Pursuing a college degree is a challenging yet rewarding undertaking; between classes, extracurriculars, social activities and self-care, it can be easy to overlook the importance of building financial literacy. However, while you’re getting an academic education, your financial education is just as important. From managing your student loans to understanding how to budget, Master Your Card is here every step of the way to help you confidently build your financial foundation and set your personal finances up for stability and success after graduation.
Personal Finance Tip #1: Manage your student loans
When planning how to pay for your education, it’s likely you’ve considered student loans. While these are an incredibly helpful way to finance a degree, understanding how they work is key to successfully navigating what might be your first line of debt.
There are two types of student loans: federal and private. Federal student loans come from the government and are either subsidized (meaning no interest will accrue on the loan until you graduate) or unsubsidized (interest begins right away). Private loans come from independent providers or banks. There are pros and cons to both options, so consider your unique situation to decide which is best for you.
If you have already taken a student loan, you may be wondering how you’ll pay it off. Keep in mind that interest compounds on principal, which is the amount of the loan, and that paying down principal whenever you’re able will prevent snowballing interest. Additionally, paying off high-interest loans first will save you money in the long run.
Personal Finance Tip #2: Understand credit
Building good credit while in college will allow you to get credit cards, take out loans, and get approved for leases, among many other important things after graduation. Credit scores are determined by credit history length, credit utilization, payment history, credit mix and new credit. While in school, there are a few things you can do to maintain good credit:
- Make your payments on time. Missing a payment can seriously dent your credit score. Autopay is a great option for recurring payments, when available.
- Try to keep your credit utilization below 30%, meaning that no more than 30% of your credit limit is spent without paying it off.
- Make small purchases and pay them off often. If you have an older credit card, keep it open to use occasionally for these purchases.
Personal Finance Tip #3: Make – and stick to – a budget
With all the new opportunities and independence that comes with college, it’s easy to lose track of spending. Creating a budget starts with separating financial needs and wants – for example, costs like rent and utilities are unavoidable, but going out for drinks and dinner is more negotiable.
From there, determine what your sources of income are and build a savings plan. Try tracking your spending for a month and use that information to determine a realistic, sustainable budget plan for you.
The most important part of budgeting is sticking to your plan. While it can be a challenge, staying focused and true to your budget will allow you to create good habits and financial success in the long run.
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