14 answers
Tsion
Student
Toronto, Ontario, Canada
3
Questions
Asked
903 views
What financial advice would you give to younger individuals, in particular students who are striving to be financially responsible?
#saving #investments #real-estate #startups #buisness #credit #student loans # JULY 20.
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14 answers
Su Miao
Real Estate Agent
1
Answer
New York, New York
Updated
Su’s Answer
1) Depending on age, research alternatives to paying for college. I.e. cheaper school, available scholarships, etc
2) Pay down student debt, consolidate, etc ASAP. Debt restricts. It took me 10 years to pay mine off because I thought there is a tax incentive but its not worth it.
3) Put $100 - $500/mo towards a retirement account such Roth IRA or traditional roth in a S&P 500 mutual fund
4) Start saving towards home ownership right away - renting will always be more expensive than buying.
5) Buy something that can generate income, I.e. a duplex if possible. Or somewhere that is up and coming. Your dream home should be your second or 3rd home.
2) Pay down student debt, consolidate, etc ASAP. Debt restricts. It took me 10 years to pay mine off because I thought there is a tax incentive but its not worth it.
3) Put $100 - $500/mo towards a retirement account such Roth IRA or traditional roth in a S&P 500 mutual fund
4) Start saving towards home ownership right away - renting will always be more expensive than buying.
5) Buy something that can generate income, I.e. a duplex if possible. Or somewhere that is up and coming. Your dream home should be your second or 3rd home.
Thank you, Su, for sharing these valuable tips!
Tsion
Anwar Chohaan
Compliance, Risk and Audit
6
Answers
Fort Lauderdale, Florida
Updated
Anwar’s Answer
Hi Tsion,
Your question is so profound especially in today's financial and health crisis. Financial responsibility does not mean just living within one means or living paycheck to paycheck. It requires discipline and planning to succeed in life.
As a student, there are two possibilities - First, you may have parents or other family members supporting you during your studies. In that situation, there is a good chance you will graduate with little or no loans. If you had to have a student loan, chances are that your parents co-signed that loan and are responsible for the debt along with you. This is a good time for you to start building your own credit. Specifically:
- Start your checking and saving accounts in local bank
- Make sure you learn how to balance the checkbook
- Get a Debit card also known as the ATM cash card and make sure you know how it works.
- Get a credit card from the same bank or credit union - Learn to use the credit card and make sure you pay back on time to build your credit history
- Start an Online investment account with an equity firm such as Charles Schwab, eTrade and start investing a small set amount to purchase stocks
If on the other hand you are taking loans and relying on Scholarships/grants to go to school, it will be harder to do some of the things above. In that case, you have usually 6 months after graduation when you have to start paying back the loans and assuming you have a job. Keep that in mind as you may have to adjust your living standards during your studies. Do get financially educated in open accounts as above and make sure you are keeping track.
Keep in mind that once you go into the job market, many jobs require good credit (or at least not bad credit) and regardless of your career choice, you have to be financially savvy to survive and thrive in life.
I wish you all the best and stay safe.
Your question is so profound especially in today's financial and health crisis. Financial responsibility does not mean just living within one means or living paycheck to paycheck. It requires discipline and planning to succeed in life.
As a student, there are two possibilities - First, you may have parents or other family members supporting you during your studies. In that situation, there is a good chance you will graduate with little or no loans. If you had to have a student loan, chances are that your parents co-signed that loan and are responsible for the debt along with you. This is a good time for you to start building your own credit. Specifically:
- Start your checking and saving accounts in local bank
- Make sure you learn how to balance the checkbook
- Get a Debit card also known as the ATM cash card and make sure you know how it works.
- Get a credit card from the same bank or credit union - Learn to use the credit card and make sure you pay back on time to build your credit history
- Start an Online investment account with an equity firm such as Charles Schwab, eTrade and start investing a small set amount to purchase stocks
If on the other hand you are taking loans and relying on Scholarships/grants to go to school, it will be harder to do some of the things above. In that case, you have usually 6 months after graduation when you have to start paying back the loans and assuming you have a job. Keep that in mind as you may have to adjust your living standards during your studies. Do get financially educated in open accounts as above and make sure you are keeping track.
