Therefore, we are starting a list of the basic financial principles our students need to understand. We will add more items to this list as we continue to engage with students and understand the financial knowledge they lack.
These principles will be used in workshops throughout the fall semester.
You have to put in some effort in order to build a good relationship with money.
Your money will help you achieve what you really want out of life, like getting your dream job, house, or starting a family. The first step in building a good relationship with your money is figuring out what you want and determining how your money will help you achieve that goal. For example, if you want to go on a study abroad trip, you must determine how much you’ll need to achieve that goal and create a plan for how you will get enough money to achieve that goal.
The second step in creating a good relationship with money is to guide your money to help you attain your needs, your wants, and your financial goals, by creating a spending plan. A spending plan is your financial map and helps you keep on course to living the life you dream of and deserve.
Even while in college, you constantly need to be proactive about your financial future, in order to be on the path to a successful financial future.
All your money behaviors affect how your how your life will shape out in the future. Before you make a money decision, you must ask yourself if that decision will help or hinder you from living the life you dream of and deserve.
One such situation students constantly find themselves in is deciding if they should have a credit card. Before you use credit, think about your financial future. If you get a credit card and practice these good credit habits: use it at least once a month, pay your bills on time, pay the full amount so you aren’t charged interest, and don’t charge more than 30% of your credit limit - you will build a good credit score, which banks & credit unions will use to determine if they will loan you money for a house or car, and how much you’ll pay in interest. Your future employer will also check your credit score to see if you are responsible.
However, if you get a credit card and don’t make the payments on time, don’t pay off your balance in full each month, and max out your credit card, you will look forward to paying more for any money you borrow through higher interest rates, and could be denied your dream job.
Remember, the decisions you make in college will ALWAYS affect your future! In order to have a nice standard of living when you graduate, you must keep debt as low as possible.
It’s imperative for your future financial success to graduate with as little debt as possible.
If you decide to take out more in student loans than you need, that mistake will haunt you. You will waste money on interest payments, which is particularly harmful when you’re young because of compound interest, which leads into the next principle.
In order to be able to support yourself, and enjoy yourself, when you retire, you must start investing as soon as you can.
How do people build wealth? Through investing and earning compound interest, which means you earn interest not only on what you put in the investment, but also on any interest that is earned. The younger you start investing, the more money you’ll have in retirement. If you can, start investing in college through opening a Roth Individual Retirement Account, a tax-advantaged retirement account for young people. When you get your first job, start investing in your company’s retirement account – their 401K - right away. Your company will also contribute money to your account, which is FREE MONEY, but you do have to put in some of your own money in order to get the free money.
Are you scared of investing? There’s nothing to it! Most retirement accounts are made up of mutual funds, which are collections of investments like stocks and bonds, which are managed by a professional. You put your money in and the professional makes sure you make money. You will need to choose your mutual funds by your risk tolerance. If you want no risk of losing your money, you will go with a conservative mutual fund. If you will allow some risk, meaning there’s a larger chance you might lose some money, but there is also a chance you’ll make lots of money, go with an aggressive mutual fund.
You must be proactive about saving money.
Most students have good intentions when it comes to saving money. However, students engage in three behaviors they think are saving them money, but are actually making them waste money.
Many students impulse spend, meaning they forget about their spending plan and purchase things that give them a temporary retail high. You need to constantly think about your future and your goals. Even that $2 impulse buy is slowing you from reaching your goals. Before you buy something you don’t need, STOP and wait at least 3 days. If you still want it after 3 days, make sure that purchase fits into your spending plan.
Another behavior tied with impulse spending is not being a good consumer and doing your research. The best way to save money, especially on big purchases, is to get into the habit of doing your research. You need to search the web to determine if you are getting the most quality product for the best price.
Many students think that if they have a coupon, that means they are getting a great deal and need to purchase the product. However, is it really a deal if you’re buying something you don’t really need?
You must protect your money.
It’s a devastating scenario when someone builds up wealth by practicing good money habits and then loses this wealth due to not having adequate protection. Insurance is the first thing that students think of concerning protection. While in college, you need to make sure you have adequate auto and health insurance, as well as renter’s insurance if you live in an apartment. This will protect your belongings in case of fire or theft. After college, you will still need auto, health, and renter’s insurance (or homeowner’s insurance if you buy a house.) You will also need to consider life insurance, which protects your loved ones in case of your death.
Another form of protection is having an emergency fund for unexpected expenses. If something comes up, like a car repair, you DO NOT want to have to resort to credit to pay the bill. You will waste money on interest.
Why is the UNL Student Money Management Center here?
To help you be proactive about your life-long financial success, to help you avoid money mistakes, and to help you gain confidence in yourself and your ability to manage your financial life. We can do it! We can all be financially successful!
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