Preparing for college life is super-exciting–and more than a little nerve-wracking. You’re looking at a new stage of life that is filled with first-time experiences, academic challenges and newfound independence. The start of college also marks a significant transition into adulthood, which includes learning to manage personal finances responsibly. Building good financial habits during college can set the stage for a secure and successful financial future. Let’s take a look at some tips that can help you navigate your finances successfully throughout your years in college.
Create a budget Living with a budget is essential for financial wellness. First, track your income, including all earnings from part-time jobs, scholarships, student loans and more. Next, list your expenses, including tuition fees, textbooks, rent, groceries, transportation and entertainment. Set a realistic spending amount for each category, and your budget is good to go! Make a real effort to stick to your budget, then review and adjust as necessary. Budgeting helps you prioritize your spending, avoid unnecessary debt and ensure that you’re living within your means. Minimize student loan debt Student loans can be a significant financial burden after graduation. To minimize your debt, explore options such as scholarships, grants and part-time jobs to cover educational expenses. You can also get ahead on your debt by saving for your student loan payments before you graduate. You can set up automatic monthly transfers from your checking account to your savings account while in college. This way, you’ll be prepared to start paying off your student loan debt as soon as you graduate. Live frugally You can have your fun while in college, and in your budget, too! First, buy used whenever possible. This goes for textbooks, sports equipment and even your college car. If you research the item you’re purchasing to ensure it’s in good condition, you’ll save a ton on the price without compromising on quality. Next, consider pooling some of your expenses with your roommates. For example, you can split the costs of food items, cleaning supplies and more. Finally, get used to eating in to generate significant savings. Spring for one or two counter appliances, such as a pizza maker and toaster, and get creative with using them for meal prep. Remember, every dollar saved can go toward your future. Prioritize essential expenses Life in college is filled with temptations and social activities, so it’s crucial to prioritize essential expenses. Ensure that your tuition, rent, utilities and groceries are covered before allocating money for discretionary spending. You’ll also want to set aside a portion of your income each month for savings and emergencies. By establishing these priorities, you can build a strong financial foundation and avoid falling into unnecessary debt. If you find there’s no money left over for just-for-fun expenses, look for ways to boost your income through part-time jobs or by selling some items you no longer use. Build your credit College is a great time to get your credit score ready for adult life. A strong credit score is essential for qualifying for large loans, obtaining favorable interest terms on those loans, securing a job and more. To build credit responsibly, consider getting a secured credit card or becoming an authorized user on a family member’s credit card. Use the card sparingly and make payments on time, and in full, each month. This demonstrates responsible credit management and will help you establish a positive credit history. Take advantage of campus resources College campuses often provide a wealth of resources to help students manage their finances. Take advantage of financial literacy workshops, counseling services and career centers that are at your college. These resources can provide valuable information on budgeting, saving, investing and finding internships or job opportunities. Seek guidance from professionals who can offer tailored advice based on your individual circumstances. Building smart money habits during college can have an impact on your financial health for years to come – maybe even your entire life! Use these tips to manage your money smartly in college. What money tips can you share with college students?
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Everyone wants to manage their money responsibly, but many people often make mistakes in ways they handle money – without even realizing it. They may have fallen into a bad habit they can’t shake off, or they may be misinformed or less educated in a certain area. The good news is, harmful behaviors can always be unlearned. Let’s take a look at three common money mistakes and how to fix them.