Keep in mind that once you go into the job market, many jobs require good credit (or at least not bad credit) and regardless of your career choice, you have to be financially savvy to survive and thrive in life.
I wish you all the best and stay safe.
Melissa Blassingame
Director - Strategic Business Development
3
Answers
Golden, Colorado
Updated
Melissa’s Answer
Hello Tsion! I see many great responses to your question. I'll make this short but to the point. The most important thing you can do at a young age is to find opportunities to earn money, and make a decision to allocate a certain % of earned money to a savings account to begin with. Opening a Roth IRA is a great idea, as there are caps to contribution when you are older and earn more money. When in a job, always contribute the maximum amount to a 401K if offered, or at least to the amount that an employer will match. There are great apps to use for budgeting (Mint, YNAB, Personal Capital), which is a great tool to use when analyzing spending patterns and setting limits for the future. Always pay off credit card balances in full at the end of the month, and never spend more than you earn. The key to my success has always been living under my means, which meant not increasing my personal spending because of an increase in salary. I typically allocate personal spending on things I most enjoy, and make a choice not to engage in material purchases for the sake of showing others how much money I have.
Good luck and know that small steps you make early in your life toward financial freedom will pay off significantly in your future! Patience is key :)
Good luck and know that small steps you make early in your life toward financial freedom will pay off significantly in your future! Patience is key :)
Hi Melissa,
Thank you for a great response. I've definitely implemented all the advice I've received so far & will continue to do the same. I love how you stressed on the importance of living below your means!
Tsion
Andrew Borst
Security Compliance
1
Answer
Indianapolis, Indiana
Updated
Andrew’s Answer
Hi Tsion, great question! One thing that has really helped me is creating a comprehensive spreadsheet that tracks my current financial situation. This allows me to track balances of money across multiple sources such as checking accounts, saving accounts, brokerage accounts and employee benefit accounts. You may only have money in one place right not, but this can still be helpful just to visualize and track your money. I try to update this every couple weeks. I prefer to manually do this but there are also apps you can use to do this for you (i.e. Mint).
You can also track financial goals in the spreadsheet. For example, if you want to save xxx amount of money each month, you can clearly track progress against that goal. Also, if you are saving up for something large (i.e. vehicle, apartment/house, paying off student debt), it's a great way to develop a plan. The centralized spreadsheet will have all the information available to track and plan your finances!
The other responses to this question have great recommendations. I would reiterate the following:
- Avoid credit card debt as much as possible (the interest rates are crazy high!)
- Be conscious about your spending. A classic example is coffee -- are you better off making coffee for 20 cents per cup or spending 6 dollars at the cafe.
- With money you are able to save, exchange traded funds ( ETFs) are great investments. They are lower risk than buying individual stocks and can compound significantly over time.
Hope this helps and best of luck!
You can also track financial goals in the spreadsheet. For example, if you want to save xxx amount of money each month, you can clearly track progress against that goal. Also, if you are saving up for something large (i.e. vehicle, apartment/house, paying off student debt), it's a great way to develop a plan. The centralized spreadsheet will have all the information available to track and plan your finances!
The other responses to this question have great recommendations. I would reiterate the following:
- Avoid credit card debt as much as possible (the interest rates are crazy high!)
- Be conscious about your spending. A classic example is coffee -- are you better off making coffee for 20 cents per cup or spending 6 dollars at the cafe.
- With money you are able to save, exchange traded funds ( ETFs) are great investments. They are lower risk than buying individual stocks and can compound significantly over time.
Hope this helps and best of luck!
