Budgeting Your Finances as a College Student

College is an exciting time for young people. They are discovering independence, expanding social circles, and preparing for their career. It’s also a very crucial time to learn budgeting and taking care of your finances if you haven’t learned it already. For you to focus on your studies instead of worrying about your funds, here are some tips to help you.

Create a Budget

Even if you’re not earning anything, it doesn’t mean that you don’t need to create a budget. You still need to estimate how much you will be spending and how much money goes into your pocket each month. Your “income” would include your allowance, savings, and part-time job income (if applicable). Learning how to manage these will help you make the most out of it and minimize unnecessary expenses.

A good way to start creating a budget is to list down on paper your monthly expenses and your money on hand. Even though you’re not yet starting college, it’s a good idea to estimate your expenses for college. When you get accepted in a university, you might have already started to read up on the cost of living in that area and if your school will provide living accommodations for you or not. This gives you a better perspective on your expenses and if you really need them or not.

Once you start college, you need to track your expenses on a daily basis. You can collect paper receipts or immediately list your expenses after spending. It might take some time to get used to this habit and even more self-discipline to stick to this routine, but it’s one of the basic skills for managing your budget.

Define Needs and Wants

Another thing that you need to work on is to know which of your expenses are solely based on wants and which expenses are a necessity for you. One specific example is gas money. If you’re spending more than $40 a week just for gas, you need to seriously consider if it is needed or if you can find ways to minimize it. In your area, it might be easier to use public transportation or even walk to your university.

On the other hand, buying groceries or food supplies are a definite necessity. Still, it’s easy to go overboard and buy expensive items just because you think it’s covered in your food expense. Even if it’s classified under a necessary expense, there are still options for you to save. For example, you can buy fresh produce and make your own food instead of eating in fast food restaurants all the time.

Limit Your Leisure Expense

Part of college is meeting new friends and establishing your social circles. In line with this, out-of-town trips or excursions are popular. Some people go on trips almost every weekend when they’re not partying with their friends. For you, these are good ways to get to know other people and forge friendships. On the financial side, these are classified as leisure expense and need to be minimized. Frequent partying or trips can be very costly and you’ll burn through your budget in no time.

Remember that you’re studying in the university to further your education and get a degree, not make friends only. That should keep your priorities straight and help you in making decisions.

Spend Time Wisely

Part of college is having lots of free time. Some people use these for spring breaks or just spending time with friends. If you’re concerned about your finances, you can use it to get a part-time job instead. This will put extra cash in your pocket and help defray your daily expenses. In addition to earning a bit on the side, the work experience (no matter how minor) will help you land a job in the future.

Use Technology

Being a tech-savvy person, there are a lot of ways you can use technology for your budget. You can make use of a spreadsheet to track your expenses and how much money you have left for the month. Knowing your allowable money to spend ensures that you don’t go overboard. There are also some phone applications that help track your expenses real time. This way you won’t be able to forget them if you choose to log them at the end of the day.

Set Goals for Yourself

It’s very tempting to buy the latest smart phone or that new bikini as soon as you have enough savings. For you to use your money wisely, try to make short and long term goals. Your short term goal can be that new piece of clothing you want, while a long term goal can be a new car or a new gadget. Knowing what you want to save your money for will help motivate you to keep a little of your money on the side. As a bonus, it feels really good (and guilt-free) when you buy your goal item.

Learn about Bank Auto Deposits

If you’re receiving money on a regular basis (allowance or salary) in your bank, ask the bank if they have an auto deposit option. This works by setting aside a fixed amount from your bank account at specific dates of the month. Let’s say that you earn money every 15th of the month. You can set your account to withdraw automatically $50 and put it in a separate savings account. This way you won’t need to worry about setting aside money and focus on budgeting the amount left. A lot of banks now offer this option, so it’s worth asking them if you’re eligible for this.

Ask Around

Experience is definitely the best teacher. This holds true when it comes to budgeting as well. Your friends and family members who have experienced university life might be able to give you some suggestions on what worked for them and what to avoid. Talking to other people and learning about their experience is much better than reading it on the internet whole day. They’ve already tried it and they definitely know what they’re talking about.

