Developing Your Financial Wellness
- Develop a budget by tracking income and expenses.
- Learn how to save an emergency fund and for future goals.
- Understand credit and how it can be managed.
- Learn how to manage debt and student loans.
Budgeting
Managing money starts by tracking income and expenses. Being aware of what is being received and what is being spent is the first step towards financial wellness.
- Add up all the money you make each month. This is your monthly income.
- Add up all the money you spend each month. These are your monthly expenses.
- If your expenses are equal to, or more than your monthly income, you will want to use a budget to ensure you are not spending beyond your means.
- If your expenses are less than your monthly income, a budget is still useful to help ensure you maintain good financial habits and can keep track of the amount of money you need for your expenses.
How to Budget
Budgeting is keeping track of your expenses and assigning each dollar to certain spending or saving categories.
- A good starting point is the 50/30/20 rule:
- 50% of your income towards necessities like housing and bills
- 30% of your income towards lifestyle like entertainment, dining out, and clothing
- 20% of your budget towards your financial goals like paying off debt or saving for retirement
- Using a spreadsheet to make a budget
Saving
Saving helps plan for future goals whether that’s moving to a dream city after graduation, owning a car, or traveling. It also provides financial security in case of emergencies.
- Start by saving $1,000 for an emergency fund. This could be used for unexpected expenses like car troubles, home repairs, or medical bills.
- While in college, paying down debt may take priority over saving for an emergency fund, but setting aside a small amount is still important.
- Saving has been shown to be more productive when you have a specific goal in mind, so dream big and start acting.
Managing Your Credit
Credit is a snapshot of how well you can manage your money, especially money that you have borrowed. Your credit score helps determine how much money a lender is willing to loan you.
Managing your credit involves multiple components: payment history, amount owed, length of credit history, new credit, and types of credit used.
To improve your credit score, start with small steps like:
- Making sure your credit report is accurate
- Paying down debt
- Paying bills on time
- Keeping a low balance on your credit card (less than 30% of your credit limit)
Managing Debt & Student Loans
- Tackling debt frees up your income.
- You may have debt from student loans (federal and/or private), credit cards, or auto loans. Whatever you may have borrowed money for, it is important to know what debt you do have. You can start by simply making a list and making note of what the debt is, the lender, current balance, interest rate, and minimum payment amount for each one.