Jonathan Kolakowski, CPA
Auditor
14
Answers
Hartford, Connecticut
Updated
Jonathan’s Answer
Great question! One, there is a difference between being financially responsible and achieving financial freedom. To be financially responsible, I would suggest simply keeping yourself on a budget (this doesn't mean not spending money, this means just tracking your cash inflows and outflows, or being aware of the money that's coming and going out). More importantly, and what I think you're meaning to ask is how to become financially free starting from a young age. You already have the easiest step complete, you're young! The key to any investing advice is start as young as possible, and with whatever amount feasible. You don't have to have thousands of dollars to start investing. A few suggestions to be financially responsible/free:
- Open up a Roth IRA and contribute as much as you can per month (if you can't max it out). $6,000 for 2020.
- If employed, contribute more than the "normal" 6% to your 401k, contribute as much as you can financially withstand (if you can't max it out). $19,500 for 2020.
- After maxing out both your IRA and 401k, consider opening up a individual investing portfolio to save/invest even more that what those two accounts allow.
In summary, invest as much as you can and in as many accounts as possible (starting with tax-advantageous ones). Never rely on social security or solely your 401k at 6% being your retirement fund. Go above and beyond, if you really want to be financially free at an early age (and feasible since you'd be starting young), strive to invest at least 50% of your salary. So, keep revisiting your investing accounts and goals every year as your salary increases to ensure you're keeping up with that 50% goal.
- Open up a Roth IRA and contribute as much as you can per month (if you can't max it out). $6,000 for 2020.
- If employed, contribute more than the "normal" 6% to your 401k, contribute as much as you can financially withstand (if you can't max it out). $19,500 for 2020.
- After maxing out both your IRA and 401k, consider opening up a individual investing portfolio to save/invest even more that what those two accounts allow.
In summary, invest as much as you can and in as many accounts as possible (starting with tax-advantageous ones). Never rely on social security or solely your 401k at 6% being your retirement fund. Go above and beyond, if you really want to be financially free at an early age (and feasible since you'd be starting young), strive to invest at least 50% of your salary. So, keep revisiting your investing accounts and goals every year as your salary increases to ensure you're keeping up with that 50% goal.
HanSon Tieu
Director of Presales
5
Answers
Toronto, Ontario, Canada
Updated
HanSon’s Answer
This is a great question and one where I feel like we don't do a good job of with the existing school curriculum. Generally speaking, savings takes time so the sooner you start to do it, the more time you have to do it. When looking at your income, think shaving off a % (5-10) an setting it aside as if it didn't exist in the first place. It's amazing how quick that small cut will increase if you have time for it to grow.
Reetika Monavarthi
Project developer
1
Answer
Bengaluru, Karnataka, India
Updated
Reetika’s Answer
If you're an individual striving to be a responsible person since your student life, I'm going to give you a very few and simple but powerful tips.
1. Always track your expenses
Start saving money from what you already have. Even if you don't have a part time where you can earn some money, keep tracking from what you already have. If time permits, try to write them down. Take 5 mins of your time to sit down and write what you spent. Also, write down what do you want to buy in the future with your money. This is a proven strategy which is being used by Japanese since ages. When you write down what you spent on and what you want to buy, your mind realizes if that's what you really need or it's just an impulsive desire.
2. Save
It's a given that many of us, at our student times, want to save money even if it's a small amount. So, we usually keep targets but fail to meet them after few days just because we don't meet our own targets of saving. KNOW THE POWER OF SMALL STEPS. Save each penny.
3. You want to buy something ? Wait for atleast 24 hours to make the purchase. After a day or two, if you still want to buy what you had your eyes on, go on. This step is to reduce impulsive buying.
1. Always track your expenses
Start saving money from what you already have. Even if you don't have a part time where you can earn some money, keep tracking from what you already have. If time permits, try to write them down. Take 5 mins of your time to sit down and write what you spent. Also, write down what do you want to buy in the future with your money. This is a proven strategy which is being used by Japanese since ages. When you write down what you spent on and what you want to buy, your mind realizes if that's what you really need or it's just an impulsive desire.
2. Save
It's a given that many of us, at our student times, want to save money even if it's a small amount. So, we usually keep targets but fail to meet them after few days just because we don't meet our own targets of saving. KNOW THE POWER OF SMALL STEPS. Save each penny.
