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3 Facts About College That Will Set Up Your Financial Future

student holding a past due envelopIf you want to keep college debt from crippling your financial future, you need to make sure that you will act appropriately while you are in still in school. Some people make the mistake of partying all the way through college and end up living like a student on a limited budget once they start working. That is because they are already paying for the financial mistakes that they made in the past.

Study shows that what you do in college will affect your life

What you do in college have serious effects to your future. In fact, Gallup.com conducted a poll survey that proved how a students life in college affected them after graduation. It is interesting to note that your level of work engagement and your overall well being will be affected by how you acted back in college. The bottom line of the study revealed that college graduates would have been more engaged with their work and thriving in various areas of their well being if:

  • Their school prepared the for life after graduation
  • Their school were sincerely concerned about the long term success of students
  • They had a mentor in college, had a professor who got them excited about learning and cared about students as a person
  • They had an internship in college, active in extracurricular activities and worked on a project that took the whole semester or more to complete

3 important truths about college life and your future financial standing

From the above study emerges three important truths about your college life that has a significant impact on your financial future. Let us discuss them one by one.

Where you graduate is not important.

An article published on the NYTimes.com revealed an interview with Laszlo Bock, the VP of Google that is in charge of hiring people. He mentioned that the GPA and the school were a graduate came predicts nothing about how they will perform in the company. In fact, there is a growing number of people in the company that did not have any college degree. While good grades are still important, they have observed that it is not the defining factor that will make a graduate successful. What is important are the skills that the student will get from their school. That being said, you should know that you can come from a community college and avoid high student loans and still be successful in big companies like Google.

What happens to you in college will set you up for life after graduation.

In connection with the previous, the Gallup study revealed that it is experience and skills that you will get from college that will define your success in your work. In effect, that will have a profound impact on your earning potential. Business owners are attracted to people of skill, not those who graduated from Ivy League schools. If you tap into the right influences like a mentor and social skills you get from extracurricular activities, you will find yourself more engaged to your work. The dedication that you will display can be evident in your output and that will make you shine in your work.

What you spend in college will come haunt you after.

This is not really directly indicated in the Gallup study but considering that we are trying to identify the factors that will affect your financial future, we need to incorporate this fact. It can be logically assumed that student loans, credit card debt – these will haunt your paycheck for the next few years – even a decade. You need to be careful about how you will use them or if you will use them at all in college. According to an article published on Demos.org, the higher your student loan debt, the more of your lifetime wealth will be compromised. Instead of investing the money you get from your paycheck, you have to share that with your payments. This is true for both student loans and credit card debt.

Financial practices of a college student to set them up for success

Given the truths that we just discussed, you have to consider how your financial practices in college should be implemented to set up your future correctly. You can influence your financial future even as early as your high school days. If you start saving your college to avoid student loans, that will start you up on your personal wealth early in life.

But even if you failed to start while you were in high school, you still have time to correct your finances when you reach college. Here are 5 things that you can do to take care of your finances as early as now.

  • Implement a budget plan. Regardless if your parents are supporting you 100% or not, you have implement a budget in your life. This is a habit that you will need until the very end. It will help you reach your financial goals and more importantly, it will keep you from debt. Most people live on a limited income and a budget plan will allow you to point out the expenses that you need to prioritize. It will help you make smart choices about your money while in college.
  • Learn about your debts. This is true for both student loans and credit card debt. A secure financial future does not necessarily mean you do not have debt. It means you may have debt but you have full control over it. Not only that, it also means you have a backup plan in case your main source of income is compromised. To create this plan, you need to understand your debts thoroughly. Your ignorance might lead you to make mistakes that could have been avoided if you only researched about your debts.
  • Reserve your credit cards only for emergencies. Student loans are bad enough and your financial future will be much worse if you combine it with unnecessary credit card debt. You can understand how this can jeopardize your financial future. Keep your debts low and if you have to use a credit card, make sure that you have a plan to pay it off before the grace period ends.
  • Get a job. If you need to get money for your college expenses, do not use your card or go running to your parents. Get a job and finance your own expenses. Not only will it teach you to be self-reliant, it will also give you the skills that will prove to be helpful when you start applying for a job. Remember that internships and skills are major factors that Gallup mentioned you need to be engaged and thriving in your future life.
  • Live a frugal life. When you are a student, you get all sorts of discounts. Make sure that you source these out so frugality will not seem restricting. If you learn about the true practices of frugal living, you will realize that it is not about deprivation. It is learning how to have the things that you used to enjoy without spending too much for it.

