Personal Finance for College Students

You’re finally living on your own, attending classes and joining new clubs and organizations. In college, it’s easy to overlook personal finance when focusing on your studies, but proper money management is vital for a successful future. If you’re new to college and money management, here is some personal finance advice. 

Consider Your Credit

Swiping a card is convenient, but that money has to come from somewhere. If you’ve fallen victim to overspending on your card, try to set up a system to evaluate your spending habits. Perhaps you could limit card spending and use more cash. Or, perhaps you need to change your card limit to dissuade yourself from making unnecessary purchases. In addition, you should keep track of when your credit card payments are due—missing those payments can harm your credit score, which can be difficult to improve later down the line.

Search For Perks

Many colleges and surrounding businesses offer benefits to students. From dining halls to student discounts, you’re bound to find ways to save money. For instance, shops close to your school may offer student discounts, allowing you to pay a set percentage less for meals and clothes. In the same vein, your school may offer textbook rentals as opposed to purchases, which can save money. Or, if you can find those books online at Amazon or from other e-commerce sites, you may be able to save bundles. 

Build a Budget

Understanding and implementing a budget can have positive long-term effects. If you’ve struggled with overspending or other money-related issues, budgeting can be a huge benefit. Calculate the amount of income you’ll make in a given month, including rates for on-campus jobs, and figure out your expenses. You’ll want to save a percentage of that income and avoid going over it. The sooner you establish a budget and learn to stick to it, the sooner you’ll save money and build your personal finances.

Find a Job

Colleges often have part-time jobs available for even the busiest of students. From cooking in the dining hall to operating an office desk to providing prospective students with campus tours, student jobs abound in academia. Taking on a job for just a few hours each week can help you better understand time management while generating income. If you want to earn academic credit while you work, internships and work-studies can be a great use of your time. Plus, any campus job is a terrific resume-builder for your post-grad job search. 

Tips for Financial Independence and Early Retirement

What do you consider to be “retirement age”? Perhaps early 60s or late 50s. What about 30s and 40s? The FIRE movement, which stands for “financial independence, retire early,” has gained traction with individuals as young as their 20s. The idea of working 9-to-5 jobs for several decades is an intimidating one, and FIRE offers the chance to work hard and, earlier than expected, play hard. However, FIRE is not an easy process, and it takes plenty of planning to truly retire early. Here are some considerations to take into account if you plan on retiring early.

Do Your Research

Monthly earnings from social security and pensions, costs of present and future healthcare concerns, and similar factors must be considered before an individual takes any steps towards early retirement. There are several complications, ones that often work against each other, to sort out during the planning phase of FIRE, but these factors help paint a picture of your financial future. Make sure you understand what FIRE really is, and what it means for you and your situation. In some cases, research may prove that early retirement isn’t the best option; rather, switching to part-time work or taking a temporary hiatus from work is better. 

Speak With a Financial Advisor

Financial advisors often assist individuals experiencing drastic life changes, such as making a family or retiring. When it comes to the latter, financial advisors will examine whether a client’s current financial system sets a strong foundation for retirement. Additionally, financial advisors look to the future to predict potential issues. Taking all of this into consideration, clients and advisors can develop a plan to work towards that independence. While hiring a financial advisor does come at a cost, the benefits of receiving an expert’s advice and planning assistance can be a lucrative investment. 

Don’t Rush the Process

A simple Google search can unearth a plethora of FIRE horror stories. A common trend in these tales involves early retirees jumping the gun and retiring before they’ve hit their financial goals. For some, this means retiring several years sooner than planned. While earlier-than-early retirement is enticing, it’s unwise to throw your financial goals out the window. Doing so means deviating from your financial plans, which in turn leads to increased risks of your independence returning to dependence. Remain patient and diligent as you work towards retirement, and avoid making rash decisions to save time—that won’t always equate to saving money.