Mistake #1: Ignoring one’s financial situation It is quite common for people to go about their everyday lives without giving much thought to their financial situation. They may not know how much money they have in their checking and saving accounts, be blissfully ignorant of their outstanding debt and/or have no awareness about the quality of their credit score. Unfortunately, when it comes to money, ignorance is NOT bliss. Ignoring money can lead to serious consequences, like insurmountable debt, missed payments and minimal or no savings for future needs. By turning a blind eye to one’s financial health, they risk falling into a cycle of financial instability and stress. The fix: To avoid this mistake, assess your income, expenses and savings on a regular basis. Creating a budget can help you get a handle on your financial inflows and outflows, which will enable you to make informed decisions about your spending habits. By confronting your financial situation head-on, you can identify areas where you can cut back, save more and, best of all, achieve and maintain financial wellness. Mistake #2: Not having a clear money vision The second common money mistake is a lack of a financial plan or goals. Without an established money vision, it can be challenging to make smart money choices. You may find that you slip into negative financial habits when there are no goals to keep you in line. These poor habits include (but are not limited to) spending impulsively, accumulating unnecessary debt or failing to save for your future. The fix: It’s crucial to establish short-term and long-term financial goals. Whether it’s saving for a down payment on a house, starting a business or planning for retirement, having a clear vision will guide all your financial decisions and ensure they’re choices you can live with for years to come. To make it easier, break down your goals into actionable steps, such as setting aside a specified amount of money for savings each month or investing in assets that align with your long-term plans. A vision will provide you with motivation, purpose and a sense of control over your financial future. Mistake #3: Not discussing money The third common money mistake is failing to talk about money within various kinds of relationships. This can be a relationship between parents and children, business partners or, most commonly, between life partners. Money is a sensitive topic, and many people believe they can avoid arguing over money by simply not talking about it. Unfortunately, though, this rarely works. Instead, not talking about money can lead to misunderstandings, conflict and financial instability within the relationship. The fix: Have open and honest discussions about money with your partner. This includes talking about shared financial goals, spending habits and even potential conflicts surrounding money. By establishing open lines of communication, you can work together to create a joint financial plan that aligns with both partners’ values and aspirations. Regular conversations about money can also help to build trust, ensure financial transparency and avoid surprises or hidden financial burdens down the road. Money mistakes are common, but with some knowledge and proactive steps, you can easily avoid them. Use this guide to learn how to fix three common money mistakes and avoid making them in the future. What’s your biggest money mistake? Q: With prices soaring and expenses mounting, I’m worried that back-to-school shopping will kill my budget and push me into debt. How can I beat inflation and save on back-to-school shopping?
A: While you may need to adjust your annual back-to-school budget to account for inflation, there are ways to save on these costs and keep your budget intact. Follow these tips to beat inflation this back-to-school season. Shop with a budget Your first step toward saving on back-to-school shopping is to create a budget for this shopping season. Determine how much you can afford to spend and allocate specific amounts for different categories such as clothing, supplies and electronics. Having a budget will help you stay focused and avoid impulse purchases. Take inventory Before hitting the stores, take inventory of what you already have at home. Check your kids’ closets, drawers and study areas for supplies and clothing that can be reused or repurposed for the coming school year. This will give you a clear idea of what you really need to buy and help prevent unnecessary spending. Plan ahead Start shopping early and take advantage of sales throughout the summer. Watch for clearance sales, promotions and discounts. By planning ahead, you can secure better deals while avoiding the rush and price hikes that happen closer to the start of the school year. You can also take advantage of your state’s tax-free weekend for bigger savings. Buy generic Don’t hesitate to reach for generic brands when purchasing school supplies for your kids. Store brands, like Walmart, or Target’s Up & Up, are consistently cheaper than name brands without compromising on quality. Shop without your kids While your kids may savor the experience of choosing their own school supplies for the coming year, shopping with kids is one of the best ways to kill a budget. Kids always have their own ideas of what’s best to spend money on, and their opinions may not necessarily align with yours–or with your budget. If your kids aren’t thrilled about you doing all the shopping on your own, compromise by allowing them to join you on one or two shopping trips, for example, when you shop for shoes and backpacks, but do the rest on your own. Think secondhand Consider purchasing used textbooks, clothing and electronics. You can find gently used items at significantly lower prices on secondhand websites like ThredUp, and at thrift stores like Goodwill. When shopping secondhand, it’s important to ensure that items are in good condition and meet your requirements before making the purchase. Also, when buying a secondhand (or any) item online, only use secure platforms and ask to see the item, or