As we head into a new year, now is the time for college students to evaluate their college, financial and career goals and set new goals and plans for 2013.
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“Become aware of what you did wrong last year, and develop a plan to avoid that this year. Discover where you spend the most disposable money, and try to cut that down,” says Vincent Turner, CEO of PlanWise.
The key to making resolutions is to make them as clear and defined as possible. Don’t just resolve to save more money, determine a savings amount and set a deadline. If setting goals for the whole year seems like a tall order, students can re-evaluate the goals they made at the beginning of the year and see where they stand a few months in, suggests Scott Gamm, founder of HelpSaveMyDollars.
“Maybe you've made some progress with your goals or perhaps they need to be tweaked or you need to develop a new plan of action,” he says. “Regardless, this is the time to get back on track with your goals.”
To start 2013 off with a bang, here are five financial New Year’s resolutions that every college student can benefit from.
Resolution No.1: Get Wise About Student Loans
Massive student loan debt can be crippling after graduation, so students need to know the specifics of their student loans and repayment terms.
“One thing most [loans] have in common is that you must be in school at least half-time to be eligible,” says Shelley Solheim, director of financial education for Capital One. “If your class load falls under half of a full time load, you will have to start repaying the money immediately.”
It’s essential that students continue to borrow only what they need and that they understand all of the terms of loan repayment, advises Turner.
“Go over federal and private loan clauses with a parent--do all the research you can before making a big purchase, and understand to the best of your ability how it will impact your future.”Resolution No.2: Make Saving a Priority
It can be hard to save during college, but students need to set realistic savings goals and should challenge themselves to put aside a certain amount each month, especially if they didn’t save enough in 2012, says Solheim.
“If you find yourself reaching this goal in January and February, bump the amount up by 10%,” she says. “If you tend to spend money just because it's in your pocket, then don't allow yourself to carry around more than is necessary--put saving at the top of your to-do list every month.”
To help save, experts recommend setting up an auto-deposit into a savings account so that students are automatically saving a portion of their paycheck without “missing” that money.
Resolution No.3: Add or Create an Emergency Fund
In addition to saving for the long term (a home, retirement, etc) it’s important to establish or build on an existing emergency fund this year.
“Many students live in the present when it comes to finances--it is important to account for unexpected expenses of the future so that you are not left with financial panic after an emergency,” says Turner.
As with a regular savings account, the easiest way to add to an emergency stash is through automation, says Gamm.
“If you had to deposit the money into your savings account yourself, you'd probably spend it! Make it automatic so you don't have to think about it.”
Resolution No.4: Build Good Credit
Students will need a strong credit score upon graduation to make big-ticket purchases like a car or home.
Paying bills on time is a good step for students to start establishing credit history. “Setting up online billing payment for your monthly bills (utilities, cable, water) might help you keep track of paying your bills,” Solheim says. “If you don’t pay your bills on time, you’ll end up paying more than you owe because of the late fees and finance charges.”
Considering the restrictions of the CARD Act, students can find ways to start building their own credit, especially since credit history represents 30% of the overall score, says Kimberly Foss, personal finance expert and founder of Empyrion Wealth Management.
“Piggyback on your parents’ card to establish credit with them, convert your cell phone bill from your parents to your name to help build credit history, [and] apply for a credit card on your own and use it to build credit, but always pay it off entirely--on time every time.”
Resolution No.5: Become More Financial Savvy
Students should aim to at least know the basics of investing, budgeting and personal finance to avoid sinking into debt and making mistakes later in life.
“The earlier you start contributing to an account, the more you'll end up with when you retire, thanks to compounding interest,” says Gamm. “Even if you can only contribute $30 per month, that will still make a huge impact.”
Reaching out to family, friends and certified financial planners now will help students better understand their financial goals and how much risk to take considering their future.
“The best way to build wealth is to make your money work for you,” says Solheim. “Stocks, bonds and mutual funds are all common investments that can build wealth over the long-term.”