Understand Your Drive

Why do you want to retire early? Is it to avoid unhealthy amounts of stress? Are you trying to spend more time with your family? Has a hobby become your life-long passion? A thorough understanding of the “why” behind your desire to retire early will help you figure out how to reach your financial goals. Anyone can say they want to have more free time. But what are you going to do with that free time? Take some time to introspect and figure out what drives you towards early retirement. 

Why You’re Overspending (And How to Stop)

Compare your monthly income with your monthly spending. Do you notice a glaring discrepancy? Are your earnings in the red? Can’t figure out how you spent hundreds on groceries? You aren’t alone. Overspending is easy to do, and purchases can accumulate in the blink of an eye. Here are some reasons why you’re overspending and advice on how to stop.

You’ve fallen into a bad habit

Do you buy lunch at the deli down the street every day? This is just one example of a bad spending habit. It may be comfortable and convenient to make a daily or weekly purchase, but ten dollars per day, five days a week, four weeks a month equals $200 each month just for lunch. 

The best way to remedy a bad spending habit is to ease yourself out of the habit. For the lunch example, try packing a meal most days each week, and only go out once a week or so as a special treat. You don’t have to quit anything cold-turkey, and easing yourself towards a better spending habit might inspire you to be more mindful of what you buy.

You ignore automatic payments

This one is easy to notice, especially if you subscribe to magazines and newspapers that clog your mailbox. Still, with the rise of streaming services and other digital subscriptions, you may not be keeping track of all the services you subscribe to. It’s easy to let automatic monthly payments slip through the cracks, but those payments are also an easy way to lose money.

Each month, carefully study your credit card statement. Write down the names of subscriptions you used during the month, whether that means watching a movie on Netflix or flipping through a copy of Sports Illustrated. Next to that list, write down the subscriptions you didn’t use. Unsubscribe from the ones that you didn’t touch. You’d be surprised how much money you can save annually just by paring down your subscriptions.

You haven’t disciplined your spending habits

It’s hard to find someone who hasn’t disciplined their spending habits. Whether you fall victim to impulse buys at the checkout line or fill your gas tank before it hits the halfway mark, everyone has a spending vice. 

No two people have the same income, interests, and habits, which can make disciplining your spending habits difficult. The key is to figure out what you’re buying and why you’re buying it. It helps to break purchases up into categories, such as “loans,” “food,” and “entertainment.” Not only will this show how much you’re spending, but it will also reveal what exactly you’re spending your money on.

3 Things to Consider Before Investing in Stocks

As an increasing number of books, websites, and apps introduce the stock market to the general public, more people find the stock market to be accessible. Even though software and guides have streamlined the process, adequate research is essential for anyone hoping to get into the stock game. It’s crucial to keep numbers in mind, but nuggets of advice are equally important. Whether you’re a first-time investor or seasoned stock aficionado, the following three tips are important to keep in mind.

You have to set goals

Throwing your cash in random directions and hoping something sticks is the exact opposite of what a good investor should do. Look into the industries that interest you and seek out key players and up-and-coming competitors. Then, develop a strategy by deciding how much money you’ll invest total, and how much each investment will be. It’s best to start simple if you don’t have much investing experience, which means you should stick to regular investments and establish a well-researched foundation. Once you’ve started that foundation, give yourself a timeframe before you check on those stocks again—as you’ll see in the next section, obsessing over the numbers is going to hinder you.

You have to keep a level head

Billionaire investor Warren Buffett has maintained for years that the buy-and-hold strategy is the best option for any investor. Real-time updates cause dramatic fluctuations to the stock market. While sudden drops in stock rates are worrisome, a goal-focused investor should be safe, even if rates are down. This is especially key in the short-term, as split-second decisions can be dangerous for the success of an investor’s stock portfolio. A volatile market is one in which long-term negative changes come into play. A short-term downturn is not necessarily a cause for alarm.

You have to diversify your investments

Don’t just invest in a bunch of businesses from one industry. Check out a few industries and businesses of interest to you, and ask yourself whether they fit in with your overall goals and budget. A diverse portfolio reduces the overall effect of a downturn on your portfolio. This may not be doable early into your investing journey, but as your portfolio grows and your investing confidence improves, diversification is going to be important.