a photo of the item, before finalizing the transaction. Finally, use a payment method with purchase protection, such as a credit card, so you can always reclaim your funds should the item turn out different than expected. Use discounts and coupons Before you shop, look for coupons, promotional codes and student discounts to bring down the prices of the items you need to buy. Many retailers offer exclusive discounts to students and teachers. Sign up for newsletters or loyalty programs to receive updates on special offers. You can also use a discount-finder app or browser extension, like Rakuten or Honey to scour the web and automatically pull up any coupons for the items you need. Additionally, check with your child’s school or local community organizations for any available discounts or programs. Buy in bulk When possible and it makes sense, purchase supplies in bulk. This is particularly useful for items that are commonly used throughout the school year, like notebooks, pencils and paper. Buying in bulk often comes with a lower per-unit cost, providing long-term savings that will pay off all year long. Prioritize quality and durability While it may be tempting to opt for cheaper alternatives, prioritize quality and durability. Investing in well-made products can save you money in the long run, as they are less likely to require replacements later. Prices are soaring, but that doesn’t mean you need to fall into debt when back-to-school shopping. Follow the tips outlined here to beat inflation and save. How are you going to beat inflation this back-to-school season? Share your best tips in a short video. When life is comfortable and things are going well, it’s hard to think about experiencing harder times. But failing to plan for stormier days can have a devastating impact on your financial health. Life is full of surprises, and some of them can be expensive. Whether it’s a medical emergency, job loss, car repairs or any other unforeseen event, having a financial safety net can provide a sense of security and stability. Let’s take a look at why it’s so important to save for rainy days.
Stay out of debt Did you know that approximately half of Americans do not have more than $400 saved for emergencies? And yet, emergencies do not discriminate –they can, and do, happen to those who are unprepared just as much as to those who are prepared. When life throws an expensive surprise your way, and you don’t have the funds to cover it, you may fall into debt just to get by. You may choose to swipe the plastic, borrow more than you can afford or fall behind on your monthly payments in order to cover the cost of the emergency. Unfortunately, this can lead to months, or even years, in debt, as consumer debt tends to have high interest rates and can be difficult to repay. On the flip side, if you had a well-padded emergency fund prepared, you would have the cash you needed to fall back on in case of an emergency. This would help you stay out of the debt cycle and keep you financially fit, no matter what life throws your way. Be prepared for sudden unemployment When you live paycheck-to-paycheck, you depend on your job for financial survival. However, unless you are a Justice serving on the Supreme Court, no job is guaranteed to last forever. Your workplace may decide to downsize, close its doors or even to replace you with a bot. Or, you may find yourself unable to work due to personal circumstances. Having an emergency fund in place when you’re gainfully employed can help you stay afloat should you suddenly find yourself unemployed. Flexibility and freedom Saving for a rainy day brings an element of flexibility and freedom to your life. It enables you to pursue new opportunities, take more risks and make major life changes without the constant fear of financial instability. Whether it’s starting a business, furthering your education or taking a sabbatical from work, having this fund will provide the necessary support to explore these possibilities. Peace of mind Financial stress can take a toll on your physical and mental wellbeing. Constantly worrying about money can lead to anxiety, depression, strained relationships and more. Knowing you have an emergency fund built up and on the ready for a rainy day can offer a sense of security and peace of mind. Achieve long-term financial goals Saving for a rainy day is not just about preparing for emergencies; it is also a stepping stone toward achieving long-term financial goals. Whether it’s buying a house, starting a family or planning for retirement, having savings will help you stay on track. Avoid economic downturns related to market fluctuations The economy is subject to fluctuations, and financial markets can be volatile. During economic downturns or recessions, people will often face reduced job opportunities, pay cuts or decreased business revenue. However, an emergency fund can make a challenging economic climate easier to navigate. People who’ve saved up money for emergencies will be less reliant on credit cards and loans during these times, thus reducing their vulnerability to economic uncertainties. If you don’t have a well-padded emergency fund, start building one today! Most experts recommend having three to six months’ worth of living expenses in your emergency fund. Review your monthly expenses to reach this number, and then make a plan for building up your fund until it’s complete. You may want to prioritize your emergency fund over other investments until it’s set up. When the sun is shining, it’s hard to believe the rain will come, but no one’s life is all sunshine, all the time. Saving for a rainy day is a crucial part of financial wellness. Start saving today for a more secure and financially fit life. What kind of emergency will have you running for your emergency fund? Tell us about it in the comments. Q: I find the financial news to be confusing despite my efforts to keep up with developments and trends in the economy. What do I need to know about the current state of the economy and how can I learn to read the financial news?
