust me, you’ll get plenty of offers.  These warnings are for good reason—if you don’t know what you’re doing, you can quickly mount a lot of debt.  However, using credit—in a responsible way—is a habit you can and should start during college (if you’re not already).  Your credit history and its corresponding “credit score” have big implications on your future ability to borrow money.

Borrowing is the only way most people can achieve financial goals that would take too long to save for—expenses such as a home, a car, or higher education.  Borrowing money (via credit) has a cost—the finance charge (also referred to as “interest”).  The finance charge is added to the purchase price (the “principal”) and makes goods and services more expensive.   If you should need to purchase something with credit, or if you want to go ahead and start building up your credit score, be cognizant of the applicable finance charges.

Becoming financially independent is your responsibility.  If you start making good financial decisions now, I promise you’ll thank yourself in four years.

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