3. You want to buy something ? Wait for atleast 24 hours to make the purchase. After a day or two, if you still want to buy what you had your eyes on, go on. This step is to reduce impulsive buying.
Ibraheem Mohammed
Underwriter
9
Answers
San Ramon, California
Updated
Ibraheem’s Answer
Hi Tsion
I would start thinking about doing things that are cost effective.
• Researching ways to pay for college.
• Set a budget and track your expenses
• Cheaper schools
• Is there scholarships available?
• Interest rates on the Student Loan
• Can you work part time and go to school?
Start saving whatever extra money you have in an account. It could be something simple as throwing money in a savings account or stocks. (See online investment firms like Charles Schwab or E-Trade)
I would also recommend getting a credit card with a low limit so you can start building credit. Again, you must be very discipline when it comes to credit card and make sure to pay the whole balance every month.
Good Luck
Open a Savings Account
I would start thinking about doing things that are cost effective.
• Researching ways to pay for college.
• Set a budget and track your expenses
• Cheaper schools
• Is there scholarships available?
• Interest rates on the Student Loan
• Can you work part time and go to school?
Start saving whatever extra money you have in an account. It could be something simple as throwing money in a savings account or stocks. (See online investment firms like Charles Schwab or E-Trade)
I would also recommend getting a credit card with a low limit so you can start building credit. Again, you must be very discipline when it comes to credit card and make sure to pay the whole balance every month.
Good Luck
Ibraheem recommends the following next steps:
Itai Gerchikov
Sales
3
Answers
San Francisco, California
Updated
Itai’s Answer
Being a student is particularly tough. But as a young person with a job, put money in your 401K ASAP. Particularly a Roth early on as you will most likely be in a higher tax bracket when you retire and pull it out. And once you have a strong retirement plan, you can go and buy a house, car, etc with out worrying.
As for students, as you take out loans you should price shop on interest rates. Call competing banks and negotiate. Had I known what I know now, I think I could have saved thousands on interest.
As for students, as you take out loans you should price shop on interest rates. Call competing banks and negotiate. Had I known what I know now, I think I could have saved thousands on interest.
Thank you Itai !
Tsion
Stefanie A
Marketing
3
Answers
Sydney, New South Wales, Australia
Updated
Stefanie’s Answer
Hi Tsion,
What a great thing to think about early! I can see there are a lot of great points already provided to you so I am going to keep it short and basic/simple :)
Firstly, start with the basic, commit to a saving plan (so eventually it becomes a habit)
If you earn an income, I strongly suggest to make a commitment of x% to be put aside into saving account each month with no excuse. It's even better if you set-up a separate saving account. Up until now, I still have a specific account where it doesn't have direct link to my 'transaction' account. My original logic for this was so that I didnt get tempted to use the money in my saving account. It has worked really well for me up until now :) Depending where you are, you might be able to find bank/financial institutions that offers a bonus interest rate/ a higher interest rate if you don't do any withdrawals to the account (or something similar nature). Look out for those offers !
If the technology allows, set up an auto-transfer for an "x" amount from your day to day account to your special saving account. That way you dont need to think about it every month.
Secondly, track your spending every day for at least for a month (I am sure there are loads of Apps out there to help but I used to literally just write them down on my excel spreadsheet!)
This exercise was a good eye-opener for me as it helped me realise :
1)where all my money went and..
2)small expenses actually add up to not-so-small expenses !
MOST importantly, it helped me assess my habit and helped me identify where I can actually cut back and make/save more!
Hope that helps!
What a great thing to think about early! I can see there are a lot of great points already provided to you so I am going to keep it short and basic/simple :)
Firstly, start with the basic, commit to a saving plan (so eventually it becomes a habit)
If you earn an income, I strongly suggest to make a commitment of x% to be put aside into saving account each month with no excuse. It's even better if you set-up a separate saving account. Up until now, I still have a specific account where it doesn't have direct link to my 'transaction' account. My original logic for this was so that I didnt get tempted to use the money in my saving account. It has worked really well for me up until now :) Depending where you are, you might be able to find bank/financial institutions that offers a bonus interest rate/ a higher interest rate if you don't do any withdrawals to the account (or something similar nature). Look out for those offers !
