Personal finance is as unique as the individual behind it. It can be as varied as one person planning for retirement, another purchasing a home or another budgeting for beer. However diverse it may be, using a couple of simple financial tools, students today can plan for a stable financial future.
UM-St. Louis personal finance professor Jesse Swanigan has observed a common problem with young people and their financial matters.
"People don't set personal financial goals," Swanigan said. "They need to do a personal interview and ask themselves what they want."
Swanigan also said that many people have a future lifestyle in mind, but do not have a course of action to reach their dream.
"To be able to comfortably retire, you must start planning now," he said.
Swanigan teaches that creating and following a personal budget is imperative to achieving financial goals. He recommends in a budget to have money automatically deposited into a savings account on a monthly basis.
"If you don't see it, it doesn't hurt," Swanigan said.
Once a savings budget is in place, the next step is to reduce debts. Swanigan advises people to look at which of their debts has the highest interest rate. That debt should be reduced first. This is done using money from their budgeted savings account.
Another part of personal financial success is an individual's credit. Nearly everybody with a social security number has a credit score that is based on their financial past.
Some factors that influence credit scores include a person opening or closing a credit card, making or missing a payment on that card, signing an apartment lease or having a car loan. In other words, when a person has the option to use an asset before entirely paying for it, his or her credit score is probably being adjusted.
Credit scores are people's financial reputation, and can be either an asset or liability to their character. If a person has a strong credit history, it may allow him access to attractive interest rates for loans on items such as a car or home. On the other hand, if a person has a checkered financial past, it will lead to higher interest rates on loans, assuming they are offered. Moreover, some businesses are even using the credit history of prospective employees as a factor in their hiring decision.
Clearpoint Financial Solutions is a non-profit organization that provides consumer credit counseling.
Clearpoint's Corporate Trainer Bruce McClary advocates the use of limited credit. He said many his of clients are in their mid-to-late twenties paying for mistakes made years ago.
"Establish a credit card with a small limit and always make the monthly payment," McClary said. He explained that making at least the required monthly payment is important for young adults because they have a short credit history and any blemish, such as a missed payment, can be very damaging to their credit score.
McClary warned of credit card issuers oncampus offering low interest rates.
"You usually find company's offering zero percent during registration time," he said. "Always read the fine print. Those zero percent rates usually last a few months before turning into 18 or 20 percent."
McClary encourages people to check their credit scores at least once a year.
"Your credit report could say that you missed a mortgage payment that you never even had," McClary said. He recommends obtaining free credit reports through the government mandated website.
Both Swanigan and McClary agree, responsibly managing the use of credit and following a budget are two realistic steps towards financial freedom.
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