Opinion | Plan your finances, minimize debt
November 14, 2020
As college students taking different classes, completing different majors in different years with different professors, student debt binds us together in a shared experience of financial planning.
College, aside from being a time to grow, learn and experience a preview of adulthood, is a constant, tiresome battle with money. From buying textbooks to paying for tuition, money often seems to fly out of our pockets. Many students are left wondering how they can gain some of that money back, or at least reduce the rate of their capital’s mass exodus from their bank accounts.
The University offers multiple classes on the subject of financial literacy personal financial planning, such as ACE 240: Personal Financial Planning. In this class, students learn financial tactics used individually and for households; useful information for a student in any major.
Through acquiring this knowledge, students can stand to benefit in many financial areas, namely student loans and budgeting.
Many students take out loans to pay for school, but few know the ins and outs of exactly where their money goes. Thoroughly understanding the benefits of different payment plans and interest rates in student loans can guide students to pick the right loan for them, saving tons of money in the process.
For example, a student who has the money to pay off college loans during the school year due to working, saved up money or family help might not have to worry as much about high interest rates compared to a student who knows they will be paying off their student loans for many years post-graduation.
Knowing this financial strategy will allow the student to pick a loan despite having a lower credit score or needing a different payment plan, such as paying an upfront sum compared to monthly installments.
Our financial situations are unique; knowing how to select loans that fit our individual finances can prove beneficial in the long run.
A second advantage of taking a financial planning course is learning how to budget. It’s easy to be tantalized by countless restaurants on Green Street. We frequent malls, shops, the bookstore, buying little gifts here and there for friends, family or ourselves.
Budgeting prevents us from overspending. Applying this tactic to our spending habits as one life’s largest expenditures, education, falls upon us can help us pay off debt faster and achieve financial stability even after college.
Countless financial experts such as Senator Elizabeth Warren have recommended the 50-30-20 budget system. This plan allocates fifty percent of post-tax income to necessities, thirty percent on wants and twenty percent to savings.
This budget system has proven popular because of its simplicity. A student who works 10 hours a week at an hourly wage of $10 post-tax, earning $400 a month, has $200 for necessities, $120 for wants and $80 for savings. Easy.
Simply seeing where exactly a student’s earnings go provides an easy method for students to tangibly understand how much money they can spend on what they want. In the aforementioned example, for instance, the student could spend $30 a week on wants such as gifts from the new Target, eating at Mia Za’s with friends and so much more while still paying rent and paying off loans.
As jobs become harder to find and as businesses close down due to COVID-19, financial planning becomes even more imperative to discuss. Therefore, taking a class on personal finance is the perfect way to set yourself up for financial success, now and for the years to come.
Chiara is a freshman in LAS.