5 Things College Students Should Do Now for Future Financial Wellness
Since April is Financial Literacy Month, it’s a great opportunity for college students to learn more about financial wellness and how to better set themselves up for success in the future. It's crucial that you start planning for your future as soon as possible. Becoming financially independent for the first time can be a difficult process, but with the right resources and making informed decisions, it can be easier than you think. These finance tips will help you find the right place to get started as a student.
1. Consider an Income Share Agreement
As a young adult, navigating through the process of taking out student loans can be tricky. Stride Funding offers Income Share Agreements (ISAs) that are a great alternative to traditional fixed payment installment loans. According to this article on Student Loan Planner, ISAs are “very common at schools that offer engineering, math-based majors, and other STEM programs, though they are growing in popularity across the United States.” ISAs are a great option for students pursuing major post-secondary degrees, including bachelor and master degrees, as well as doctoral programs. Choosing the right plan for you and making sure you’re able to pay it off promptly is ideal. Having debt for an extended period can hurt your credit down the road, so, timely repayment of your student loans will set you up for future financial success.
An Income Share Agreement has a few different criteria that will help determine if it’s the right path for you. Figuring out the income percentage that you’ll pay back as well as the timeline of it will ensure that you are aware of all your obligations as you go through the process. ISAs can be a great alternative to traditional student loans, but making sure you consider all your options is just as important.
2. Save Up for Big Purchases
As you get older, you’ll be getting ready to make some of the biggest purchases of your life. This could be a new car to drive to and from work, purchasing your first house, or starting a family. As you gain more experience at your job, you’ll likely be getting raises or promotions. It’s crucial to save money as your income increases, so you can be better prepared for the future.
This goes along with planning for any future expenses. As you move forward with these big purchases, planning out your expenses will save you stress in the long run. When you’re looking to buy a home, asking yourself “how much house I can afford?” is a great way to plan ahead. This will ease the stress of the home buying process by narrowing down your search. For example, you’ll have an idea of where you can afford a home based on square footage, amenities, and design style.
3. Budget Your Spending Properly
While you’re in college, frivolous spending can cause some serious damage to your future financial growth. It’s crucial to find the right balance between saving for the future and enjoying your time in college. One of the best ways to get some extra spending money in college is to get a part-time job. This could be something on campus, like working in the bookstore or an office, or it could be working off-campus in a local shop or restaurant. With a part-time job, you’ll be able to balance time with your classes and have some extra spending money to use on the weekends. Another great option would be to find a paid internship. These are typically harder to come by but can offer more relevant experience to your coursework, and they look great on your resume upon graduation.
With a part-time job, it’s also important to create a budget that you can track and follow throughout your time in college. This can make or break your financial stability as a student. Saving your money for later on in life is crucial, but it’s also okay to enjoy your time in school and spend some of the money you earn on the things you enjoy. This can be anything from going out with friends or a favorite hobby. Creating a physical budget, like the envelope method, will help with this process. Allocating a certain percentage of your income to savings and a certain amount to your spending will ensure that you don’t spend more than you should. As a bonus, you can create a separate savings account to put some of your money. This way, you won’t be tempted to spend more than your budget. Many jobs also use direct deposit, so money can be deposited into the respective accounts automatically to help you manage your budget.
4. Apply for Your First Credit Card
Applying for your first credit card as a student can be tricky, especially since you likely won’t have a very substantial amount of income to report on the application. Even so, there are a lot of great introductory credit cards available for students. Finding one with the right spending limit, good benefits, and reasonable fees associated is crucial. The best credit cards for students vary in these criteria, so making sure you’re aware of all your options will help you make an informed decision.
Building credit early on will help you in the future when you’re looking to take out larger loans, like on a house or a car. The better your credit score, the more likely you are to be approved for the best available loan terms. As you use and pay off your credit card on time, your credit score will increase. This will result in you being given a higher credit limit or even a credit card with more perks once you’ve shown that you can pay on time. Banks will then see this good credit history when they’re considering you for a car loan or a mortgage down the road.
5. Set Yourself Up for Post-Grad Success
Upon graduation, you might choose to pursue a graduate degree or get right into a career. Whichever path you choose, even if you decide to take some time off after graduation to travel or pursue a hobby, these financial tips will help you have the security to do whatever it is you’re seeking. If you decide to continue your education, your savings are a great starting point to help you with rent or tuition. If you decide to go into a career, adding more into your savings as your income increases is ideal. This can be challenging in the beginning, so continuing to budget properly for all your expenses will allow you to stay on top of your finances while still adding to your savings.