Keep Buying to a Minimum

When you’re excited to go to college, it’s easy to buy almost half of the furniture store. Keep in mind that you’ll be staying in an apartment or the college dorms. At most, 4 glasses or 4 pairs of utensils are enough. You won’t expect to host parties every night or have a lot of people staying with you. It’s even recommended to postpone your shopping until you know the space of your living accommodations. So you won’t spend too much and overbuy everything.

In addition, it’s also advisable to buy used textbooks. Books are one of the main necessities and major expenses when you go to school. However for college textbooks, chances are you won’t use them that much and you’ll read only a few chapters. This is one area where you can definitely save money by going for the cheaper alternatives and not spending excessively.

College can be a very new place for many people, especially freshmen. It’s one place to learn about independence at the same time preparing for your future career. Stick to these budgeting tips for college students and it just might make your college life enjoyable and fruitful.

Categories: Finance

Saving for a Home

The transition from renting an apartment to owning a house can be too wide for many people. For first-time buyers, the biggest problem is saving for a down payment. It can be too much for their current savings and drastic measures need to be taken most of the time.

Financial experts are expecting home prices to rise every year and it’s forecasted to do so annually. Saving for your home down payment becomes more challenging and you might not even know where to start or what options you have. Here are some things to help you save for your new home.

Create a Budget Timeline

For starters, you can break down your intended down payment amount into yearly or monthly goals. Let’s use the scenario wherein you need to come up with $20,000 as a down payment in 2 years time. In 24 months you need to save at least $833 per month.

You can use this budget timeline to monitor your progress if you’re right on track with your savings or if you need to catch up. It’s advisable that you create a separate account just for this. It will be easier to track and it won’t be too confusing to distinguish which money is for your down payment and which is for your daily expenses.

Modify Your Current Accommodation

To move out of your apartment into a house, you need to slash down one of the biggest expense right now: your rent. Transfer from your current apartment into a smaller one if possible. You don’t need to live in a big apartment when you’re trying to save for a house down payment. It might involve sacrificing your comfort, but your main goal is to save money at this point. Just by changing your apartment you can save as much as 30% from your current expenses.

Another area where you can earn money using your apartment is to rent out a free room. If you have a spare room, rent it out to someone else to help defray expenses like rent and utilities. You can put the savings you get from this into your bank account towards your home down payment.

Downgrade

For radical measures, you can even downgrade some of your gadgets or your car to a cheaper version. In the case of downgrading your car, don’t trade it for a car that easily breaks down. The last thing you need is to spend money for repairing or just maintaining your car. Large trade-offs like these are what you should consider if you want to aggressively save money. Think of it like a couple of last options if you find yourself falling behind on the saving timeline.

Create a Budget

If you haven’t done it yet, create a budget for your savings. A budget will give you a good overview where your money is going and if you can do anything to reduce that. From your budget, you can find some expenses that are easier to cut down. For example, your cable subscription might cost a lot for channels you didn’t even know existed. If you’re tied up with work, then a high-end cable subscription isn’t a very feasible idea. The same applies to your internet plan. If you’re using to browse simple websites or just to check your emails then you don’t need the fastest internet plan out there. You can cut back on these areas and save money. You can apply this line of thinking to other miscellaneous expenditures like entertainment and gym memberships.

If you’re already slashing your expenses left and right to squeeze the most savings out of your budget, then you should start asking yourself whether you need this expense or if you just want it. Minimize your usage of credit cards and shop using cash instead. Shop in physical shops instead of online stores where you can simply use your credit card to pay for your purchases.

While you’re minimizing these expenses, don’t deprive yourself from all forms of enjoyment as well. You can still include entertainment or miscellaneous expenses in your budget; just don’t make them very frequent. Continue to eat out or go on a night out with your friends – just have these appointments once or twice a week. There are plenty of other inexpensive ways to have fun with your peers without draining too much from your budget, just be creative.

Tap into Your Retirement Savings

You may have already started contributing to your 401k plan. If you’ve already done so, try to reduce the amount you contribute into this. Redirect these funds instead to your house down payment to speed things up a bit. If this is your first home, the early withdrawal penalty will be waived as you and your spouse withdraw $10,000 each from your IRA fund.