Top Personal Finance Apps of 2019

Many people struggle with managing their money. Tracking bank balances and expenses can be tedious and somewhat dull. The good news is the technology industry has made it much easier to balance checkbooks and pay bills using the power of smartphones and apps. There are hundreds of personal finance apps to choose from, so here are some of the best personal finance apps of 2019 to help narrow down the list.

Prism for Bill Payment

Prism combines all your bills and bank balances in one user-friendly platform. You can schedule bills for payment and receive due date notifications. There is no charge to download the app, and it is compatible with Windows 8, Kindle, iOS, Windows Phone, and Android phones.

EveryDollar for Budgeting

Dave Ramsey, the well-known personal finance guru, helped design this app’s budgeting features. The app features a built-in expense tracker that connects to your financial institution. Using this feature, you can see how much you have spent each month and how much money you have left to spend. The app also has financial planning that lets you contact money management experts.

Clarity Money for Managing Subscriptions

This app lets you manage all of your monthly subscriptions in one platform. Unfortunately, many people cannot keep track of all their subscriptions and do not realize just how much money they are spending. Clarity Money eliminates the need to handle monthly subscriptions individually.

The app also allows you to analyze your spending patterns and how you can improve your finances based on those patterns. You also receive a free Vantage credit score from Experian.

Acorns

This app invests money for you every time you make a purchase with a credit or debit card. For example, if you spend $3.75 using a linked card, Acorns will round up that transaction and invest the $0.25 in a portfolio of exchange-traded funds. The app makes it possible for the average person to invest without spending thousands of dollars with large investment banks.

 

Personal finance apps are not the only digital option you have to manage your finances. Many reputable online financial publications offer free budgeting worksheets, templates, easy-to-use financial calculators and offer tips on how to build a budget that works based on your unique financial situation.

Building Financial Independence After College

College years bring forth an abundance of growth and independence for students alike.  You’re likely getting into the habit of managing your school work and class schedule completely on your own, and if you’re taking advantage of on-campus housing you’re living on your own for the first time.  With all of these new life milestones coming to light, there’s a good chance that though you’re taking your own independent strides, you may still be under a parental wing, financially. As graduation is approaching for many college students this month, it may be time for you to consider the best ways to adapt to the real world, and potentially build your financial independence.  Here are a few tips:

Open Your Own Account/Credit Card

The first major step to building your own financial freedom after college is looking into opening your own bank account or credit card if you haven’t already.  Visit a bank that you trust, and sit down with a banker that will help set you up with the right type of account, preferably one that builds interest or provides you with small rewards.  As for a credit card, building your credit is an essential part of growing up; however, always be careful when using a credit card. To build your credit wisely, make small purchases that you can pay off in full each month.  Racking up a high balance that requires you to make minimum payments can ultimately do more harm than good in the long run. Additionally, you’ll want to research which credit card would work best for you. Many companies offer different programs and rewards and incentives; make sure you find what fits your financial situation best.

Take on Small Bills

If your parents were assisting you with some of your bills, such as your cell phone or car payment, consider taking them on, on your own.  You can start small, by taking over your cell phone, and build as you go, moving forward with a car payment/insurance, rent, and your student loans.  These payments will not only help you practice paying bills on time, but many of them will also help build your credit score.

Generate Income

During college, you may have had a part-time job or an internship.  Now that you’ve graduated and have more time available, you can consider adding more hours to your current schedule or looking for full-time work.  Either option will generate a consistent income that will help you build steady financial independence.  Once you’re building your income, consider making some of it automatically deposit into a savings account or an emergency fund.

Student Loan Myths

Student Loan Myths

Many people take out student loans in an attempt to ensure they earn more over their working lives. Overall student loan debt in the US is now more than $1.5 trillion. Those in such debt generally have a great desire to pay it off. This leads to many myths around the subject of student loan debt. Here are a few to avoid.