A: Kudos to you for taking the initiative to learn all you can about how the economy impacts your money and livelihood! Indeed, financial news can be confusing. One day the economy is headed for a deep recession, or worse. But the next day’s headlines will boast about rising stocks and a climbing dollar. It’s hard to make sense of it all and to sift through the noise and find what’s relevant to your life. Here, we’ve outlined the factors you need to know about today’s economy and provide a primer on how to read the financial news. Which factors characterize the economy now? While your grocery bills may have you thinking otherwise, there’s actually good news on the economic front … right now, at least. The consumer price index (CPI), which tracks the cost of household staples, rose 4.9% in April, 2023. It’s the smallest increase in two years. The inflation readings of the U.S. Bureau of Labor Statistics report weakening inflation readings for 10 consecutive months since its peak in June of 2022. This means consumers should be seeing relief in staple categories like food, energy and housing. However, the state of the economy is measured by more factors than the inflation rate alone. Consumer spending, for example, has weakened in recent months following a spike in January. Additionally, the U.S. Gross Domestic Product (GDP), rose at an annual rate of 1.1% in the first quarter of 2023, falling short of the 1.9% that economists had expected. It’s also important to note that the average interest rate now averages 5-5.25%, which is its highest level since 2007. On the flip side, though, new home sales rose in March for the fourth consecutive month. While the economy has definitely seen better days, all is not doom and gloom on the financial front. Inflation is easing and there is hope for more good news in the coming months and years. As a consumer, look out for fluctuating interest rates and a decreasing rate of inflation. While these factors may influence your spending, it’s important to practice responsible money management in any economic climate. How to read the news Follow these tips to make sense of the financial news:
Financial news can be confusing. Use this guide to learn what you need to know about the current state of the economy and how to read financial news. Q: I’d like to open a long-term savings account, and I’m reviewing my options. I’ve heard about something called a CD ladder; is it a good choice?
A: A CD ladder, known as a certificate ladder when opened at a credit union, is a savings tool that combines the security of share Certificates with the flexibility of staggered maturity dates. Let’s take a closer look at certificate ladders and why this may be an excellent choice for your funds. What is a Certificate ladder? Certificates of Deposit (CDs) have been a longtime, popular investment banking tool for individuals seeking a safe and stable place for their funds. Their credit union counterparts, share certificates, are the same type of product, so don’t let the terminology differences trouble you. They offer a fixed earnings rate over a specified period (term), and provide a reliable source of income. However, traditional certificates often lack flexibility since investors must commit their funds for the entire term. This is where certificate ladders come in. Certificate ladders operate on a simple principle: instead of investing in a single certificate with a fixed term, savers distribute their funds across multiple certificate accounts with different, staggered, maturity dates. For example, instead of investing $10,000 in a single 5-year certificate, a member may choose to allocate $2,000 to five different certificates, each with a maturity date of one year apart. This strategy creates a “ladder” of certificates, with one maturing each year. What are the advantages of Certificate ladders? There are several significant advantages of certificate ladders:
Despite its many advantages, certificate ladders are not a suitable choice for all investors. First, each certificate within the ladder has a fixed term. This means early withdrawal penalties may still apply if funds are accessed before a certificate’s maturity date. Additionally, the rates offered on certificate ladders may not be as high as those on riskier investments, like stocks or bonds. As a result, individuals with a higher risk tolerance, as well as those seeking significant growth, may prefer other investment options. Certificate ladders provide a compelling blend of flexibility, security and liquidity. Use this guide to make an informed decision about investing in a certificate ladder and give your money its best chance at growth. When it comes to money, everyone has an opinion, and they want to share it with the world. Unfortunately, though, popularity in and of itself does not make an opinion true. Let’s take a look at three commonly offered money tips that aren’t all that great.
