Money Management for College Students - Admission/Application Essay Example

MONEY MANAGEMENT FOR COLLEGE Attending college Your experience in college has numerous possibilities. It is the first among many steps in your life that will facilitate your career goals. However, securing a tertiary education is an expensive endeavor that requires smart financial management skills. You may have to deal with enormous sums of money as well as smaller denominations. Regardless of the quantity, you need to manage your finances adequately enough to pursue your main objective, which is acquiring an education. Therefore, the main goal of this newsletter is to help college students become financially independent. When you keep your finances under control, you can focus on what brought you to college in the first place; studying. What we know about financial management among college students Chan et. al. (2011) created a money management model that demystifies financial literacy among college students. They identified three key factors that influence financial management. These include: personality, environment and cognitive factors. One’s personality affects performance in the area of money management adversely. People with impulsive tendencies often spend and borrow without discretion. They barely reflect on the consequences of their actions. Sadly, this factor is innate to an individual and may or may not be changeable. Cognitive factors involve acquired knowledge about financial management. If a learner has knowledge about credit card expenditure, budgeting, acquisition of student loans among others, then the person is more likely to manage their finances effectively. Undergraduates who feel that they have the right knowledge are likely to make healthier choices and stay out of debt. This group of learners is apt to be proactive about their money, and thus take action when necessary (Walstad et. al., 2010). If a person’s tolerance towards debt is high, then they are more likely to borrow money (through loans and credit cards) than one with a low tolerance. This quality is what we will focus on in the piece. It is our intention that we will solidify your knowledge in financial literacy and thus make you better managers of your money. Finally, a student’s environment may also affect financial literacy. Current financial standings have an impact on one’s money decisions. If a student receives support from their parents, then their expenditure and savings will reflect that situation. The level of employment and investment that one has done in college could also augment one’s spending power. If a student comes from a relatively stable family background, they are more likely to use credit cards because they are assured about its repayment in the future. Even one’s financial outlook may play a role. A learner who thinks that they will secure employment after graduation is likely to get a student loan than one who does not. In light of the above information from the literature, it is clear that a financially literate college student ought to possess certain traits. First, they need to have a positive financial disposition. This should be a student who has low materialism. They ought not to be too carried away by advertisements, acquisition of the latest gadgets as well as the hottest designer clothes. These are also students who have a high future orientation. Such individuals do not engage in spur-of-the-moment expenditure because they have other priorities to think about. People in this group need to be willing to take some form of investment risk, as well. Scholars have also found that these individuals tend to exhibit unique behavioral traits. They save regularly and have some sort of plan or formula that facilitates these regular reserves. Perhaps one of the most predominant features is their reliance on a budget. All financially literate students live by a budget. They prepare it in light of their circumstances and stick to it after they do. Furthermore, their credit use is quite impressive as they may have it but often use it responsibly (Gutter, 2008). Advice from the Experts 1) Have a plan The first step towards financial literacy is establishing some goals and working towards them. Now that you are in college, you cannot think of money as something to spend. If used wisely, it can work for you. Once you have established some goals, and made a plan, then take actions to achieve those outcomes. A great way of making the plan is through a table as shown below. Target Date to achieve it Amount needed How to achieve it Own a laptop 5 May 2017 $500 Savings Open an investment account ( In stocks, mutual funds and bonds) 9 December 2016 $ 1,000 Offer pet maintenance services Buy a car 5 October 2018 $3,000 Fix people’s computers Start a t-shirt merchandising business 5 May 2014 $ 2,500 Ask my parents (National Endowment for Financial Education, 2011) 2. MAKE AN INVENTORY OF ALL YOUR FINANCIAL OBLIGATIONS Before making a budget, which is the primary component of any savings plan, take the time to organize all your financial information. This may involve identifying critical dates as well as collecting all the documents that affect this segment of your life. Place all the information under the following labels: Loans and credit payments: Credit cards, car loans among others may fall here. Taxes: Tax returns and pay stubs belong in this category. Receipts: May include warrants Insurance: Medical cover, automobile insurance and others. Financial aid: All academic loan agreements and documents pertaining to the same need to be covered Savings: All cash-related or bank balances Investments: Stocks, mutual funds and bonds are some of the many options available to you. Bill payments: All small and