You Can’t Pay Student Loans Early

There is a common myth that says you have to pay the stated amount each month and that it’s impossible to pay off student loan debt early. This is not the case. It is indeed possible to pay extra and take care of student loans before the actual term of the loan is finish. There’s no penalty for paying early, and you may be able to save thousands in interest costs in the process.

You’re Stuck With Your Interest Rate

Student loans can come from the government, and they can come from private lenders. Those who take out loans from multiple lenders will likely get stuck with a variety of interest rates. Private loans can come with higher interest rates, but there’s no need to be stuck with a bad rate. It’s possible to refinance these loans and save money in the process. There is the possibility to consolidate the loans into one loan if you have a good credit score.

You Can Skip Payments

Some borrowers are stuck with very large student loan payments each month. There is an option for income-based repayment plans. Others might think skipping a payment or two is a good idea from a cash flow standpoint. Actually, this idea could not be further from the truth. Going into default on a student loan will hurt your credit score. Additionally, the interest will continue to compound on the unpaid amount, which will increase the amount of debt you actually owe.

Public Service Forgiveness Is Free Money

There is a program in place that allows borrowers who work in public service to have their student loan debt forgiven after spending 10 years serving the public. However, contrary to popular belief, this is not free money. You’ll have to claim the amount of the debt that gets discharged as income on your tax return, and you’ll owe taxes on that amount.

Student loans can be scary. The amount that college students are willing to borrow has grown in recent years. There are many myths that surround repayment. Don’t get caught up in believing them. They can wind up costing you even more money.

What Your FICO Score Means

What your FICO score means

Just as the understanding of the value of a dollar comes with time, the importance of your credit score often evades us until we are deciding to buy a car or purchase a home. The gravity that a credit score holds is substantial. These scores influence the credit available to you and the terms that go along with it, such as interest rates. When looking to purchase a car or home, lenders rely on the consumer’s credit scores for an understanding of the risk they take on by loaning money.

While there are different credit scores, the most widely used and accepted is the FICO score created by Fair Isaac Corporation. Using the information provided by one of three major credit reporting agencies (Equifax, Experian, and Transunion) FICO creates a credit score ranging from 300 to 850, with the higher number representing lower risks for lenders and insurers.

How exactly do they determine a consumers credit score? FICO analyzes five main factors, which each have a different impact on the score:

  • Payment History (35% of the FICO score)
  • Debt/amounts owed (30%)
  • Age of credit history (15%)
  • New credit/inquiries (10%)
  • A mix of accounts/types of credit (10%)

While the exact number of your credit score can be distracting, it is more beneficial to focus on the areas that require work, rather than feeling overwhelmed by your rank on the credit range. Let’s take a more in-depth look at the five main factors considered by FICO when determining consumer credit scores:

Payment History

This is simply how well does a consumer do with paying their bills on time. Credit reports show when consumer payments are submitted for lines of credit, and it specifies how long payments took to come in: 30, 60, 90, 120 or more days late. Since payment history is the most significant component of a credit score, it is essential to get all credit line payments in as soon as possible.

Accounts Owed

This refers to the amount of money a consumer owes in whole. Having a lot of debt doesn’t necessarily have a significant impact on your credit. Instead, FICO looks at the ratio of money owed to the amount of credit available. Put simply, do not max out your lines of credit.

Length of Credit History

The longer a consumer has had credit, the better this element of their score will be. FICO looks at how long the oldest account has been open, the age of the newest account and the overall average.

New Credit

This refers to recently opened lines of credit. If a consumer opens a bunch of new accounts in a short period, this signals FICO that there is a higher risk, which lowers the consumer’s credit score.

Mix of Accounts
Just like stockbrokers want to diversify their portfolios, consumers want to expand their credit portfolio. With a healthy mix of retail accounts, credit cards, installment loans, such as a car loan, and mortgages, a consumer has ensured a higher FICO score.

