Five need-to-know concepts to plan your financial future
Eating Ramen every night may be acceptable now, but that cheap diet probably won’t hold up post-graduation.
The long-term financial future might seem too foreign and far off to plan, but Director of Student Financial Literacy Phil Schuman is here to help.
He broke down the five most important concepts students need to know.
1. Budgeting and saving
Only spend money on what you need now. Schuman recommends budgeting your income by spending 60 percent on essentials, 20 percent on wants, and saving the remaining 20 percent.
“That way, you know exactly where you stand, and you can live how you’d like to live,” he says.
2. The difference between needs and wants
“We don’t need the most expensive cable package, if we need one at all,” Schuman says.
You have to establish guidelines. To prevent impulse purchases, Schuman suggests “going naked” when you shop — don’t take your wallet or purse. If you see something you like, think about it for a week. If you still want it after that, try to work it into your budget.
3. Credit scores
Students often shy away from getting credit cards, but they aren’t something to fear.
Imagine they’re another form of a debit card that needs to be paid off immediately. As long as you do that, you’ll be able to build credit.
Credit is important for car loans, mortgages, and employers, who will sometimes check to make sure you are financially responsible.
4. Student loans
Before making any big purchases after college, make sure you have enough money to payoff your student loans, Schuman says.
Student loans are not evil. You just have to make sure you can budget for the expense.
5. Big purchases
Once you’re ready to buy that new house or car, it’s time to research loans and interest rates.
Talk to someone who has been through the process before you agree to anything. They will be able to objectively sift through the information and make sure you aren’t missing something.
"Just because the bank says you can, doesn’t mean that you should,” Schuman says.
Need more help?
IU’s Office of Student Financial Literacy is a resource for students looking to learn more about budgeting, saving, and taxes, among other topics.
They will offer workshops on campus this school year and are launching their website through IU’s student financial literacy initiative.