Finer Finance Fridays - UG Edition #1
FINER FINANCIAL TIPS FOR UNDERGRADS
Hey Undergrads!! You called, I heard you, I am answering! I was in your shoes once (not THAT long ago) (:-). So, I remember what it feels like to carry the pressure of academics and be worried about student debt. I was blessed, I didn't have any student loans in college, BUT I was also not educated about credit, debt, or personal finances. So, I got myself into big trouble with credit card debt. I was also helping to support my family, one of the reasons I stayed close to home for college. I came from a single-mom household. There were others helping to care for me, but my mom didn't have extra financial support to give, so I was a working, full-time student. Even, if that is not your particular scenario when I say I understand the struggle, I mean it!
The financial decisions you make in college will have an important influence on your financial situation after college. In addition, your financial situation in college can affect your academic performance. Waiting until you graduate and get a "real job" to be responsible with your finances could cost you more in the long run. It's important to start now.
This is one of the reasons I believe financial literacy earlier in life is more important than ever, and not just to family and consumer economics professionals. Financial institutions, the student loan community, financial professionals and educators, and others have identified personal financial management education as a priority. It is definitely a priority for me, and it should be for you too! I am here to help!
So, what does it mean to be financially "literate". It is the ability to read, analyze, manage, and communicate about the personal financial conditions that affect material well-being. It includes the ability to discern financial choices, discuss money and financial issues without (or despite) discomfort, plan for the future, and respond competently to life events that affect everyday financial decisions, including events in the general economy. (Mason and Wilson 2000)
Can you do all of that, if so GREAT!! You are ahead of the game, because I couldn't, when I was an undergrad. So, if you were like me, keep reading.... we will work together to make sure you have the right tools to be Financially Finer! Nothing about what I am about to list is "new", but I hope it can help you get through the remainder of your undergraduate experiences making smarter money choices, and without any more unnecessary debt.
Develop and Stick to a BUDGET. Make a budget. You don't have to go crazy with the details. Just outline how much money you receive monthly and what you need to spend. Include an allowance for "pocket money" and don't go to the ATM for more than what you put in your budget. Track your spending to make sure you're sticking to your budget. Money really doesn't grow on trees, so spending less is easier than earning or making more. And take extra care of your wallet when you're out partying. It's easy to get caught up in the moment and "make it rain", when you're having a good time. When you are getting ready to go out with the sorors or other friends, decide BEFORE you go, how much you can afford to spend and stick to it!! Soror Kimberly Pope founder of The Pope Institute for Polish, Poise, and Etiquette was interviewed by "Young Money" earlier this month, about the proper etiquette for splitting the bill with friends. This can be a difficult situation, check out how you could handle it: The Etiquette of Splitting Check.
Borrow as Little as Possible. The average college student leaves school with about $23,000 in debt. When it comes to student loans, you should ONLY borrow enough to pay for your college costs, NOT a new car, or a Spring Break vacation! To figure out how much money you may need to borrow, look at a college's cost, your cost of living, your family's contribution, and your financial aid award. You don't have to accept the entire amount of a loan you’re offered. You won't need to borrow as much if you have a part-time job to cover some of your expenses. You may even qualify for a work-study program at your college. I get it, it seems like easy money while you are in school, but 6 months after graduation, those loans become due...what does that mean? It means you have to pay it back, based on the terms you agreed to. So, don't borrow what you don't have to. Check Tools and Calculators as a resource to help you figure out what you might need and how much it will cost you.
Start Saving NOW! In your 20s, you have a small window of opportunity to wield the power of compounded interest. Consider this: If you save $3,000 a year when you're between 20 and 30 years old, put the money into an IRA with a 7% average annualized rate of return and never save another dime, you'll have $442,000 by the time you're 65. However, if you wait to begin saving until you're 30 years old and put in $3,000 each year until you're 65, you'll end up with only $283,000 at the same rate of return. That's 35% less than if you had just saved the money in your 20s, even though you'd have put in more than three times the amount of money. That is the power of compounded interest! So save regularly now. Skip a pizza, or a hair/ nail appointment. Just save. I WISH I had known this when I was in my 20s.
Set a "Think About It" Limit. If you're going to spend more than $50 on something, think about whether you really need it. The $50 dollar limit is a good point to stop and ask yourself if you can do without it. Is the restaurant too expensive? Do you really need that extra blue pair of shoes, or will they go on sale in three months? You have to ask yourself if the YOLO (You Only Live Once) approach to decision making is getting you in trouble financially. What's the point of "winging it" if it's stinging you later? Think about it.
Be CAREFUL with Credit. Like I mentioned earlier, this is what got me into credit trouble. The Discover Card reps came to the campus and had a booth set up in the cafeteria hallway. I didn't hear a word they said except, fill out this form. I signed on the dotted line and received $5,000 at my disposal. Soon after, other offers started arriving in the mail. I was fine managing my payments, because I had a job, but I didn't know what it meant if I sent in a payment late, and I was only paying the minimum balance, because I had no idea how interest rates worked. I made some of the most simple, yet costly credit mistakes before I even really had credit. Is that you? If it is, turn that around as quickly as you can. Remember that a credit card doesn't equal free money (that's what I thought). If you can handle a credit card, start with a $500 secured limit card that offers points or other rewards and pay your monthly in full. Don't look at your credit limit as a goal for spending. Carrying too high a balance on your card can hurt your credit and cost you more. Late fees add up quickly. Look at the annual percentage rate, annual fee, grace period and penalty fees. Do what makes sense for your budget. Keep track of your credit score and your credit report. There are lots of ways to get free reports online. Check out Credit Karma. Don't ruin your credit before you actually have a chance to use it for the more substantial things in life, like your first apartment, a car, or your first home. Yes, credit impacts ALL of that.
Focus on and practice these Five Finer Tips for now. In the next UG Edition of Finer Finance Fridays, we will get more into surviving the student loan debt crisis. In the meantime, if you have questions, Connect with me. I'd be happy to hear from more of you! Consider this, according to "Make Lemonade" there are more than 44 million borrowers with $1.3 trillion in student loan debt in the US, so I know some of you are impacted. The average student who graduated in the Class of 2016 has $37,172. In the next UG edition of Finer Finance Fridays, we'll talk about some resources available to help you survive. I will leave you with this, debilitating student loan debts are preventing recent graduates and their parents from being able to participate in normal economic activities like buying homes and cars, and it is even preventing people from being able to participate in crucial consumerism habits like buying gifts....not to mention being able to afford sorority dues and the cost of attending conferences. Until next time Undergrads, Keep it Finer!
That's me, in the white crossing jacket, holding up the Dove, all of my sisters from Spring 2000 celebrating with our new brothers the night they crossed, at our plot on Greek Hill. Spring 2000 Iota Gamma Chapter and Gamma Psi Chapter at Rust College! Shout out to The 7WDMTTNZ: Carla, Dawn, Anita, Melissa, Shamira, Nicole, Ramonda, and The GMS2K: Marco, Smiley, and Kevin! Love you all! ZPhi!
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