Managing your personal finances can be difficult. If you’re like most students, juggling a full course load, part-time (or full-time) job, and other commitments to sports teams and social clubs is all you can handle. Although you are busy, it’s important to dedicate some time to understanding your personal finances. We've provided some helpful tips and insights about budgeting, credit and debit cards, the basics of credit scores, and other useful topics concerning personal finance. 

Budget

A budget is an itemized summary of likely income and expenses over a given period. As it relates to personal finance, budgets are an invaluable tool to help prioritize your spending and manage your money. No matter how much money you have, budgets provide an up-front, organized summary of income and expenses. Budgets can be made for different lengths of time and can be combined with other tools.

HOW DO I CREATE A BUDGET: 3 STEPS

  1. Financial Goals: Before creating a budget, you should establish some financial goals. Setting financial goals will help drive your budget. For example, perhaps you want to save for a large purchase? If so, factoring in a certain amount of money per month towards savings will help elements within your budget.

2. Track spending: The best way to understand where your money goes is to track your weekly spending. This small step will help you realize where your hard earned money is being spent. Once you understand where you're spending your money, it will become easier to take control of what you are buying and cut out any “useless” expenses. 
Remember: TRACK EVERYTHING! That iced coffee each morning at $2.50 certainly adds up over the course of a year.

Use this worksheet (PDF) or create your own. Have you noticed anything after a week of tracking your spending? Are you spending more money than you have? Are there any areas for saving (i.e. cutting down on those iced coffees or utilizing your pre-paid meal plan as opposed to going out every night)?

3. Develop a Budget: Now that you know where your money is going each week, you are ready to create a monthly budget. Having a budget (and sticking to it) will allow you to spend your money more appropriately. The best part about a budget: you are the one creating it, so you chose where your money is spent. Helpful hints when creating a budget:
 Create a budget that fits your lifestyle. If you enjoy going out to eat, budget for that expense. Odds are if you create a budget that does not fit your lifestyle, you will not stick to it anyway.
 Spend less than you make. This sounds obvious, but if you create a budget in which you are spending less than you make, you avoid carrying over debt from month to month, AND you can put that extra money into savings. 
Keep it simple--try and avoid a confusing budget. There are many budget templates and worksheets available; choose the one that works best for you. This particular template allows you to assign a monthly figure for certain expenses and then compare what you actually spent to see if you stayed “within your budget” during the month.

Use this sample budget worksheet (PDF) or create your own.

Try an online money management tool:
 

Budget Simple: Budget Simple works under the simple philosophy that to create a balanced budget you must spend less (or equal to) what you earn. It's designed to be simple enough for anyone, and best of all, it's free.

Mint: A popular resource for many people, Mint.com is free to join, tracks your spending, and allows you to customize your own budget.

Cash Course

Cash Course is an online tool to help guide students to making informed financial choices.

Get prepared for whatever life has in store. Topics range from the basics of picking the right checking or savings account, to what the best insurance options are for home, car, renting, etc. Other areas of teaching look at issues such as the aspects of getting a job, how to compare salaries and benefits, or some other life events affected by money like marriage, buying a home, or how to deal with money when family and/or friends are involved.

Register for a free account at the Cash Course website and take charge of your money.

Credit & Debit Cards

How does a credit card work?

Credit cards are considered to be revolving lines of credit. Lines of credit extended by the credit card issuer will vary for each individual card holder. Once a credit line is used and repaid, the portion of the funds repaid will become available again for use. Credit cards give you the option to pay a monthly minimum balance instead of the entire outstanding balance. However, keep in mind that the interest charges will accrue if balances are not paid in full. Essentially, credit cards allow you to borrow money and the cost of borrowing money is the interest you pay. 

How does a debit card work?

Debit cards allow you to electronically access your bank account and withdraw cash to pay for purchases. Many financial institutions will issue debit cards to individuals that have checking accounts. Unlike most credit cards where you pay a balance monthly, when you use your debit card, the funds come out of your checking account immediately.

Which one is better?

