Dear College Freshman

They always say hindsight is 20/20, and I'd say that sentiment is certainly true about handling your finances in college. Approaching a one size fits all for college finances doesn't quite work because all colleges aren't built the same, and all students and their respective families aren't built the same. However, I think there are still a few key principals that I wish I could go back and tell my Freshman self. Do you have any? 

Dear Freshman,

Congratulations! You have graduated high school, moved away from home, and are enjoying your first semester in college! I know, I know, the freedom is amazing. Social freedom is great, but you are now responsible for your financial freedom too.  Before you get too far ahead of your self, here are a few things that you should keep in mind. 

Learn How to [roughly] Budget

This is a tough thing for grown adults, so don't be scared away too soon. It is not something that comes easy, but once you figure out what is going on, it does. get. easier. The simple way to think about it is this - how much money do you have to spend? Do you have a job, savings, money from your parents, or a scholarship? If you have any or all of that, add it up and try to determine how much you have each month. 

The next step to this is focusing on how many "fixed" expenses you have. These are things like car insurance, cell phone bills, rent, etc. A lot of college students are fortunate to still be on mom and dad's payroll, but a lot are not and are already paying these things on their own. If you fall in the latter of the two categories, add up those expenses. This is money that you will spend every month no matter what. 

Now comes the tricky part. You need to see what the difference is in your "income," be it from work, parents, scholarship, etc., and your fixed expenses. The difference in those two amounts is what you have left for the month to spend on other things like coffee, dinners out, long weekend trips, and other fun activities. 

Save

You know that "extra" money that {hopefully} you have at the end after you pay all of your fixed amounts that we just talked about? Do your very best to save some of that. Even if it's just $20 a week or $50 a month. Every little bit counts, and in the end it all adds up. If you have to pay for your books this is especially important because that is a big expense that usually comes all at once. The good news for books is, you can check out this post, where I talk about a few days you can save on text books. Unfortunately for other big expenses, like car repairs, there aren't always less expensive options. (For Example - Earnest offers a service to help you refinance your student loans and make them more affordable.) So save. that. money. You'll be happy you did, I promise. 

Eat for Free Every Chance you Get

Here's the thing about college, and grad school for that matter - people want you to be a part of their club and join their organizations. People also recognize that free food is a great way to draw a crowd. I cannot count the number of free lunches I had in Law School just for sitting through another lecture that was being held by the career center or another law school group. Go. to. those. lunches. The good thing about college is that you are almost always required to have a meal plan, especially your freshman year. Make sure you take advantage of that because those meals are already paid for. I know, I know, it gets old after a while, but try to be creative. I always knew that if I was disappointed with the dinner selection I could just have a bowl of lucky charms or a chocolate chip waffle. Have that back up plan, but make sure you are using those meals. The more meals you eat on campus the more money you are saving and it will be easier on your wallet when your friends want to go grab some ice cream on Saturday night. 

Re-Evaluate Each Semester 

Keeping the above ideas in mind, it is also important to re-evaluate your expenses every few months. College has that natural split of semesters, or trimesters, and that is the perfect time to look back on your income and spending and see what you did wrong, and what you did right. Are you really reading those magazines that seemed like too good of a deal to pass up? If not, cancel. Have you enjoyed your weekly coffee dates with one of your friends? Great, keep making room for that in your budget. It is easy to make things happen when you plan for them. By looking back each semester you can really see how you're doing, what you need to budget for, what you want to budget for, and what costs you can cut because they just don't matter.

Here's a final tip - keep up with the news, especially the business news. The more you understand not only about your finances, but the country's economy as a whole, the easier it is to keep yourself in check. My favorite way to start the day is by reading the Morning Brew. It is a quick snap shot of how the markets finished, why some shares took a dive, or a jump, and what we can expect in the future. Plus they have an interview question of the day - my favorite part - and it is never too early to prepare for the dozens of interviews you're likely to encounter as you continue on in your college career. I strongly encourage you to check it out!

Enjoy college and have fun! It will be the best four years of your young life!

xoxo
Legally Southern

ps - if you are having an oh Sh*t, I'm already an adult moment - check out this post about staying financially fit!  

Tips to Becoming Financially "Fit"

Everyone seems to be striving to be fit lately. Following the latest diets and exercise trends. But what about your financial fitness? How's that coming along?
Just like being physically fit takes a lot of continuous work, becoming (and staying) financially fit is a lifelong process. Fortunately - they both get easier with time. Today I wanted to share with y'all some of the key factors I consider to being financially fit, and some ways to help get you on your way there. Regardless where you may be on your journey to being financially fit, these tips will help keep your in your best shape!

Know. Your. Finances.

I know, this post is supposed to teach you how. But what I mean is, first you've got to know what you've got. Sit down and write out your fixed monthly income and your fixed monthly expenses. If you are married or have combined finances include all income and expenses.

For the purposes of these calculations, fixed monthly income is what you get on each paycheck after taxes. Your fixed monthly expenses are the expenses that you need or are already obligated to each month. These include things like hours payments (mortgage/rent), student loans, car loans/leases, electricity, water, cable, internet, gym, etc. While some of these expenses may not be considered "needed," it may be more expensive to get out of a contract than to keep paying it, so if you have any of those, assume for now they are fixed and not going any where.

