Financial planning tips for students are especially important as students will inevitably have to address expenses during their academic journey. School costs can add up quickly for adult students, so creating a detailed financial plan is crucial. This involves estimating income, identifying your expenses, and then tracking your income to cover those expenses while also setting aside funds for savings and other financial goals. The primary goal of budgeting is to ensure that individuals are living within their means; that is, that their income is equal to or greater than their expenses. By utilizing the budgeting tips provided in this blog, students will reap the benefits of setting financial goals, creating a budget, and reaching financial stability.
Set Clear Financial Goals
The cost of college can add up quickly. The average cost of college debt is around $37,000 for federal student loans and usually can take anywhere from twenty to thirty years to pay off. Almost six percent of student borrowers owe at least $100,000 in loan repayments by the end of college. Considering the high cost of school-related needs like tuition and rent, students should take advantage of college resources to reduce their other expenses. For example, most campuses offer reduced dining plans, emergency grants, and financial counseling services to support students facing financial challenges.
Unfortunately, most students do not start their post-secondary education by establishing financial goals. However, setting clear financial goals helps students ensure that they are focused on their objectives and progressing towards a more financially secure lifestyle during college and beyond. While making major life purchases, starting a family, and entering retirement may seem far off for a student, setting financial goals early encourages students to think beyond their current circumstances and better prepare for the future. Students also gain the benefit of building a growth mindset by delaying immediate gratification to set themselves up for long-term success.
One of the most useful ways for students to begin is to identify short and long-term financial goals. Short-term financial goals are usually achieved in under a year, for example, saving up for a vacation and paying off credit card debt. Long-term financial goals might take years to reach, for example building retirement savings and investing in various assets. Establishing actionable steps with due dates is key to reaching goals.
Create a Budget
Creating a budget is an essential life skill. Students who establish and stick to a budget are more likely to prioritize their expenses, manage their debt, and avoid impulse spending. This can be done by allocating money to essential costs, like rent and groceries before spending on non-essential items, like entertainment and fashion. Budgeting can help students avoid the trap of accumulating high-interest debt and developing poor financial habits.
A good budget tip is the fifty-thirty-twenty rule. This refers to the practice of allocating fifty percent of your funds toward necessities, thirty percent towards personal wants such as travel and entertainment, and twenty percent for savings. This helps to cut extraneous spending, thereby avoiding unnecessary debt and saving money that would be otherwise spent on interest payments. Furthermore, building up savings provides a financial cushion to prepare for emergency expenses.
Moreover, because money-related stress can negatively impact academic performance and overall well-being, sticking to a budget can alleviate this stress by providing a sense of control and preparedness for when emergencies arise. Students should take advantage of relevant resources such as Good Budget, Mint, and Digit. Whether managing everyday expenses or working toward long-term financial objectives, a budget is an invaluable tool for anyone seeking financial success.
Build Credit
Planning for a financial future as a student is a smart approach to achieving long-term financial stability. Students should start building credit early, as this will set them up for financial independence. A good credit score is essential for many major purchases such as buying a vehicle or home. A person with a higher credit score is viewed as a lower risk to institutions providing loans and thus has a better chance of obtaining the funds at a lower interest rate. Also, higher credit scores can boost employment opportunities, as some employers conduct credit checks as part of their hiring process.
To attain a good credit score, students should get a credit card as soon as possible. Credit cards designed specifically for students are a good option because they often have lower credit limits and more forgiving approval criteria. It is also recommended to seek out a credit card with no annual fee and a low interest rate. Students should use the card responsibly by making small purchases and paying the balance in full each month.
Paying bills such as rent, electricity, and car payments on time can also help students acquire a high credit score. To get set up for success, students should start by making a list of expenses, tracking payment due dates, and setting up automated payments. Then they should regularly monitor their savings, checking, and credit card accounts to notice any unexpected activity right away.
Conclusion
Financial planning is something that students should get started on early. By utilizing the financial planning tips in this blog, students will be much more likely to achieve financial stability, reduce stress, and acquire valuable life skills. Developing a solid foundation of financial responsibility includes setting financial goals, creating a budget, and building credit. Ultimately, the discipline and habits developed during school years help set the stage for a lifetime of financial security.
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Written by Dylan Kirkpatrick