1: The latte factor This one is responsible for too many would-be budgeters being disappointed when a small change of habit does not turn them into an overnight millionaire. The claim: Cutting out your daily latte will solve all your money problems. The truth: Trimming discretionary expenses will only have an impact on your budget IF you are responsibly able to not spend it elsewhere. Yes, if you make a conscious effort to trim your budget, you can turn your financial situation around. However, simply deciding to forgo your daily latte won’t necessarily make a difference to your finances. Here’s what often happens: When a person cuts down on their coffee habit, they feel deprived and end up spending that money on something else. Everyone desires a little indulgence. That small coffee habit may be what gets you through the day, so cutting it out may leave you feeling resentful, to the point that it weakens your willpower for making responsible money choices the rest of the day. Also, while the six-dollar-a-day latte is not insignificant, it likely won’t make a huge dent in an underwater budget. Expecting that this minor change will get you out of debt within the year or help you save up for a new car will probably lead to disappointment. The fix: You can cut down on your coffee habit and enjoy the financial benefit with these easy tips. First, consider if you really want to do without your daily latte. If it’s your only indulgence, consider trimming your budget in another area, or only buying a latte every other day instead of seven days a week. Also, be sure to set aside the money you save on your latte so it doesn’t disappear. You can transfer the six bucks to your savings account each time you skip the coffee, or set aside cash in an envelope and then make a larger deposit at the end of the month. In addition, if you’re looking for a way to make significant changes to your financial situation, consider cutting back on bigger expenses. For example, downsizing to a simpler or older car instead of insisting on new can save you thousands of dollars a year. 2: Cut up your credit cards This one sounds bold and powerful, but in reality it doesn’t do all that much for your finances. The claim: Get yourself out of debt by taking a pair of scissors to your credit cards. The truth: You can still accumulate debt even when your cards are in pieces. Also, destroying your cards won’t help you kick a rooted behavior of overspending. This advice is quite outdated and is really a matter of symbolism more than anything else. In a world of online shopping, no one needs a physical credit card to spend money. With only your credit card numbers, which your computer and phone may “remember” on their own, you can shop to your heart’s content. You may decide to take it to the next level and close your credit card accounts. While this will render you unable to rack up more debt on this card, it won’t solve the root cause of your debt. For example, if you’re depending on your credit cards to make ends meet, closing your accounts won’t help much. Also, it’s important to have some open credit cards as they are an essential part of building credit history and getting approved for large and low-rate loans. Closing accounts will lower your available credit and increase your credit utilization, thus lowering your score. The fix: If your credit card debt is out of control, take steps to rein it in. First, create a detailed monthly budget that assigns a dollar amount to every expense and includes some just-for-fun money as well. Next, make a plan for paying down your outstanding debt. Finally, look for ways to trim expenses or boost your income so you can get out of debt sooner. 3: Follow your passions This advice sounds great and wonderful, but in real life it doesn’t always play out all that well. The claim: Do something you love, and you’ll never work a day in your life. The truth: Passions don’t always pay the bills. In an ideal world, we can pay our bills and cover our expenses by working at something we love to do. But sometimes, our passions don’t translate into lucrative careers. For the wealthy-born, or those only working to supplement an already adequate family income, choosing a career based on passion alone can work, but for many people, doing so can mean a lifetime of financial struggle. Also, sometimes turning a beloved hobby into a job makes a person quickly lose their liking of that hobby. The fix: It’s best to work at a job you find enjoyable and fulfilling that also pays the bills. When choosing a career path, list your passions, and then research the various occupations in these areas and their general pay scale. Next, make a rough calculation for how much income you’ll need to cover your expenses. If your numbers line up, you’re good to go. Otherwise, you may need to make some adjustments to your dream career or lifestyle. If this is the case, consider a job that plays to your skills, if not your passions. This way, you’re more likely to succeed at your career and to find it fulfilling as well. You can also start a side hustle that utilizes your passions. It may turn into a full-time career. It’s far more likely, though, that it will remain a side hustle forever, while still providing the outlet your passions need. Money tips can be helpful, but it’s important to remember that not all advice is created equal. If you want to take a deeper dive into your finances and take steps to change your financial behaviors, IRFCU offers free financial counseling. Contact us for more information. |
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