4 Ways to Wisely Use Your Tax Refund

4 Ways to Wisely Use Your Tax Refund (1)

Now that tax season is fully underway, you may be thinking about what you want to do with your tax return when it comes in.  For some, it might go right into a savings account.  For others, it might be an opportunity to splurge on different items you’ve had your eye on.  A healthy balance between the two, is looking into some wiser ways you can utilize your refund.  If you’re waiting on your refund to come in, consider some of these great options to put it towards:

Contribute to Your Emergency Fund

You may have one already, and if you don’t, it might be a good time to consider starting one.  An emergency fund is a great tool to have in case you encounter an unfortunate major expense that you wouldn’t regularly have the funding for.  You can contribute to your emergency fund on a regular basis depending on your pay schedule. However, when your tax refund comes in, depending on the amount, you may be able to make a large contribution, and give yourself a better financial cushion in the event of an unexpected expense.

Invest in a Down Payment

You may be in the process of looking for a new home, or even a car.  Both of these purchases are likely to require some sort of down payment, especially if you want your monthly payments reduced as much as possible.  Your tax return is a great way to contribute to a downpayment and significantly lower what your monthly costs or the length of your finance or mortgage term will be.  If you’re buying a home, for example, this lump sum of money will be a great contribution to your down payment or even your closing costs.

Pay Down High-Interest Debt or a Mortgage Payment

Any debt you’ve been carrying for a while is likely racking up interest, and depending on the company or what type of loan it is, the interest rate could be extremely high.  Your tax return would be a great way to pay down some high-interest debt and bring you closer to having it paid off completely. Additionally, you can also consider contributing to your mortgage payment if you’re a homeowner.  However, you should always make sure that your mortgage company isn’t going to charge you a penalty for early or pre-payment.  If you’re certain you won’t get a penalty charge, consider using your tax return to make some additional mortgage payments.

Make a Home Investment

If you’ve been wanting to make some interior or exterior home updates, refund time is a great time to do it.  This extra money may help you make improvements or updates that you might not have been financially ready for before.  In the long run, this will ultimately improve the value of your home while turning it into exactly what you envisioned.

Common Financial Mistakes Many People Make

Common Financial Mistakes Many People Make

Rarely, does someone have a perfect financial history.  Mistakes in finance are common and it’s likely that most people have experienced them at one point or another.  The important thing is to figure out how to correct them, as they can tend to pile up and create somewhat of financial hardship.  However, don’t panic; with the right tools, you can easily change your financial habits. The following tips are a great guide and provide insight into the many financial mistakes people tend to make.

Too Many Monthly Payments

You may not realize it, but your monthly payments tend to add up, quickly.  Many people are seeking the “better” things in life, so they’re willing to tack on monthly finance payments to acquire the things they desire.  And while the monthly payments may not seem like a big hit at the time, the more you have, the more they tend to add up. Additionally, it’s not uncommon for people to have monthly payments that are more on the unnecessary side.  Consider the gym, for example. While for some, a gym membership is a great investment, for others, it may just be a monthly bill that isn’t regularly utilized.  Consider where your bills each month are going, and see which ones are actually necessary.

High Credit Balances

While credit cards may seem like a great way to get what you need, without having to see your bank account take an immediate hit, they can do more harm than good if they aren’t used properly.  Think of a credit card as borrowed money; money that needs to be paid back, and should be paid back in full to avoid any further charges like interest and late fees. The days of cash only are gone for many people, as credit cards are a regular part of today’s society.  Utilize your credit cards to purchases that you know you’ll be able to pay in full and avoid using them for everyday purchases that will increase your balance quickly.

Failing to Set a Monthly Budget

Budgeting your expenses on a monthly basis is a great financial habit to have; however, many people neglect to do this.  Without a budget, you’re freely spending your money without keeping track of where it’s going. By the end of the month, you’re left wondering where your paychecks have gone and why you aren’t able to contribute anything to your savings account.  

Falling Behind on Bills and Payments

Making late payments is an unfortunate, but common habit for many individuals.  Late payments can hurt your financial health in that you will likely get hit with late charges and increased interest payments.  Additionally, late payments can affect your overall credit score and lower it by a few points. Once this cycle starts, it can be hard to correct and break.