You should consider getting money from your retirement savings only when you need it. The main reason why you’re saving for your retirement as early as now is to take advantage of compound interest. If your money is reduced, then it won’t be able to fully grow as it should be. You’re significantly reducing the money you will get when you retire just to pay off a new house. Weigh these options first before withdrawing from your IRA.

Know Where to Put Your Money

Since you’re creating a separate account for your house down payment, put your money in a low-risk investment like a high-yield savings account. Compare interest rates between online banks and credit unions since they offer higher rates than traditional banks.

There are a couple of distinct differences between credit unions and banks which you should be aware of before transacting with them. Credit unions are generally a group of people who pool their money together and accept additional investments from outsiders or they can let non-members borrow their money at a modest interest rate. This is how they generate profits. Since they’re a smaller group, they can provide better service and tailored terms for you. However, don’t expect service 24 hours a day, 7 days a week. As mentioned, they’re a smaller business so they are usually open just on weekdays at office hours.

If you’re going to go with an investment with a higher return, always keep in mind that a high-paying investment has a big risk to lose money. Regarding the return rate of your money, it’s not that important compared to having it available when you need to withdraw it. Just make sure that it’s in a safe place regardless of growth and you should be fine.

These financial tips for saving for a home can also be applied for any other financial goals or obligations you may have. The important thing is to maintain a level of discipline and if you’re going to do an aggressive saving plan, be sure to stick with it. It won’t make sense if you try to save for your home down payment but give up halfway just because you’re tired of saving or you’re too far behind your budget timeline. Always motivate yourself with your end goal in mind. It might be difficult now, but when you make that down payment, it’ll all be worth it.

Categories: Finance

Basics in Budgeting

When you think about budget, you immediately think that you should save as much as you can while minimizing expense to zero if possible. That’s a very idealistic way of thinking and is impossible to achieve. This is because there will always be expenses, major or minor, wherever you are. Living expenses will always be present and unless you’re a hermit, you can’t do away with this. The key to budget is finding the right balance for your income and expenses. Here are some things you need to be aware regarding budgeting and what you can do about them.

Income and Expense

Income is defined as something that puts money in your hands. It can be from any source: your allowance, a regular income, cash gifts, and even assets. There are many kinds of income out there, but as long as it increases your savings account or your net worth, then it’s defined as an income. This is what you’ll be using to pay off your monthly expenses, daily living costs, and what you’ll use for savings or investments.

Next up is expenses. These are opposite to income in the sense that they take money from your account. This can be in the form of utility bills, credit card payments, taxes, meal expenses, and your living costs. From the many types of expenses, the most important for now are fixed expenses. These fixed expenses are your monthly financial obligations. You can’t do away with these; it only fluctuates depending on your usage. Examples of fixed expenses are your rent, utility bills, and tax payments.

Wants and Needs

When mapping out a budget plan for your income and expenses, it’s very important to realize the difference between a need and a want. A need is something that you definitely can’t live without, like education, food, clothing, and shelter. On the other hand, a want is one which you don’t need to survive like, designer clothing, vacations, the latest car, and expensive gadgets out there.

Recognize which among your expenses is a need or a want, then consider reducing it. For example, that designer clothing looks good and is all the rage right now, but you don’t need it to function properly. Even hand-me-downs or clothing items you already have in your closet will do. Once you realize which among your expenses are luxury items can make things easier for you to replace them with something more economical.

As you define which among your expenses are needed and which ones are not, you’re slowly developing your prioritization skills. When you’re faced with important decisions regarding your finances in the future, it’ll be easier to make frugal choices at that time.

Do Your Own Work

A specific area where many people waste a lot of money is in the services you pay for. It feels very nice to have someone clean your house and mow your lawn every once a while. However, if you avail of these services regularly, you could be throwing away money you could have easily saved and used for other purposes. Instead of putting this money into your savings or other investments, you’re wasting it on frivolous expenses. The long-term result is you’ll end up paying for your retirement and investments longer than needed.

While you’re still earning, learn to do your own work and live within your means. You don’t really need to live in a 4-bedroom house if you’re still a bachelor and you’re not planning to settle down soon. Live frugally and use your money instead of something worthwhile like a mutual fund or your 401k plan. When the time comes for you to use that money you won’t be in a panic or in a rush to put money into your retirement funds.