If the technology allows, set up an auto-transfer for an "x" amount from your day to day account to your special saving account. That way you dont need to think about it every month.
Secondly, track your spending every day for at least for a month (I am sure there are loads of Apps out there to help but I used to literally just write them down on my excel spreadsheet!)
This exercise was a good eye-opener for me as it helped me realise :
1)where all my money went and..
2)small expenses actually add up to not-so-small expenses !
MOST importantly, it helped me assess my habit and helped me identify where I can actually cut back and make/save more!
Hope that helps!
Wayne Archibald
Cybersecurity Associate Director here to share knowledge!
210
Answers
Silver Spring, Maryland
Updated
Wayne’s Answer
Good day Tsion! It is so awesome that you are thinking about being financially responsible at this stage. Here are a few things I wish I did at your stage in life.
Start earning money as soon as possible. Even young kids can earn money for helping neighbors with yard work, walking their dogs or washing their cars. That kind of entrepreneurial practice can help you get comfortable with making and managing their cash.
Start the savings habit. Getting into the habit of setting money aside when you are young can set up a lifetime of healthy saving. Saving for the future can be an abstract concept for teens, but at least start thinking about saving money and save as much as you can.
Track Your Spending. It is a good idea to establish a relationship with a bank when you are young. In ten or 20 years when you want a loan to buy a house, a long track record with a bank can be helpful. Research the different types of accounts banks offer. Some will charge fees if you do not keep a minimum balance. You should never pay a penny in fees to a bank for any reason.
Open two accounts, a checking and a savings account. Save half of every dollar you get so half goes into checking and half into savings. It is essential to separate your money. You can get a debit card for the checking account. You can now spend money via your debit card rather than cash so you can easily track your spending. The card will also allow you to deposit cash into your accounts at the ATM rather than having to go to a teller every time.
Write down your needs versus wants. Writing down your needs and wants on a piece of paper helps you prioritize how to spend your money. That central tenant of budgeting can help you move closer to your goals.
Think about your goals. Your goals should be specific “Don’t say, ‘My goal is to buy sneakers and hang out with my friends.’ Say, ‘I’d like to go the Maroon 5 concert next year.’ Set goals and be specific. Do some planning on what money you have coming in and what can be set aside to meet your goals.
Make Smart Decisions About College. A smart decision about college can include the decision not to attend the most expensive school or work full time to help pay for it. A smart decision might also be attending a local college for two years and then transferring to a more expensive, prestigious school. It means applying for every grant and scholarship you are evenly remotely qualified for.
Avoid following the crowd. My father used to say things like "If 9 of your friends jump off a bridge, you do not need to be the 10th friend to do something stupid." The thing applies to spending money. ALways remember the needs versus wants and always do what is best for you.
Understand he difference between "good" vs. bad debt. Learning the difference between “good debt” and “bad debt” is crucial to wealth building and debt management. Building a line of credit is vital in today’s society. However, accumulating credit card debt, paying bills late or avoiding paying bills altogether can negatively affect your credit score as well as their future. It is paramount that you understand the value in having a good credit score. If possible, avoid debt whenever possible.
Good luck Tsion!
Start earning money as soon as possible. Even young kids can earn money for helping neighbors with yard work, walking their dogs or washing their cars. That kind of entrepreneurial practice can help you get comfortable with making and managing their cash.
Start the savings habit. Getting into the habit of setting money aside when you are young can set up a lifetime of healthy saving. Saving for the future can be an abstract concept for teens, but at least start thinking about saving money and save as much as you can.
Track Your Spending. It is a good idea to establish a relationship with a bank when you are young. In ten or 20 years when you want a loan to buy a house, a long track record with a bank can be helpful. Research the different types of accounts banks offer. Some will charge fees if you do not keep a minimum balance. You should never pay a penny in fees to a bank for any reason.
