Introduction
Everything written about time and money management can be reduced to three main ideas:
- Know exactly what you want. State your wants as clear, specific goals. Put them in writing.
- Know how to get what you want. Take action to meet your goals, including financial goals. Determine what you’ll do today to get what you want in the future. Put those actions in writing as well.
- Take action to get what you want. When our lives lack this quality, we spend most of our time responding to interruptions, last-minute projects, and emergencies. Life feels like a scramble to just survive. We’re so busy achieving someone else’s goals that we forget about getting what we want.
Whether it is balancing your income and expenses, taking charge of your credit, or managing student loans, identifying your financial goals and priorities will help you create a financial plan with confidence.
Guidelines for Financial Planning
As you identify your financial goals and priorities, you might consider the following guidelines:
Balance your income and expenses. List specific ways that you will reduce spending and increase income. If you have a family, consider posting this list for everyone to see.
Take charge of your credit. A good credit rating will serve you for a lifetime. With this asset, you’ll be able to borrow money any time you need it. A poor credit rating, however, can keep you from getting a car or a house in the future. You might also have to pay higher insurance rates, and you could even be turned down for a job.
To take charge of your credit, borrow money only when truly necessary. If you do borrow, make all of your payments, and make them on time. This is especially important for managing credit cards and student loans.
Use credit cards with caution.
- Pay off the balance each month. An unpaid credit card balance is a sure sign that you are spending more money than you have. To avoid this outcome, keep track of how much you spend with credit cards each month. Pay off the card balance each month and on time, and avoid finance or late charges.
- Scrutinize credit card offers. Look carefully at credit card offers. Low rates might be temporary. After a few months, they could double or even triple. Also look for annual fees, late fees, and other charges buried in the fine print.
- Be especially wary of credit card offers made to students. Remember that the companies who willingly dispense cards on campus are not there to offer an educational service. They are in business to make money by charging you interest.
- Avoid cash advances. Due to their high interest rates and fees, credit cards are not a great source of spare cash. Even when you get cash advances on these cards from an ATM, it’s still borrowed money. As an alternative, get a debit card tied to a checking account, and use that card when you need cash on the go.
- Use just one credit card. To simplify your financial life and take charge of your credit, consider using only one card. Choose one with no annual fee and the lowest interest rate. Consider the bottom line, and be selective. If you do have more than one credit card, pay off the one with the highest interest rate first. Then consider cancelling that card.
Avoid debt when possible. The surest way to manage debt is to avoid it altogether. If you do take out loans, borrow only the amount that you cannot get from other sources—scholarships, grants, employment, gifts from relatives, and personal savings. Predict what your income will be when the first loan payments are due and whether you’ll make enough money to manage continuing payments.
Set a target date for graduation, and stick to it. The fewer years you go to school, the lower your debt.
