Create a budget
Budgeting is essential to manage your finances effectively. Creating a budget helps you keep tabs on your income and control your spending. Plus, it makes it easier to be prepared for college expenses.
Start by identifying your income sources, like funds from a part-time job or financial aid. Add these amounts to find your monthly income. Next, list your estimated expenses and subtract them from your income. This number represents the amount of disposable income you have each month.
If your expenses exceed your income, you’ll need to review how you’re spending your money to avoid overspending. It is equally important to monitor your spending and review your budget often. If you find that you are spending more than you earn, you'll need to adjust to keep your finances on track.
Set financial goals
Consider setting both short-term and long-term financial goals. Having a target to work toward can help you stay motivated to practice good financial habits. Break your financial goals into smaller chunks and work them into your budget to stay on track.
To illustrate, say you want to save $1,200 in 12 months. You can meet your goal on time by creating a line item in your budget to deposit $100 to your savings account each month.
Choose the right bank accounts
Consider opening both a checking account and a savings account. A checking account is perfect for everyday purchases. A savings account is ideal for future expenses. Pay attention to those accounts which offer rewards and perks especially for students.
Also, look at the credit union or bank’s branch and ATM network. Ensure that the nearest branch or ATM is on or near your campus. Some credit unions participate in a Shared Branch network, so even if your credit union is based in Hawaii, you can visit a Shared Branch in California, for example.
Furthermore, you should consider the financial institution’s online and mobile banking capabilities. These platforms should be user-friendly and include such tools as real-time transaction monitoring, mobile deposit, and electronic transfers.
Build an emergency fund
As a college student, having funds stashed away for life’s unexpected expenses is essential. These include car repairs, cell phone damages, or unexpected medical bills.
You can build an emergency fund even if you’re on a tight budget. Start by setting goals and saving small amounts over time. Small amounts add up over time, even if it’s only $10 or $20 a month. You can automate your savings to simplify the process. Also, consider depositing any financial windfalls to build your emergency fund faster.
Understand credit
Understanding how credit works can help you make informed decisions about using it. This knowledge will also help you know how to boost and maintain your credit health.
Your credit score is a numerical representation of your creditworthiness. The most common credit scoring model is the FICO score. It's between 300 and 850 - the higher, the better. Here's how it's calculated:
- Payment history (35%)
- Credit usage (30%)
- Credit age (15%)
- Types of credit accounts (10%)
- New accounts (10%)
Factors such as timely payment history, credit utilization, types of credit accounts, credit age, and new credit contribute to the credit-scoring calculation.
Monitor your credit report to ensure it doesn't contain errors or outdated information. You can request your credit report for free from the three major credit bureaus - Experian, TransUnion, and Equifax. Reviewing your report can help you spot errors and understand the factors impacting your credit score. HawaiiUSA members with Digital Banking get free, secure access to their credit score with My Credit Score.
Use credit cards responsibly
Only spend what you can afford to repay. Furthermore, it’s best to pay off your balance in full each month if possible. Doing so helps you avoid costly interest charges. Plus, it keeps your credit utilization rate low. Financial experts recommend keeping your total credit utilization rate below 30%. Aim for 10% if you can.
The bottom line
These practical tips will help you confidently make informed decisions about your money. It doesn't matter if you're embarking on your college journey or nearing the transition into the real world. If you want help navigating your finances, schedule a free financial coaching session with us.