Open two accounts, a checking and a savings account. Save half of every dollar you get so half goes into checking and half into savings. It is essential to separate your money. You can get a debit card for the checking account. You can now spend money via your debit card rather than cash so you can easily track your spending. The card will also allow you to deposit cash into your accounts at the ATM rather than having to go to a teller every time.
Write down your needs versus wants. Writing down your needs and wants on a piece of paper helps you prioritize how to spend your money. That central tenant of budgeting can help you move closer to your goals.
Think about your goals. Your goals should be specific “Don’t say, ‘My goal is to buy sneakers and hang out with my friends.’ Say, ‘I’d like to go the Maroon 5 concert next year.’ Set goals and be specific. Do some planning on what money you have coming in and what can be set aside to meet your goals.
Make Smart Decisions About College. A smart decision about college can include the decision not to attend the most expensive school or work full time to help pay for it. A smart decision might also be attending a local college for two years and then transferring to a more expensive, prestigious school. It means applying for every grant and scholarship you are evenly remotely qualified for.
Avoid following the crowd. My father used to say things like "If 9 of your friends jump off a bridge, you do not need to be the 10th friend to do something stupid." The thing applies to spending money. ALways remember the needs versus wants and always do what is best for you.
Understand he difference between "good" vs. bad debt. Learning the difference between “good debt” and “bad debt” is crucial to wealth building and debt management. Building a line of credit is vital in today’s society. However, accumulating credit card debt, paying bills late or avoiding paying bills altogether can negatively affect your credit score as well as their future. It is paramount that you understand the value in having a good credit score. If possible, avoid debt whenever possible.
Good luck Tsion!
Hi Wayne, thank you for the insightful advice you've shared and it's information I plan to implement into my personal life!
Tsion
You are very welcome! Keep shining!
Wayne Archibald
Kenneth Romanowski
CFP Board Emeritus (R), CTFA (Ret.), Instructor and Researcher of Financial History
28
Answers
Ardmore, Pennsylvania
Updated
Kenneth’s Answer
Hello, Tsion!
As someone who spent over 40 years in financial services and retired three years ago on my own terms, I would like to give you some suggestions:
1. What type of lifestyle do you want? If you are looking to live extravagantly while earning a modest salary, you need to re-think your goals.
2. Don't spend more than you earn, and consider your savings or investments as a regular "expense."
3. Try to make savings and investing as easy as possible. Use payroll deductions or automatic checking account deductions where possible.
4. Make sure you have an emergency fund of, at a minimum, 6 months of expenses before investing.
5. Buying a home is usually a good idea, but don't do it if you don't plan on staying in the home for at least 10 years. There are many costs to incur when you buy a home, and you want to be sure you get those back when you sell.
6. Remember that "location, location, location" are the three most important rules to real estate. As with any investment, you need to ask yourself before you buy how difficult it will be to sell your home or any investment when the time comes.
7. If your employer matches your contributions, make sure to take advantage of this benefit. It will help you accumulate wealth faster.
8. A previous commenter mentioned student loans. I still feel that a college education can be worth it, however, you must take a serious look at how much you will spend on your education versus how much of a salary you will reasonably get when you go into the working world. Student debt can keep you from achieving your dreams because those monthly payments will reduce your available funds for mortgage payments or investments. If money is tight, consider starting with a community college, and then working your way up from there. It's really great if your employer will help pay for your education as part of your benefits, but remember that you will be studying and working at the same time, and there are times that this arrangement can be stressful, especially if you have family responsibilities.
9.Take your credit rating very seriously. A poor credit rating can hinder your chances for a better job or larger credit. Make absolutely sure that you make your payments ON TIME, EVERY TIME. No exceptions. Also, credit card debt can be worse than student loan debt because the interest rates are higher. Make a goal of bringing your credit card debt down to zero. Once that happens, if you are looking to make a purchase, only make it if you can pay off the entire bill when your statement arrives. If you can't do that, ask yourself why? Also, ask yourself do you really need what you are buying?
