Banking

Financial Downfalls of a College Student

Every college freshman is confronted with new finance problems and issues. Out of their parent’s house, not having to report where they are going or explain what they are doing all the time. It is like finally understanding what freedom is supposed to feel like. Cloud nine feels pretty good for a while. You are floating along, going to parties, going out to eat, spending all the money you saved from the summer before or all the money Mom and Dad sent you off with when suddenly, the money and the cloud are gone and you are left sinking into a major money problem, with a bank account sinking as well.
Financial Downfalls of the College Student

Don’t be ashamed. It happens to almost all of us incoming college students. Here are a few helpful tips to keep you in line during your first year and keep you on that cloud and out of debt.

1. Find a job.

This may seem obvious to those who worked during high school, but for those who did not need to, this may seem like a last resort. You may begin looking at all the negatives of what getting a job can mean; less study time, less social time, and more responsibility on top of your school work. Now, push those thoughts out of your mind and look through the positive ones. You will make money and new friends with your co-workers, gain good real world experience, and create new opportunities for yourself. Look for places where you have the possibility to move up, or that have benefits for college students. I currently work for a grocery chain in the Midwest, Hy-Vee. Hy-Vee offers a 401 K plan for everyone ages 19 and over. This is the kind of benefit I am talking about.

2. Find the right bank.

Look at the banking options you have around you. Check out the savings account and checking account options. Which one has the highest interest rate? Do any of them offer start up or joining benefits? Pick the one that seems like the best fit for you and go start a bank account! I highly recommend starting out with a checking account. Once you’ve accumulated around $500, start a savings account. Usually savings accounts have to be started with a $100 deposit. Once you do this, start a monthly automatic transfer of a small sum from your checking into your savings. This way, you will be automatically saving money and not even needing to think about it. A small amount, such as $10, $15, or $20 will not be missed during the month.

3. Create a budget.

This may seem like the solution to all your problems. “Oh I’ll just start a budget and stick with it. No problem.” Well, it is actually a lot harder than it seems. First, take a look at the things in your life that are costing you money, like driving, eating out, groceries, going out with friends, other car expenses, rent, utilities, etc. Then take a look at how many hours you work during a week. This may seem overwhelming, but once you know where all your money is going, where you can cut back, and where you can afford to give more, you will feel much more confident in your financial situation. Make a list of all things you cannot live without, like driving, groceries, rent, utilities, etc. Now, plan out how much you can put towards these items each week. Remember; do not plan out on spending all your paycheck on these things every week. You will want to have a little “random” fund set aside in case of emergencies or something comes up that you had not thought about. If you are planning on creating the savings account with the automatic transfer of money, do not forget to budget that in either.

Once you figure out where all your money will be going, you will feel so much more secure in your financial situation.

4. Take advantage of your options.

If you are attending school in a big town, like I am in Iowa City, take advantage of the buses. Many times the “Cambus,” or the university’s bus system will be free. If you can use their buses, you will save your gas money for the week.

Look for coupons online and at the grocery store you use. I am not recommending that you become an extreme couponer or anything. Just think about what you are buying and where you can afford to save money.

Find the free shows downtown or go to the park and play Frisbee golf with friends! Activities that are free usually tend to be a lot more fun for you and your pocketbook. Jump into your new financial situation with confidence and knowledge, and have a great time doing it! Check back often for more great easy to understand financial advice, that every college student is going to want to know about.

Investing in Bonds

Have you ever thought of making some extra money with the money that you already have? If it could take no work at all and the interest rate on your money is insane. You really can earn money for simply investing and it will be easy and is a great option for anyone. The most common bought bond and the one you will most likely want to purchase are individual bonds.

Individual bonds are usually sold in $5,000 dollar parts and they are considered OTC bonds. OTC simply means over-the-counter. You don’t have to get anything special to buy these bonds except the initial cash investment. Bonds are not quoted at the $5,000 ratio, most are quoted as if they were sold in $100 increments. They are rated based upon this. According to the ratings if your bond was quoted at 98 it would be $98 per $100. In the $5,000 bond this means you payed $4,900 for your bond or 2% less than it is worth for selling. Now this is a good thing because you can essentially buy bonds for a cheap price and wait a while to sell them for a profit.

Bonds are not a short term money maker, they require quite a bit of long term investment and good choices. You always want to try and buy bonds in an area that you feel knowledgeable and comfortable. This greatly increases your chances of knowing what you are investing in and making some money off of your bond.

Next, there are some bonds that are called bond funds. This is essentially the same as a stock fund in that a professional manages a bond fund for you and gives advice on things such as reinvesting bond interest and where to place your next bond. Bond funds are initially a service provided to you so they do require a management fee. This fee can be either an initials start up fee or a periodical management fee. When investing this fee should come into account as it will lower the overall money you are making from your bonds.

In some cases however this professional advice is worth the amount out of bond profit. Options like the bond funds are great for beginning bond investors who are still assessing the market and aren’t very experienced with investing in bonds for a profit. Thirdly there are market bonds. These are the quick cash bonds that are high risk. They require an initial investment of anywhere from $1,000 to $10,000 on fast moving bonds. The investor can withdraw at any time and these usually offer the highest profit per time period.

Lastly there are Bond unit investment trusts. These are by far the most stable bonds as the investor knows exactly how much they will make because the portfolio of bond profit is a constant rate. These trusts are good for large investments or investors who want security with their bond.