large bills to be paid (National Endowment for Financial Education, 2011) 3) PREPARE A BUDGET Start by identifying your income and then outline your expenditure. Income sources may include financial aid from one’s family members, grants, loans or scholarships, earnings from a part-time job, savings, gifts, profit from a self-employment venture and others. One ought to have a list of the earnings and the exact amount of dollars they equate to in the list. This should be divided into monthly installments even if the money is received on an annual or semester basis. Make sure you include every single thing you spend your money on. This may include snacks, laundry services, buying clothes, attending concerts, downloading movies. It could also refer to larger purchases like car loan insurance, credit card payments, transportation, rent, electricity and heat, school supplies, food and textbooks. After listing all the items, add up the total income and expenses. Find the difference between the two, and if expenses exceed income then prioritize and eliminate some things. If Income exceeds expenses, then count this as part of your savings. Get into the habit of having more income than expenditure as this cultivates a healthy financial lifestyle (Black, 2009). 4) MANAGE YOUR DEBT Tame your debt by using student loans only as a last resort. Plenty of scholarships and grants are available for students in college. Find one that meets your needs and has fewer restrictions. Scholarships may sometimes be perceived as free money since no repayments are necessary. Consider parental support if possible, and only go for student loans after exhausting these options. Many graduates attribute challenges in debt management early in the career due to student loan repayments. Credit cards can be avoided in college. However, if you really need one, then resist nudges from credit card pushers. Stick to one and maintain a low limit on it. Take the time to select credit cards that have low interest charges. Choose one with a secured deposit and refrain from charging anything that you cannot pay for immediately. Make punctual payments and exercise discretion before using it. Myths Related Family members’ advice counts: Contrary to what most people may presume, students are less likely to listen to what their parents or siblings tell them about money. What matters to them are examples set by these individuals. The truth is that you are more likely to withdraw from a negative account if you know that your parents will still give you money. Actions speak louder than words in this scenario. Students do not care about financial management information: Many students want to learn about management of their finances. They simply lack avenues for getting this information. Workshops, class instruction, and websites are just some of the many sources of knowledge about money (McCormick, 2009). Credit cards cause debt: It may be true that credit cards may increase one’s propensity towards debt, but they do not cause it. One can still be financially stable with credit cards. It simply takes astute planning and preparation. You only need one credit card in college. When you do get one, treat it like a debit card. Do not wait for charges to accrue before you pay off your balances. Think of a credit card as a route to establishing strong credit rating at an early age. Maintain an aversive attitude towards it and keep checking on your balances. Budgeting is not necessary: Writing down and keeping track of your expenditure may seem like a grinding process, but it is well worth the effort. The choice is up to you on how to budget. You may use a notebook, checkbook or an online system. Regardless of the method one employs, no one can keep a pulse on their expenditure by proxy. You need to know exactly what you are keeping and giving away, so take the time to carefully track it down. Impressing friends and managing money are compatible: Many students fool themselves into thinking that they can still win both battles. It is simply not possible to make expensive purchases meant to awe your friends and still keep your money in check. Trying to use products as a status symbol often plunges one into debt. At the end of the day, mismanaging money in a group will not insulate you from its implications. So, do not succumb into peer pressure because you will have to face the consequences alone. Resources for further information Supon, V. (2011). Helping students to become money smart. Journal of Instructional Psychology, 39(1), 66-69. Lauber, G. (2010). A case for teaching financial literacy. School Administrator, 67(7), 41-41. Allen, R. (2009). Financial literacy: An imperative in economic hard times. Education Update, 51(2), 1-5. References Black, S. (2009). An investment in literacy. American School Board Journal, 196(2), 44-45. Chan, F., Chau, F. and Chan, K. (2011). Financial knowledge and aptitudes: Impacts on college students’ financial well-being. College Student Journal, 132. Gutter, F. (2009). Financial management practices of college students from states with varying financial education mandates. Retrieved from https://www.cgsnet.org/ckfinder/userfiles/files/Gutter_FinMgtPracticesofCollegeStudents_Final.pdf McCormick, M. H. (2009). The effectiveness of youth financial education: A review of the literature. Journal of Financial Counseling and Planning, 20(1), 70-83. National Endowment for Financial Education (2011). 40 money management tips. Retrieved from http://www.smartaboutmoney.org/Portals/0/ResourceCenter/40MoneyManagementTips.pdf Walstad, W., Rebeck, K., & MacDonaldR. (2010). The effects of financial education on the financial knowledge of high school students. Journal of Consumer Affairs, 44(2), 336-357. Read More