10. Finally, when you are young, time is on your side. With investments, the compounding of interest and dividends will pay off for you in the long run. Also, the best credit ratings occur when someone has had great credit for many years.
Good luck....and congratulations on asking a really good question. Every great journey begins with a first step!
As someone who spent over 40 years in financial services and retired three years ago on my own terms, I would like to give you some suggestions:
1. What type of lifestyle do you want? If you are looking to live extravagantly while earning a modest salary, you need to re-think your goals.
2. Don't spend more than you earn, and consider your savings or investments as a regular "expense."
3. Try to make savings and investing as easy as possible. Use payroll deductions or automatic checking account deductions where possible.
4. Make sure you have an emergency fund of, at a minimum, 6 months of expenses before investing.
5. Buying a home is usually a good idea, but don't do it if you don't plan on staying in the home for at least 10 years. There are many costs to incur when you buy a home, and you want to be sure you get those back when you sell.
6. Remember that "location, location, location" are the three most important rules to real estate. As with any investment, you need to ask yourself before you buy how difficult it will be to sell your home or any investment when the time comes.
7. If your employer matches your contributions, make sure to take advantage of this benefit. It will help you accumulate wealth faster.
8. A previous commenter mentioned student loans. I still feel that a college education can be worth it, however, you must take a serious look at how much you will spend on your education versus how much of a salary you will reasonably get when you go into the working world. Student debt can keep you from achieving your dreams because those monthly payments will reduce your available funds for mortgage payments or investments. If money is tight, consider starting with a community college, and then working your way up from there. It's really great if your employer will help pay for your education as part of your benefits, but remember that you will be studying and working at the same time, and there are times that this arrangement can be stressful, especially if you have family responsibilities.
9.Take your credit rating very seriously. A poor credit rating can hinder your chances for a better job or larger credit. Make absolutely sure that you make your payments ON TIME, EVERY TIME. No exceptions. Also, credit card debt can be worse than student loan debt because the interest rates are higher. Make a goal of bringing your credit card debt down to zero. Once that happens, if you are looking to make a purchase, only make it if you can pay off the entire bill when your statement arrives. If you can't do that, ask yourself why? Also, ask yourself do you really need what you are buying?
10. Finally, when you are young, time is on your side. With investments, the compounding of interest and dividends will pay off for you in the long run. Also, the best credit ratings occur when someone has had great credit for many years.
Good luck....and congratulations on asking a really good question. Every great journey begins with a first step!
Jessica Riehl
Tax Accounting Director
2
Answers
Washington, Washington
Updated
Jessica’s Answer
As a student, it is tough because you generally don't have any income (unless you are working a student job or something on the side like waiting at a restaurant or babysitting). I would focus on not creating more debt - e.g., don't rack up credit card bills, try to only take out student loans for the bare minimum, and only spend money on what you actually need. College is a tough time financially, but don't worry, nearly everyone goes through it and it will pay off in the end. Focus on your studies so you can have a long successful career! :)
Once you start earning income, the key is to save. One method that worked really well for me: after putting the maximum pre-tax amount allowed into 401(k) or IRA, I saved 10% of every paycheck and put it into a savings account immediately. After a few years, once I was more financially stable, I upped that to 15%. After 10 years I changed it to 25% of my paycheck, since I had more disposable income and less things to buy. Now I have enough money in my savings account for a down payment on a house. Also, after a couple years, once you get the hang of saving, you can start investing those savings into stock index funds where the money will earn more returns than a savings account with low interest rates. Lastly, for the first 5 years of my career, I tracked my expenses like a hawk. I wanted to know everywhere and everything that I was spending my money on. This helps you make more responsible decisions when you want to buy something or go on a shopping spree. After a while I knew what was "normal" spend for my budget and what was too expensive or would put me in debt.
