Controlling Your CASH

Beth Roehrig, a junior at Syracuse University, knows what she wants: a Bachelor's degree in communications, a summer internship (preferably in New York City), and her own apartment after graduation. How can she reach these goals without accumulating too much debt? How will her spending habits today affect her future? In order to build her savings, she worked two jobs this summer and she will work part-time during the school year.
She lives on a budget. She only uses her credit card for emergencies. She receives scholarships and grants, which reduce the amount she has to borrow on her student loan. Beth is in a good financial position to achieve her goals. She's quite different from most young people, however. Most teens don't have the skills they'll need to thrive in today's society, according to The High School Student Consumer Knowledge Test. Results of the test given in 1991 showed participants scored less than 40% in the financial services section. How can you set yourself up for success in money management like Roehig?

BUDGET YOUR MONEY
Experts say the first step in planning for your financial future is creating a budget, a map of your income and expenses, to give you a clearer picture of your financial standing. Completing a budget helps you set limits on your spending in order to control where your money goes. The goal is to channel your funds into attaining things that are important to you, like clothes, a concert or a car. Because your wants and needs change, you will need to re-evaluate your budget every few months.
"If living destitute in retirement is not a problem, if you never care to own a home, or own a new car or nice furniture, then I'd say you don't need a budget. You don't need to save," says Dr. Walter Woerheide, professor of finance in the College of Business at the Rochester Institute of Technology. As soon as you have an expensive long-term goal that you must save for, you need to start budgeting your money. No budget should be without a category for savings. "If you really want to set aside some money for college, a house, or retirement, then you really can't spend everything you make each month," he says.

SAVE FOR THE FUTURE
Even if you plan to finance a new car with a loan, you will need to save at least 10% for a down payment. This means you'll need $1,000 for a $10,000 car. Odds are that someday, you'll want a wedding, a vacation or a comfortable retirement. It's impossible to afford these things without building up some savings.
"Coming up with $500 may seem like an overwhelming task," Woerheide says. Working out a savings plan will make it seem attainable. "If you set aside x dollars over y weeks, you have a sense of progress. If you have the incentive to save the money, you will get there." The ability to save is part discipline and part habit. Most experts advise setting aside a percentage of your weekly income.
For example, every time you take your paycheck to the bank, you would put 10% into your savings account and 90% into your checking account. Low-risk short-term investments like money markets or CD's can help you earn money on your savings. To learn more about the basics of investing, check out "Get A Financial Life" by Beth Kobliner (Simon & Schuster, 1996).

CUT THE COST OF COLLEGE
Many financial aid options help make college more affordable.
Verna Hazen, director of financial aid at the Rochester Institute of Technology, described four types of financial aid. "There are grants, which is gift money; scholarships, which are usually given based on grades; loans which have to be repaid; and work opportunities" she says. You are eligible for hundreds, maybe thousands of dollars of tuition assistance, even if you don't think you have the right grades or a low family income. Qualifications depend on the organizations offering the scholarships. "It's not all the straight-A students who get scholarships, there are all kinds of qualifications," Hazen says.
Students can also earn college money by working. You can find a job on or off campus. You can also apply for the Federal Work-Study program, through which the college provides a job. Another option is the federal AmeriCorps program, where volunteers do one year of community service in exchange for tuition assistance. "It's something I would encourage students to think about, if they are interested in doing that type of work," Hazen says. "The ROTC is a valuable source of money as well, for students interested in going into the military." The key is to start looking for financial aid as soon as possible. Make an appointment with your guidance counselor. And when you visit colleges, don't forget to stop by the financial aid office.

GET CREDIT SAVVY
A credit card can be many things: a status symbol, a convenient payment option or a tool for establishing good credit. But it can also be a quick way to get into debt. You need to know how credit cards work before you use them. Bill Brown, director of education at The Credit Bureau, says, "Too many people, teens and adults, think that credit cards are an extension or substitute for income." Often, people use credit when they can't afford to pay cash, not thinking about how and when they can afford to pay off the balance on the credit card.
Be careful: Teens and college students are frequent targets for credit card offers. Pay attention to the offers. Terms vary from one bank to the next and banks must disclose pertinent information about their offers: APR (annual percentage rate), annual fees and other details. Collect several offers and compare the terms before accepting a credit card.
For your first one, consider a secured credit card. This type of card requires a deposit, which bank holds as collateral against your balance. Generally, after one year, the bank will issue you an unsecured credit card and return your deposit (with interest).
A few tips for smart credit card use: pay your balance in full each month to avoid accumulating debt and being charged interest. Charge only what you can afford to repay. And reserve your credit card for emergencies, like unexpected car repairs. An alternative to a credit card is a debit card, which automatically deducts your purchases from your checking account. You won't need to worry about overspending, paying interest, or carrying cash. But make sure you have adequate funds in your checking account.

ORGANIZE YOUR FINACES
Keeping track of your finances is more than just important. When you are responsible for your own debts, you can't afford to lose bills, receipts, and service agreements. You can't write bad checks without paying a penalty. Companies don't accept "Oops," "Sorry," or "I forgot." The best way to keep track of your finances is to create a system for paying bills and organizing paperwork. Buy a calendar to record due dates, a file box and filing folders for keeping track of paperwork. Put unpaid bills in a designated place, such as a desk drawer, along with stamps, pens, and your checkbook. Then mail your payments at least a week before they're due.

ESTABLISH GOOD CREDIT
"A credit report is like a high school or college transcript - a record of how you've performed on your financial obligations," Brown says. "In the real world, it will be paid more attention to than the college transcript." Any company that extends you credit (including music clubs and rent-to-own stores) reports your bill-paying record to one or more of the three national credit bureaus. If you have a history of on-time payments, you have good credit. Late payments or nonpayment will damage your credit. Without good credit you can forget about getting credit cards and loans. Even prospective employers and landlords can review your credit report before accepting you.
If you do have trouble paying your bills, there are several places to turn to. First, you might try leveling with your parents. A heartfelt "I've learned my lesson" will earn you more respect than trying to hide your financial mess. It also might get you a loan until you can get back on track. If you can't afford to pay a bill, you can usually work out a payment plan with the credit card company. Brown suggests that you submit in writing a plan to pay the debt over a few months, and ask for a letter of confirmation. Then stick to the plan. "The planner is always ahead, secure, and has more in the long run than the guy who wings it," Brown says.

INTERNET RESOURCES: www.emich.edu/public/coe/nice connects you to the National Institute For Consumer Education, a great resource for info on money management. www.mapping-your-future.org/ provides a wealth of information for the college-bound student. www.finaid.org offers information on financial aid, and includes a free scholarship search.

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