Manage Your Wants

Earlier we talked about separating your needs and wants. It’s impossible to do away with your wants for good. The best that you can do in this situation is to manage it accordingly and make sure that you won’t break the bank every time you choose to “reward” yourself.

It’s a part of our human nature that we’re not satisfied with what we have and we always desire something much better and more expensive than what we have now. For example, you think that you want a faster internet subscription so you try out different internet service providers until you found the right match for your wants. That’s okay and understandable, but if you’re just using that to check your emails and some minor browsing, then that’s definitely a waste of money. This holds true for many other subscriptions or purchases out there.

To manage your wants effectively, set limits to your luxury purchases before you even step into a store. Think about how much you can spend on an item and the space in your home. It won’t make sense if you buy a trampoline, but you don’t even have a backyard to place it. It’s even a good idea to include your luxury expenses in your savings allocation. Set aside a sizable portion of your paycheck for these purchases. It’ll give you time to think if you really want it and you won’t be burdened too much when you do buy it.

Set Realistic Goals

Part of creating your budget is to also make your short-term and long-term goals. These will guide your savings and will motivate you when you’re not sure if you feel tired with all the savings and budgeting. Short-term goals could include that gadget you’ve been eyeing for some time or a new TV set. For long-term goals, it can be your emergency savings, or your retirement plan.

Whatever your goals may be, give yourself a realistic time frame when you want to finish it. Consider your current budget and how much you can set aside for these goals. If you choose a shorter time frame to spur yourself then it might backfire as you frantically save and you might even end up sacrificing your other savings just to make that purchase. Give yourself ample time to save for that goal and stick with your budget accordingly.

Don’t Falter

Each time you make a mistake with your budgeting or spend too much, don’t just throw the towel in and call it a day. Everyone makes mistakes, and you are no exception. Especially when it comes to personal finances, it doesn’t come easy or naturally for everyone. Take time to assess your mistakes and learn from it. It doesn’t matter that you have a clean record or you are able to follow your budget to the dot. In fact, it’s better to make financial mistakes when you’re still starting out so you won’t make them again when you are already handling big investments or huge amounts of money.

These tips regarding basic budgeting can be applied to most situations whether rich or poor. The only thing that matters is you have a serious mindset about managing your money and you’re thinking about the future.

Categories: Finance

Mortgage Debt Consolidation Loans

It’s hard to keep track of all the debt that you have. You might be paying for multiple credit card debts, an auto loan and other obligations. It is difficult to monitor all those for a number of reasons.

  • It’s not easy to track the payment dates.
  • It’s not easy to keep track of the interest of all your debts.
  • If you miss a payment, it is likely to pull down your credit rating.

Because of these things, it might be a good idea to try debt consolidation. If you think that it might be a good option for you, then you should check out mortgage debt consolidation loans that are available.

How Debt Consolidation Works

The practice of consolidating debt means you are taking out a large loan that would cover your entire financial obligation. You start paying off all those obligations as a single debt left to worry about.

The Best Option for Homeowners

If you are a homeowner then a good way to obtain enough funds to pay off all your obligations is to use the value of your home. You can use mortgage debt consolidation loans which are taken against your home equity. The term equity refers to the value of your house left after deducting the mortgage repayment. There are two ways that you can use your home equity. You can take out a loan or open a line of credit.

Taking Out a Loan and Opening a Line of Credit

When you take out a loan on home equity, you are given the money in a lump sum. You can use the amount to pay off all your debts. When you open a line of credit, you would normally be given a credit card which you can use for borrowing against your home equity as you please.

Making Things More Manageable

The management of all your financial obligations is a lot of easier with debt consolidation. When you have a single loan to worry about, things would be less burdensome. You don’t have to constantly monitor different interest rates. Neither you need to worry about missing payments and paying late charges.

A Boost To Your Credit

Another advantage of paying your debts by consolidating them is that it will mean a tremendous boost to your credit standing. The fact that you will be paying multiple debts all at once is going to have a huge impact on your credit and that will have a very positive effect on it.

You Still Owe Money

At the end of the day, however, consolidation does not mean that your debts would be wiped clean. You would still owe money and you have to work hard in order to pay back the whole amount of what you owe.

Categories: Finance