Money Management You just earned your first paycheck from your new college job, and you feel like you are at the top of the world. Now you can finally afford that new CD, a trip with your friends to the movies and the new gadget you’ve been eying. But wait…you don’t want to miss a payment on your credit card, your bank account is running low, you have to pay interest on your student loan. Sound crazy? That’s life in college. While you don’t have to save every penny you earn, money management is very important.
Here are ten tips on how to effectively manage your money in college, while still being able to afford the things you crave.
1. Make a list of your wants and needs. Can’t figure out the difference between the two? Anything necessary for your everyday life is a need. Needs include groceries and money to pay for bills and loans. Wants include items you would like to have, yet could live without. These include CDs, movies and fast food.
2. Calculate how much money you earn each month. Be sure to include paychecks, if you have a job, as well as money from your parents and other sources.
3. Determine how much money you must spend each month on needs. You won’t know how much money you can spend on your wants until you know how much you must spend on your needs. Try to be as accurate as possible, and only include an item as a need if it is an absolute necessity.
4. Plan a monthly budget, and stick to it. Your budget should be set up like a chart. In the rows, along the horizontal axis, list each month. In the columns, along the vertical access, list each need. In the box corresponding to the month and the need, list how much the need will cost. Once this is set up, calculate the total amount you must spend on needs for the month. Subtract this number from your monthly income, and bingo! You are left with the total amount you can spend on wants for the month.
5. Open a savings account and a checking account. There are advantages to both types of accounts, which is why you should open one of each. After you calculate how much you will spend on needs and wants, if you still have money left over, put it in a savings account. You will receive higher interest than if you put it in a checking account. Yet the money you plan on spending on needs and immediate wants belongs in a checking account. Why? Because checking accounts come with debit cards. “The advantage of debit cards is you don’t have to carry money. Also, debit cards tailor to the right purchase amount. You can use a debit card rather than having to take out $20 and only using $14 for a purchase,” said John Adam, senior financial consultant at PNC Bank.
6. Use checks and your debit card for all major transactions. Checks, as well as debit cards, are a part of checking accounts. Many utility companies, such as the telephone company, may only accept checks as payments. It is important to have a method to pay your bills. As Adam said, debit cards are useful since they have the same purchasing power as credit cards, yet funds are drawn directly from your checking account. Debit cards can also be used to withdraw cash at ATM machines. If you don’t believe debit cards are convenient, just ask Liz Preis. This University of Pittsburgh freshman has had two jobs, and deposited the majority of the money in her checking account. “I carry a little cash but use my debit card for most of my larger purchases,” Preis said. She likes her debit card because there are no monthly fees, and she won’t have a bad credit rating if she mismanages it.
7. Keep a careful record of what you buy. This is important especially if you use a debit card. Once your debit card number is released, others might be able to use it. Make sure you know exactly how much is in your account. It’s also important to keep track of what you buy so you don’t overdraw from your account. If you write a check and don’t have enough money in your account, the check will bounce. Many businesses have service charges for handling a bounced check. You will have to pay the original amount of the purchase, plus the service charge.
8. Limit credit card usage. There are distinct advantages to having a credit card. If you plan on making Internet purchases, it is much safer to use a credit card than a debit card, since most credit cards offer fraud protection. Also, if you get a credit card at a young age and are able to make every payment, you will establish a good credit rating, which will help in the future. This is Jason Yamaura’s plan. This Brooke Community College freshman works 25 hours per week at Radio Shack. He uses his credit card primarily as a method for establishing a good credit rating. “I put $20 a month on my credit card to build credit,” Yamaura said. Although Jason is worried about establishing bad credit if he doesn’t pay his credit card bill on time, he said “I always pay my bill on time, so it isn’t really a concern.” The major disadvantage of a credit card is if you fail to make a payment, your credit rating will fall. The solution? Get a credit card, only use it for a small amount of money, and make every payment on time.
9. Pay all your bills and loans on time. If you fail to pay your credit card bill, as well as other bills and loans, your credit rating will fall. This is very serious and will affect you the rest of your life. You may be rejected from future credit cards, as well as mortgages and other loans.
10. Always look for cheaper alternatives. It is common sense to shop around and get the best deal. This may mean purchasing generic food brands, buying your laundry detergent in bulk, or buying your clothes at Wal-Mart rather than The Gap.
Most likely, college is the first time you are financially independent. With proper planning and use of money management techniques you will be successful and balancing your budget. Remember, you can spend your money on whatever you want to. Try to spend it wisely. The choice is up to you. Article provided by  View more articles | Information provided by collegeanduniversity.net |