Whether you have a job, internship or plan to travel, summer is the prime time to take the proper steps to fix your finances in order to prepare for your next or first year of college. Here’s how:
1. Bank Accounts: If you don’t already have a checking account in your own name (meaning not a custodial account with your parents), be sure to open an account at a reputable bank that has branch locations in your hometown and on campus. If you withdraw money from an ATM that is not associated with the bank that holds your checking account, you could be charged a hefty fee from $1.50 to $5, just for withdrawing your own money! Outrageous, right? To help manage your bank account, use the financial programs at Mint.com or on the Mint.com iPhone app.
2. Credit Cards: Chances are you’ve seen the marketing booths that credit card companies set up on college campuses to try to convince students to sign up for credit cards. Hopefully, you didn’t give in and succumb to the credit card company’s marketing efforts! But if you did and you signed up for a credit card on campus and now find yourself in credit card debt, follow these three simple steps:
1) Call up your credit card company and ask for a lower interest rate – speak to a supervisor, if need be
2) Pay more than the minimum payment – even if it’s only $5 or $10 more – this will save you money in interest and get you out of debt faster
3) Once you’ve paid off your credit card, don’t close down the account, since that will damage your credit score, which has already been ruined by the credit card debt
If you never signed up for a credit card, but you want to begin building a credit history, sign up for a secured credit card. This is where you attach a security deposit of around $500 or $750 to the card, which acts as your credit limit. As per new legislation that took effect in February 2010, anyone under age 21 must have a co-signer on the credit card. The benefit of a secured card is that in most cases you won’t need a co-signer (due to the security deposit) and if you can show the creditors a payroll stub and other proof that you’re earning at least $5,000 per year, you have an even better chance of not needing a co-signer. Check with each credit card company. Shop around for secured credit cards by visiting Bankrate.com. After a year or two of using a secured card responsibly (and paying on time!), you’ll be offered a traditional credit card.
Remember: Having a credit card while in college is for the sole purpose of building credit and should not be viewed as a way to spend more money! Always pay on time and make sure that you have the cash to pay off the card in full after each month.
3. Budgeting: If you have job while in college and you rely on that income to pay for tuition, books and groceries, it’s going to be tough to save any of that money. Instead, look for ways to reduce your expenses. Download the BIGWORDS iPhone app, which finds online retailers that offer the cheapest textbooks. Also, visit websites like Savings.com and 8Coupons.com before you purchase anything, to see if you can take advantage of online coupons. Any money that you have saved as a result of the above suggestions should be deposited into a savings account.
Apart of budgeting is expense tracking. You need to know how much money you spend each month and how much money, if any, you save each month. To help, download the iXpenseIt iPhone app which allows you to take a picture of the receipt after you purchase an item – the app will store the receipt’s data and allow you to easily track your expenses.
4. Retirement: Yes, college students should be thinking about retirement. It sounds crazy, but the earlier you start, the more money you’ll have later on. Remember: Success in the world of investing takes time! Visit a discount brokerage firm and open up a Roth IRA, which is a retirement account that allows you to deposit money that you’ve already paid taxes on, unlike a 401(k), where you deposit pre-tax money. With the growing national debt, tax rates most likely will increase in the future, making a Roth IRA more appealing.
5. Financial Goals: It is imperative to have clear financial goals. Where do you want to be, financially speaking, in 6 months, 1 year, 5 years and even 10 years? If it’s your goal to have your credit card debt paid off by senior year of college, start taking the proper steps now so you can achieve that goal. Write your goals down on paper, remember them, recite them daily – with focus and determination, you will achieve your financial goals.
All of this is extremely overwhelming. Saving money sucks and it seems as if managing your money is a full time job! Use some of your free time this summer to implement some of the suggestions above. If you can adopt responsible financial habits in college, you will be ahead of the game and have a financially successful life in your 20s and 30s – something most young people can’t attain.
(slide show image on homepage courtesy of accumulatingmoney.com)
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