At this point you should take your total income and subtract your fixed expenses.This is your discretionary income to spend how you choose. Of course there are still necessities that you need to consider that were not included. But - those amounts are not fixed, so you have room to budget and decide how much money to spend on any given item.

Set a Realistic Budget (and follow it)

Now quickly jot down all of the other items that you generally spend money on each month. Clothes, food, concerts, gifts, makeup, coffee dates, etc.

After you've written these items down, consider a few things and try to estimate how much you are already spending on these items each month. It is important for you to be honest and realistic. You, and perhaps a spouse, are the only one looking at this list, so there is no reason to fudge the numbers. Being realistic about what you have and what you can spend is KEY.
Add up everything on that list and subtract it from the amount you calculated above as your "Remaining Discretionary Income."

If you are left with a positive amount - great! This means that you are not spending more than you're bringing in. On the other hand, if you are left with a negative amount - that is your expenses are more than your discretionary income - you need to start considering where you can reduce your spending on certain things.
Depending on the deficit you see when you do this calculation, you may just need to make a few minor changes, or it may require some other major lifestyle changes. Below are some of the best recommendations I have to making changes in your spending. Alone they can each make a little difference, and together implementing any or all of  these options can really make an impact.

Track Your Spending

At this point there are dozens of different apps, programs, and plans you can use to track your spending. My personal favorite is Mint. In my experience Mint is very user friendly and is accessible almost anywhere. Mint allows you to connect (almost) all of your bank accounts and credit cards and will categorize your spending. Most of the time the program can identify what kind of transaction it was - health, gym, grocery, etc., but even if it can't - you can manually tell it what kind of transaction it was, and it will "know" that for future transactions at that location. When I first started using Mint I was shocked at how much I was spending on going out to eat, or getting coffee. Ten dollars might not seem like much for a lunch out, but if you do that a few times a week, every week, it can really add up. Tracking your spending is a great place to start because it also helps you see where you can cut costs, and you can see the actual dollar amount that you are spending on any given category.

Careful Use of Credit Cards

Full disclosure - I do have a "regular" credit card through my bank, along with two or three store specific credit cards. I have always used credit cards for rewards, and generally pay off anything I charge to the card with in a couple of days. I can honestly say I have never used a credit card when I did not have the money already in my bank account.  I know that I am probably in the minority, so for the rest of you, I urge you to use caution when you decide to open a credit card and do your research on websites like Credit Card Insider. After reading countless stories, and seeing first hand with clients (both as an accountant and attorney), credit card debt is a slippery slope and it is hard to dig yourself out. I do understand that there are scenarios when you will use credit cards, without having the money in your bank account, and it is necessary. However, the spending usually doesn't stop there. Once you've used that card and see how easy it is to buy something, knowing you don't have the money, the trend continues until you've racked up a bill that you'll have to pay off over 6 months with sky-high interest. I realize that sounds like worst case scenario, but it is becoming all too common, and is actually far from worst-case. My best advice to you would be that if you don't trust yourself with a credit card, don't open one. And if you already have one, but feel like your spending is out of control, cut it up right now because it will only get worse. It will be a long time before I can really say I'm debt free thanks to student loans and a mortgage, but at least I know that I'm not also having to factor in credit card payments from irresponsible spending for things I didn't really need in the first place.

A Diet for Your Bank Account - Spending Freeze

There is nothing I love more than a good day of shopping. But a few too many shopping trips, and I immediately regret spending so much money. One of the ways I like to combat this habit, and in a sense make up for a few months or two of over spending, is to set myself up for a Spending Freeze (I totally made this term up). In the past I have either set the amount of time at exactly one month, or until a certain event was occurring, but still no less than one month.
During my Spending Freeze, I didn't allow myself to shop for clothes or any other items that I didn't need. For me, this primarily meant clothes and makeup, my two weaknesses. At the end of the Spending Freeze if there was something that I still really wanted, I let myself buy it, but this usually ended up being one item of dozens that I had considered over that time. Making myself wait for it really helped me to to think about whether it was something I actually wanted, or just something I wanted in the moment. I think at the beginning of taking that big leap into budgeting, a Spending Freeze is a great jump start to help you realize what you really can live without.

Setting Your Budget

One last piece of advice I have for you - finances are a very personal thing. I don't just mean in a privacy sense, but also in how your lifestyle varies from someone else's, and what you choose to spend money on - or not - will not be the same as everyone. Searching Pinterest for "Budgets" can be very helpful, but it is also important to tailor a budget to your lifestyle. For instance, a lot of the budgets I've looked at include child care, or pet expenses, neither of which I have. On the other hand, most don't include student loans, which happen to take more than 20% of my income every month. It helped me to look at a few different ones and then create one just for me. If that is something you need help with, feel free to reach out. The accounting major in my loves nothing more than a good budget.

Alright, y'all, that's it! Easy, right? Of course not! Taking control of your finances can be a major task, especially depending on where you are in life, and the choices you've been making up until this point. The important thing to remember is that it's never too late, and there's never a bad time to start on this path. And seriously, every little bit helps. I hope y'all have learned a little bit - I'd love to hear some tips or tricks you have to staying financially fit! And as always, if you have any questions please don't hesitate to reach out!

Have a great day, y'all! 

xoxo 

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