Money Management for College Students

By Trilogy Financial
September 23, 2019
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For many young adults, college is the first time they are independently managing their own money. It can be a time marked with excitement and new opportunities, or anxiety and worry. Financial skills built at this time can have long-lasting benefits. Likewise, money mistakes made now will carry on into their future. That is why about 70 percent of college students worry about their finances[i]. However, with the right skills and habits, this can be a great time to lay a strong foundation for their future financial independence.

The first financial decision that most college students encounter are student loans. Before taking out student loans, make sure to explore other financial aid options, such as scholarships and tuition assistance from participating employers. Also, don’t forget the option of going to local community colleges for the first couple of years. If student loans are an option, it is best to resist the temptation to take the maximum amount one qualifies for. Instead, borrow only what is needed. This will help in the long run. College is an investment, and students need to be sure that their rate of return is worth it.

It is imperative that young people know how to budget, but unfortunately, that’s largely not the case. In fact, 43 percent of college students don’t track their spending[ii]. This is particularly crucial for those who have student loans. You can help your young people early by introducing them to the concept of budgeting well before you’re packing them up for college. A budget is not simply an account of where one’s money goes. It aids in making decisions, establishing financial priorities, and staying aware of how your money is working for you. Please always remind your college students that the less they spend now, the more they’ll be able to move forward in the future.

Another common first for college students is the first credit card. Credit cards are a good tool to establish small lines of credit, but monthly balances should always be paid off immediately. Not only does this avoid late fees, but it also avoids interest building on purchases. Also, protecting personal information is imperative. Students need to constantly be aware of who they are giving their information to and what is being charged to their account.

College is a busy time full of “firsts”. These experiences can have long-reaching consequences. Help your college students prepare a solid foundation to their financial independence by providing them with the proper education and tools for a bright financial future.

[i] https://news.osu.edu/70-percent-of-college-students-stressed-about-finances/

[ii] https://www.affordablecollegesonline.org/college-resource-center/student-guide-to-budgeting/

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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By
Jeff Motske, CFP®
April 17, 2019

Now, I’ve mentioned before that I’m not a fan of large tax refunds (see March 1 blog). In fact, if you are consistently getting a large tax refund, you should probably adjust your withholdings so you can dedicate that money to your financial why’s every paycheck. After all, allowing the IRS to hold your money is a bad investment. If you should find yourself receiving one, though, you may be wondering how best ways to use it. It’s only normal to be tempted to do some retail therapy or splurge on a fun experience. However, it’s best to see how you can get your money to work for you before giving in to that temptation.

The very first thing to consider is how much debt you have. Large amounts of debt, whether it be student loans, credit cards or other outstanding financial obligations, can cripple you from saving for your goals. Using your tax refund to pay down debt might be the very thing to get you closer to saving for your goals.

You also want to make sure to bulk up your emergency fund. An unplanned repair, medical expense or job termination can all cost a pretty penny. Without an emergency fund, we may feel tempted to use our credit cards to cover the unexpected expense. As I just mentioned earlier, this simply takes us farther from our goals. Ensuring that we have an adequate emergency fund can make sure that we stay on target regardless of what life may throw at us.

Your tax refund can also be used to work towards your financial independence. Maximize your contributions. If you don’t have a plan, establish one. A little money can go a long way with the help of time and compound interest. Remember: there is no do-over when it comes to saving for retirement, so be sure to do as much as you can now because that time will be here before you know it.

I understand that using your tax refund check to indulge in something today can be quite tempting. More often than not, though, these distractions simply take you off your path to financial independence. You need to make sure that you’re making the money you receive today work to build the life you want to live tomorrow.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

By
Jeff Motske, CFP®
August 31, 2018

There are some great advertisements that show you retirees traveling, gardening and enjoying their hard-earned reprieve from the workforce. It gives a great glimpse of how good retirement can be, giving folks something to strive for. However, it’s not the only reflection of retirement. Sometimes there are valleys to go along with those peaks, and one of the most distinct valleys that are experienced in retirement is mounting health care costs.

The financial weight of health care can start off with small steps, or small pills to be precise. Nine out of ten people 65 and older have commented that they have taken at least one prescription drug within the last 30 days.1 As health issues progress, so can treatments, with some people having multiple medications and continuous appointments, not all being covered by private health insurance. According to an annual estimate conducted by Fidelity, the average retiring couple “will need $280,000 to cover health care and medical costs”.2 While many expect to rely on Medicare for their health care costs, the program is not comprehensive. Fidelity’s figure includes deductibles, cost-sharing requirements for certain medications, as well as services and devices that Medicare doesn’t cover, like hearing aids. For the unprepared, these figures can be staggering.

Those who are unprepared can, unfortunately, find themselves sliding into practices where they are not taking care of themselves in retirement. According to the 2018 Economic Well-Being Report, a quarter of adults went without needed medical care because they were unable to afford the cost.3 Those who do go in for medical care can be overwhelmed by mounting medical costs. According to a study done by the Consumer Financial Protection Bureau, “43 million Americans owe a medical debt.”4 Stress-induced by medical issues combined with stress over mounting medical costs is not what people expect to experience in their retirement.

The key to good retirement planning isn’t to plan to maintain your current lifestyle. It is to plan for possibilities and scenarios that may not seem likely today, but that statistics show could impact your tomorrow. While these statistics can be very overwhelming, if you start saving early and work with a trusted financial professional, you can be fully prepared to enjoy your retirement. In the end, you need your finances to be in good health for those moments when your body can’t be.

https://www.iris.xyz/advisor/9-facts-about-retirement

http://time.com/money/5246882/heres-how-much-the-average-couple-will-spend-on-health-care-costs-in-retirement/

https://www.federalreserve.gov/publications/files/2017-report-economic-well-being-us-households-201805.pdf

https://finance.yahoo.com/news/4-tips-keep-medical-debt-overwhelming-174638865.html

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