A solid financial strategy is your blueprint to a secure financial future.
You may think that you’re too young or that you don’t have enough money to worry about finances, but having a plan in place will help you stay on track to reach your objectives. Your strategy will evolve as your income rises and your lifestyle changes. That’s as it should be -- your financial plan should be a living, breathing document.
Simply put, your strategy is a plan for how you are going to manage your finances so that you can achieve your goals in life. Here are some basic ideas to help you get started:
Understand how you spend your money. Even if you don’t have a lot of money, you should be aware of your purchases and practice discipline in your spending habits. Start by preparing a simple budget. It will help you prioritize your spending and identify areas of potential saving.
A checking and savings account is the first step to managing your own finances. They are the building blocks from which you can begin to establish a solid credit history. If you haven’t already done so, open a checking account with a check card and online banking. Use your check card as you would cash for minor purchases such as food and gas, and pay any bills you have online. You’ll get practice managing your cash flow, as well as receive 24/7 online access to your accounts to assist you with budgeting.
It doesn’t matter how much you save…what is important is that you start saving consistently. Whether it’s $10 a week or $50 a month, examine your budget and decide how much you can realistically save. Then, utilize direct deposit or setup an automatic recurring transfer from your checking account to your savings account. You won’t miss the extra money, and you’ll feel a sense of accomplishment and security as your savings grows.
Building a good credit history is important for your future borrowing needs. Managed properly, using a credit card is an easy and effective way to begin building your credit history.
Don’t go overboard with your credit card -- one is enough, and it’s important that you use it responsibly and judiciously. Your goal is to demonstrate a pattern of financial reliability, so make sure your payments are made on time, and strive to pay the balance off every month.
What if your car needs repairs, your roommate unexpectedly moves out or another financial crisis occurs? How will you pay your bills? Being prepared (with 3 to 6 months of living expenses) will help prevent you from turning to credit cards or other borrowing when unforeseen circumstances arise. You can start building your emergency fund by opening a savings account.
Protect your car, belongings and health against the unknown. If you’re not covered by your parent’s health insurance, make sure that your student health insurance plan is adequate in case you get sick and require hospitalization. If you own a car, it’s imperative that your auto insurance policy is sufficient to cover any repairs and assets you have in the event of an accident. You may not own a home, but if you rent an apartment than you should insure your favorite valuables with renters insurance. It’s a cost-effective way to protect your belongings and ensure your peace of mind.
Develop a system for paying your monthly bills. Paying bills the same time and way each month will also save money you may otherwise incur on late payment and other bank fees. Online banking with bill payment is usually offered free by most banks -- it’s easy to use and great for time-saving efficiency.
Also, keep financial documents in a file or binder that is organized in a way that makes sense to you. Bills, credit card and bank statements and receipts should be filed for future reference, as should such things as insurance policies, car titles, passports and birth certificates. Having your records easily accessible will greatly simplify your life.