Once you start earning income, the key is to save. One method that worked really well for me: after putting the maximum pre-tax amount allowed into 401(k) or IRA, I saved 10% of every paycheck and put it into a savings account immediately. After a few years, once I was more financially stable, I upped that to 15%. After 10 years I changed it to 25% of my paycheck, since I had more disposable income and less things to buy. Now I have enough money in my savings account for a down payment on a house. Also, after a couple years, once you get the hang of saving, you can start investing those savings into stock index funds where the money will earn more returns than a savings account with low interest rates. Lastly, for the first 5 years of my career, I tracked my expenses like a hawk. I wanted to know everywhere and everything that I was spending my money on. This helps you make more responsible decisions when you want to buy something or go on a shopping spree. After a while I knew what was "normal" spend for my budget and what was too expensive or would put me in debt.
Jeffrey Holdaway
Appeals & Grievances
1
Answer
Santa Ana, California
Updated
Jeffrey’s Answer
Hello Tsion,
As a student, you're going to come across numerous credit card offers. It's okay to accept them, but remember to only spend what you can afford to pay back, and try to make payments on a daily or weekly basis. It might seem tempting to think that a $1,000 balance can be quickly cleared with a few paychecks, but that's not the right way to look at it. Instead, consider how long it took you to save up $1,000 as spare cash. That's roughly how long it would take to pay off the same amount on a credit card.
To truly gain financial independence and ensure all your needs are met, it's a good idea to have a second bank account. I personally have accounts with both a credit union and a bank. Banks often require a direct deposit to avoid fees, so if you're not currently employed, you might want to consider having two credit union accounts instead. Always ensure there are no hidden fees. Your second account should be used for direct deposits of your regular monthly expenses (like rent, car payments, insurance, utilities, income tax if you're freelancing, tuition, and so on). To figure out how much to deposit, add up a full year of these costs, factoring in savings, and then divide by the number of payments you receive. Once you've calculated this fixed amount, set up a direct deposit split with your bank.
By following this method, your primary account will only contain your variable income. This is the money you'll use for flexible expenses like food, gas, entertainment, and other adjustable costs. This strategy will help you avoid common financial pitfalls without any extra effort. Your second account, set up with autopay for all your fixed expenses, will essentially run itself. You'll only need to check it if there's a shortfall on payday, and you'll know this has happened because your main account won't receive its usual deposit.
With this system in place, your main checking account will only contain variable income, allowing you to always stay afloat with minimal stress and effort when it comes to bill payments. This approach will empower you to manage your finances effectively and with confidence.
As a student, you're going to come across numerous credit card offers. It's okay to accept them, but remember to only spend what you can afford to pay back, and try to make payments on a daily or weekly basis. It might seem tempting to think that a $1,000 balance can be quickly cleared with a few paychecks, but that's not the right way to look at it. Instead, consider how long it took you to save up $1,000 as spare cash. That's roughly how long it would take to pay off the same amount on a credit card.
To truly gain financial independence and ensure all your needs are met, it's a good idea to have a second bank account. I personally have accounts with both a credit union and a bank. Banks often require a direct deposit to avoid fees, so if you're not currently employed, you might want to consider having two credit union accounts instead. Always ensure there are no hidden fees. Your second account should be used for direct deposits of your regular monthly expenses (like rent, car payments, insurance, utilities, income tax if you're freelancing, tuition, and so on). To figure out how much to deposit, add up a full year of these costs, factoring in savings, and then divide by the number of payments you receive. Once you've calculated this fixed amount, set up a direct deposit split with your bank.
By following this method, your primary account will only contain your variable income. This is the money you'll use for flexible expenses like food, gas, entertainment, and other adjustable costs. This strategy will help you avoid common financial pitfalls without any extra effort. Your second account, set up with autopay for all your fixed expenses, will essentially run itself. You'll only need to check it if there's a shortfall on payday, and you'll know this has happened because your main account won't receive its usual deposit.
With this system in place, your main checking account will only contain variable income, allowing you to always stay afloat with minimal stress and effort when it comes to bill payments. This approach will empower you to manage your finances effectively and with confidence.