It really depends on your preference. Below are some pros and cons of using both credit and debit cards:

Credit Cards
Pros Cons

Personal Liability limitation. With identify theft a serious issues, the Truth in Lending law limits to $50 the amount a cardholder must pay if a credit card is stolen

They can be too convenient. You might appreciate buying what you need without going to the bank, but a credit card balance can rise quickly without proper management

Offer convenient purchase method when you don’t have cash

Many credit card companies charge late payment fees

Helps build a credit history

Interest rates increase if you miss a payment

Many credit cards offer benefits (i.e. frequent flier miles)

Many credit cards carry an annual fee

Provide a source of money for emergencies

Use “floating” annual interest rates that can go up without notice

Debit Cards
Pros Cons

Offer a convenient way to buy things in a manner that is analogous to writing a check, but faster. The purchase amount is withdrawn almost immediately from your bank when you use your debit card.

If stolen, you are responsible for up to $500 worth of unauthorized purchases if not reported within 48 hours.

Can be used to obtain money form ATM’s

Some financial institutions will charge fees for using ATM’s outside of their network

Allow you to make deposits or transfers between accounts

Some financial institutions charge a quarterly or annual fee to use your debit card

** Above information taken from: 2012 NEFE CashCourse, 2012 CEPF Training Manual

Credit Scores

What is a credit score?

A credit score is a number that summarizes your credit risk, based on a snapshot of your credit report at a particular point in time. A credit score helps lenders (banks, credit unions, etc.) estimate your credit risk. These scores are collected by lenders and act as key driving factors for making credit decisions. The most widely used credit scores are FICO Scores, the credit scores created by FICO, which collects credit information from the three main credit reporting agencies, Equifax, Experian, and Transunion.

What is a credit report?

A credit report details your credit history reported by any lenders who have extended credit to you. Your individual credit report lists what types of credit you use, the length of time your accounts have been open, and whether you’ve paid your bills on time. A credit report gives a broad view of your credit history, as opposed to information from one particular lender. Since your FICO score is based on information within your credit report, it is important to check your credit report yearly. You have the right to obtain one free copy of your credit report per year from each of the three major credit reporting agencies.

Why are the two important?

Credit scores give lenders a quick measurement of your overall credit risk. As a result, higher credit scores can speed up the credit approval process, lower the interest rates on your credit, and help you secure better credit offers. Similarly, maintaining a clear credit report by paying your bills on time, not missing payments, and maintaining low balances on credit cards will increase the likelihood of securing favorable credit.

Identity Theft

What is Identify Theft?

Identity theft occurs when someone uses your personal identifying information, like your name, Social Security number, or credit card number, without your permission, to commit fraud or other crimes. The Federal Trade Commission (FTC) estimates that as many as 9 million Americans have their identities stolen each year.

The crime takes many forms. Identity thieves may rent an apartment, obtain a credit card, or establish a telephone account in your name. You may not find out about the theft until you review your credit report or a credit card statement and notice charges you didn’t make - or until you’re contacted by a debt collector.

While some identity theft victims can resolve their problems quickly, others spend hundreds of dollars and many days repairing damage to their good name and credit record. Some consumers victimized by identity theft may lose out on job opportunities, or be denied loans for education, housing, or cars because of negative information on their credit reports.

How can I find out if my identity was stolen?

The best way to find out is to monitor your accounts and bank statements each month, and check your credit report on a regular basis. If you check your credit report regularly, you may be able to limit the damage caused by identity theft.

Unfortunately, many consumers learn that their identity has been stolen only after some damage has been done.

  1. You may find out when bill collection agencies contact you for overdue debts you never incurred.
  2. You may find out when you apply for a mortgage or car loan and learn that problems with your credit history are holding up the loan.
  3. You may find out when you get something in the mail about an apartment you never rented, a house you never bought, or a job you never held.

What should I do if my identity is stolen?

Filing a police report, checking your credit reports, notifying creditors, and disputing any unauthorized transactions are some of the steps you must take immediately to restore your good name. To learn about these steps and more, visit the DEFEND: Recover from Identity Theft section on the FTCs website.

Above information regarding Identify Theft is taken from “Deter. Defect. Defend. Avoid ID Theft” the Federal Trade Commission’s website dedicated to educating consumers about Identify Theft.

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Created by the WPI Office of Financial Aid, “Dollars and Sense” provides useful information to students about personal finance and important financial aid deadlines.