Blog Series: The Keys to Financial Fitness for College Students
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Get What You Need
Once you know your income, determine a list of expected expenditures each month. Be sure to remember the difference between wants and needs. Textbooks and supplies are clearly mandatory, but weekend trips, nights out and new clothes are not. Even a car can quickly drain your resources if you’re strapped for cash. Feed the Pig, the AICPA’s financial literacy site aimed at young people, recommends recording every time you make a purchase so that you get a good sense of where your money goes. Then categorize all the items, to see if you’re spending as much on morning coffee as you are on weekend entertainment. These steps allow you to understand where you might need to cut back or reconsider your spending choices. If you’re honest about your real necessities, it will be easier to create a workable budget, and find ways to save.
Avoid Credit Card Debt
College seniors with credit cards graduate with an average of $4,100 in credit card debt, according to the Nationwide survey. The importance of budgeting is clear when you see the consequences of spending beyond your means. consequences of spending beyond your means. Many students use credit cards to stretch their spending money, but given the high interest rates involved, it can be a costly choice. For example, if you have a $4,100 credit card balance, at an 18 percent interest rate and you make a $200 payment each month, it will take you 25 months to pay off that balance, and it will cost you a whopping $836.27 in interest—money you could have spent on other purchases or put aside in savings. That debt is a big burden to carry, especially since so many graduates also have significant outstanding student loan debts. Debt can make it more difficult to find or afford your own place or qualify for an auto or other loan. The best advice—if you’re going to reach for the plastic, make sure it’s a debit card. That way you will spend only what you have in your bank account and avoid overextending yourself.
Visit NCACPA’s student resources section on the website for more helpful tips and tools!
This content is in support of 360 Degrees of Financial Literacy, a national effort of the AICPA and the state CPA societies to improve the financial understanding of Americans. For more information about the profession’s efforts, visit www.360financialliteracy.org.”
The American Institute of Certified Public Accountants © 2014