Your college years are usually some of the best years of your life. They are an exciting time filled with fun, learning, and new experiences. Colleges provide the perfect environment for students to explore new things and transform themselves, and it is also the ideal place to learn valuable life skills for when they eventually leave. One such skill is how to take care of your finances, and your college years may just be the best time for you to plan on how to take charge of your financial future.
In 2019, American student loan debts hit a shocking $1.6 trillion. Therefore, it is wise to start taking financial literacy seriously – sooner rather than later – in order to avoid being a part of this disheartening statistic. But how do you economize your resources as you work your way toward graduation? Juggling college and finances might not seem easy, but follow the tips below and you’ll be well on your way to being a pro.
1.Start Building Your Credits
Credit scores matter significantly to everyone as it shows your creditworthiness. In fact, the financial industry is shifting such that credit scores are becoming increasingly crucial to banking institutions and credit card companies. But what happens if your credit scores are nothing good to write home about? Well, the chances are that it will affect your chances of securing financial opportunities such as loans from creditors after graduation.
For example, some landlords will ask to see your credit score before providing you with housing facilities. Employers will also be more than likely to check your credit score before they give you a job, which could add more debt to your shoulders if it is low. So make it a point to start building a positive credit score well before you graduate from college. If you don’t have a credit card while in school, you can ask your parents to add you as an authorized user of their credit cards. You can also open a student or a secured credit card. Try not to get so excited about having money at your disposal that you overspend on unnecessary things. Instead, learn financial self-discipline, and it will pay off in the long run.
2.Avoid or Minimize Your Credit Card Debt
The cost of tertiary education can be very high, especially for students who attend private colleges. While partial scholarships can help you settle some of your college expenses, they don’t usually solve all your problems. As a result, students who attend expensive colleges are more likely to end up with insurmountable student loan debts. Many students graduate from college owing as much as $5000 in student loan debts. The good news is that government-backed student loans usually come with affordable interest rates. For example, if you sign up for federal student loans, government programs may help you pay off your debts without breaking the bank. You can also seek assistance from organizations such as the Debt to Success System, which help debt-ridden students to find relief.
However, the situation is quite different when it comes to credit card debts, as the interest rates are quite high. Until you can settle them, you may struggle with financial freedom or independence. Therefore, try to cut down your credit card debts before you graduate, especially if you want to create wealth after school. To build your credit score means you have to minimize your borrowing habits and pay off outstanding bills as soon as possible to avoid accumulation. When you cultivate this culture of zero tolerance for too much debt while in college, you will have a much better financial standing after graduation.
3.Learn How to Budget
Good budgeting skills are vital for building a great financial future. Sometimes it doesn’t really matter how much you make, but rather, how well you budget. To budget means to know how much you want to spend and how much you want to save. A practical account spells out your spending plan according to your monthly income, monthly expenses, and your savings. As you progress through the month, you can track your budget to see if you are on track. You may also want to ensure that you have enough money left over to put into your savings account after deducting your average monthly expenses from your salary.
The idea is to avoid superfluous expenses and save more money. As a student, you may want to factor into your budget categories of expenses such as books and stationery, accommodation, internet bills, tuition fees, and your food costs. You can also use budget-planning tools such as Mint to master your budgeting skills. When you get the hang of budgeting at college, you’ll be in a better place to handle financial responsibility post-graduation.
4.Set Up an Emergency Fund
Emergencies are unpredictable events that demand your immediate attention. The Covid-19 global pandemic is a perfect example of what a crisis looks like. When the viral disease showed its destructive face to the world in late 2019, people thought it would only be a short-term health disaster. Well, the coronavirus worked against all the odds and established itself as a business killer, shutting down companies and plunging the global economy into chaos.
Suddenly, people who didn’t set up emergency funds found themselves with more problems, especially if their source of income was affected. Therefore, as a college student, you should take a cue from this and set up an emergency fund as a form of self-care. Basically, this should be your contingency plan against uncertainties such as economic downturns, health crises, and other unforeseeable circumstances that will require you to spend some money unexpectedly.
You may be tempted to ignore emergency funds during your college years because you are yet to experience a major emergency. However, the reality is that emergencies and responsibilities multiply as you grow older. Learning the basics now will be helpful for later on when they carry more consequences and cannot be ignored. Additionally, it will teach you to stay strong during a crisis and avoid panicking at the last minute. The bottom line is that it is a step in the right direction towards financial security after graduating from college.
5.Learn How to Invest
Warren Buffet started investing when he was a teenager. Now in his 90s, Buffet boasts a net worth of $80 billion. But the important part of this is that he actually acquired 90% of his wealth when he passed the age of 50. So, what does that mean for college students? It means that you should invest in your early days to reap the fruits of your labor later on. In fact, that is the whole point; investments do not yield interest immediately when they are made, and so the general rule of thumb is that the earlier you make them, the better. Unlike saving where money is just put away, investing enables the money to grow or multiply. This makes it a great way to safeguard against economic issues such as inflation.
Thankfully, in these modern days of numerous investment opportunities, college students can engage in this activity with very little capital. You cannot give the excuse that you don’t have enough to invest. For example, you may want to consider the advantages of Roth IRAs (Individual Retirement Accounts). These are non-taxable retirement accounts that you can invest in. Remember to familiarize yourself with the ins and outs of the investment market as you near your graduation. That’s because this knowledge will help you minimize the risks involved in investing.
6.Plan to Get a Secure Job
Colleges are known for burdening students with tons of courses, some of which may not be relevant for the job market. Therefore, you have to ask yourself critical questions concerning whether you want to be a job seeker or a job creator. If you would rather be the former, you need to get a secure role – not just any job. Make sure to do your research about the industry you’re looking to join and how it will fare in the years to come.
For example, some technologists are forecasting that automation will lead to a jobless future for some graduates. They believe that technology is turning the wheels of time, and it will take away a lot of jobs as machine learning and artificial intelligence progress. In advanced economies like the USA, robots have been taking over manual jobs for decades. MIT researchers have noted that “each additional robot added in manufacturing replaces about 3.3 workers averagely.” The petroleum industry is one that may witness disruption due to the introduction of electric vehicles. All in all, it means job-seeking college graduates must look before they leap.
Learn, and have fun during your college years, but also remember that it’s a good time to make big decisions about your future. Be ready for new things, and if that means investing your little resources in big opportunities, do it for the sake of your financial future. These financial tips are just a few to put you on the right track.