Manage Your Money

Unfortunately, effective money management isn’t a skill with which many of us are born. It’s learned. It’s practiced. And with knowledge and practice, you’ll find that it doesn’t have to be a chore. In fact, understanding your finances can be rewarding because it puts YOU in the driver’s seat for your financial future. The sooner you start taking control of your finances, the better your financial future. It’s never too early to start budgeting.

Building a budget

Where do I start?

• Track your spending for a month or two in a log book.
• Use the book to break income into fixed and flexible.
• Categorize expenses in the same way.
• Arrange income in one column and expenses in another.
• Total the columns and compare them.

What does it mean?

• If the calculation results in a negative number, it's time to re-evaluate your spending practices.
• Eliminate items beginning with variable expenses (clothing, entertainment, etc.).
• Keep going until the calculation results in a positive number.

How do I live on a budget?

• Small efforts mean a lot.
• Cut your coffee shop visits in half.
• Don't eat out so much.
• Walk, ride your bike, car pool.
• Take advantage of student discounts.
• Put off large unnecessary purchases.

Start saving!

• Start saving!
• A standard rule is that everyone should have a minimum of three to six months' wages in a savings account.
• Don't touch!
• If you do borrow, replace it as soon as possible.

Identify your financial goals

• Make a list of things you want or need.
• Prioritize them.
• Be sure to consider all the surrounding factors. (For example, if you want to buy a car, consider the cost of gas, insurance, repairs, etc.)
• Start working toward attaining them.

Take advantage of federal tax breaks

• In many cases, enrollment in postsecondary education can translate to tax credits and deductions for students or parents through programs including Lifetime Learning Tax Credits, the American Opportunity Tax Credit and more. To learn more about these opportunities, talk to your tax advisor and check out the IRS Publication 970, Tax Benefits for Education at www.irs.gov/publications/p970/index.html.

Credit cards

What about credit cards?

Half of all college students have four or more credit cards. Seniors are graduating with an average credit card debt of $4,000. (Source: Nellie Mae)

• They can be an asset if used properly.
• They help establish good credit rating.
• They can be used in emergencies.
• They are an alternate form of identification.
• They can be used to hold hotel or plane reservations.

On the other hand…

• Imprudent credit card use can result in a bad credit rating.
• They are an expensive way to borrow.
• Credit cards make it easier to make impulsive, unnecessary purchases.

How can I use them responsibly?

• Don't get to the point where you can't pay off your bill in full in a month or two.
• Save up for expensive items and pay for them with cash!
• Establish an “emergency use only” policy.

What if I get into trouble?

• Start by paying down the cards that charge the most interest first.
• Remember, all is not lost. You aren't the first person to find yourself here!
• Plenty of reputable debt counseling services are available.

Use GradReady tools to learn how to keep your debt under control.