4 ways to become financially smart in 2018
Monday, January 1, 2018
College can be one of the most exciting times in you life, when one comes into their own, earns a degree and moves up life’s ladder. College is also one of the most important decisions you will make in your lives, but not because it defines and carves out a future path, but it’s a financial decision that for many involve school loans that will be waiting to be paid off once you graduate. But before you move the tassel and start the new job, you need to be financially prepared for that future. Professor Len Rhodes and Mark Weitzel currently co-teach a personal finance class at East Carolina University. This class teaches students basic financial concepts & competency tools that will help them build confidence which then will allow a person to make sound financial decisions. With the help of the professionals, I put together a list of four ways you can maximize your college experience, maximize your potential beyond just a good GPA and diploma and become financially savvy.
Create and maintain a budget- Maintaining fiance is a building block to financial success and this starts with a budget. Rhodes described a budget as a “cool tool that can be fun and liberating.” Your budget should not just focus on tracking your spending, but should focus on goal setting. Start by tracking your normal spending over a few months. You can download an awesome app on your cell phone called Mint.com which will help you input expenses and allows you to see where you money is going. Then, you will see how you can reallocate money for the future. Remember your goals for your financial life should be specific, measurable and with a set time frame. Here is a simple example: I will decrease my fast-food budget by $10 per week, and within three months, I will be able to save $120 so I can travel more. You don’t have to see budgeting as negative, look at it as not cutting out something, but cutting back. Rhodes also said, “Budgets can be liberating because they allow you to focus on the thing you have the most control over: your spending.”
Create an emergency fund- We all have those times in life when the car battery dies two days before we get paid or we get the flu twice in one semester and don’t have the money for the co-pays or medicine. This kind of stuff happens all the time — it’s called life and if does not check to see what’s in our bank account before it rears an ugly head to us. If only we had set ourselves up financially ahead of time, that co-pay or dead battery won’t be a big deal. Rhodes said setting up an emergency fund should be a “great New Year’s Resolution and your first great financial goal for 2018.” Once you set your budget and can see where your money is going, you can decide how much money feasibly you can set aside for this fund. Then, you should recognize your needs versus wants. Pay your bills first and then set aside a small amount of money each month that I call “mad money.” This is money you can use to spend on anything you want, no questions asked. If you want to buy your dog 10 new toys, or like me buy yourself a boat load of new books, then it’s OK, there is no judgment. This way, you have your emergency fund set, your bills paid and when you spend your mad money, you can feel good you are making real adult decisions.
Don’t separate your financial life from your personal life- A very important thing to come away with when thinking about life goals and your finances is to realize you can’t separate your financial life from your personal life. They go hand-in-hand. All the choices we make in life and in our relationships can impact our wallets. When you go on a date or out with your friends, you are the one to make a financial decision on what to order, who will pay and how much you will spend. Once you move past dating into living together and into marriage, “you” becomes a “we” and you have to start thinking like a financial unit. This can be tough and for many couples, money is the No. 1 thing they fight over. Money is at the core of all relationships and marriage, just like college is a significant financial decision. Money brings a different dynamic to any relationship and you have to work together to get down that yellow brick road. First, sit down and have regular money conversations to discuss your dual financial goals. Don’t fight over who spends what, but look at how each purchase impacts your dual goals. Rhodes said when you do this effectively, you are not fighting against each other’s financial wish lists, you are fighting for them. When you make smart “we” decisions, you can tell your partner how happy you are that they can afford to buy that Kitchen Aid Mixer they want for Christmas (Hint, hint honey).
Focus on retirement NOW- For many college students and young adults, the last thing you are thinking about is retirement. When you are in college, you don’t see past the four years, but you have to open up the tunnel and look toward your future. You will start asking your self questions of how will you pay off your school loans, get married, buy a house and have children. Rhodes helped me develop 3 easy goals for you to accomplish retirement with a nest egg large enough to sustain you. 1. Start now, because as Rhodes said, “you have time on your side.” 2. Participate in employee sponsored retirement plans through your employer. They take out a certain amount each month that gets socked away in a fund that you can use once you hit retirement age. Lastly, start an Individual retirement account (IRA) account at your local bank. This will help you save more money because your money will earn interest and interest earns interest that you can see. If you start saving at age 25, you can have hundreds of thousands of dollars upon retirement and that in itself is a very financially savvy thing to do.
No matter how you start saving and building a nest egg for your future, you will feel confident in your future by making adult choices with your finances. Have fun and happy saving in 2018!