Statistics show that college graduates enter the corporate world with a lot of regrets about life. You do not have to be part of this statistic. Make sure that you will learn how to set up your financial future so it will be poised to grow exponentially. If that means you need to stay away from student loans, then you should know that your skills and college experiences are more important than the expensive colleges that are popularly preferred. The quality of college education is important – not where you got it.

In case you need help with your student loans, National Debt Relief has a program that can provide you with consultation services. Their trained experts can advise you about you student loan repayment options based on the type of debt that you have and your employment situation. They will even help you with the paper work involved. This service has a one time fee that will be placed in an escrow account. When you are satisfied with the service and the documentations done on your behalf, that is the only time the fee can be released. There is no upfront or recurring maintenance fee.

Co-Signing Loans: How To Be Smart About It

two men talking on coinsThere are a lot of financial decisions that can change your life. No matter how simple they may seem, you could find yourself facing a lot of problems in the future if you make the wrong move. This is what got a lot of us in debt in the present. We made a lot of bad choices that led to our failure in managing our money.

Of the many decisions that you should be careful with, cosigning a loan is right up the top of the list. While we all want to help our family and friends, co-signing loans is not one of the best ways to do it. That act can lead to a lot of negative things – even if you think that the borrower is a very responsible person.

Are you really helping others by guaranteeing their loan?

Co-signing is defined by Wikipedia.org as something that involves promising to pay the debt of another person in case they are unable to do so. It is not the same as counter-signing wherein you merely act on behalf of another. The full responsibility still falls on the person being represented.

When you cosign a loan, that means you are accepting full responsibility for that debt. You are equally liable in case the lender or creditor is not paid on time. Your credit score will also suffer if the person you cosigned for ends up being irresponsible.

Truth is, it is hard to say no to someone close to you when they ask you to cosign their loan. We have that natural sense of wanting to help our loved ones – especially our children and elderly parents. We think that a few simple strokes of your pen is all it takes to help them out of a financial fix. But before you can continue with that trail of thought, you have to ask yourself: are you really helping them? Sure you are helping them get the finances to pursue their goals but is co-signing loans really the answer to the problem?

Here are some thoughts that you need to ponder on.

  • You are giving them the easy way out. Instead of saving up for a certain expense or working hard for it, you are putting name and credibility on the line. You are giving them the easy solution – something that may or may not cost you.

  • You are not increasing the value of their financial achievement. There is nothing more valuable than working hard to achieve something. If you help your loved one by co-signing for them, you are removing the value of their financial goal. They could lose the sense of wanting to take care of something just because they got it without much effort.

  • You are teaching them to rely on others instead of their own abilities. By agreeing to help them with their loan, you are teaching the main borrower to just rely on others to get financial help. They will not think about taking care of their credit history and their personal finances because you can bail them out if they ask for help.

In the end, you know that you are not really helping the borrower with their financial difficulties if you agree to do this for them. Think this over and do not be afraid to say no if you do not feel comfortable with it.

How being a guarantor for someone else can ruin your finances

If you ever co-signed for a loan and you are now in trouble, any financial expert will just look at you with that “I told you so” expression. Most financial experts will tell you flat out to never co-sign a loan for someone else because you are risking more than your finances. You are also putting your relationship on the line. Suze Orman is one the financial advisors who discourage this practice passionately. Here is a video compilation of her thoughts about co-signing loans.

While this is a big no-no, there are instances wherein you are compelled to help someone with their financial problems. For instance, if your child wants to go to college and neither of you saved up for it, you may be required to co-sign for that student loan. If your elder parents are asking for help, this may be something that you can help them with.

But before you agree to co-signing loans, here are a couple of things that you must do first.

  • Choose the people whom you will co-sign for. Even if it is your parent or your child, if you know that they are irresponsible with money, then just say no. You are saving both of your relationships this way – even if you will earn the ire of the one asking for help.

  • Find out why they cannot get the loan themselves. If it is because they have a bad credit history that involves a lot of payment defaults, then do you really want to help them out?

  • Look for alternatives. Maybe the one asking for help can save up for the purchase? Or maybe they can sell some of their assets to get the funds that they need? Instead of helping them with the loan, why not help them get the means to acquire the money that they need? This may be a better option for everyone.

  • Protect yourself before signing. Make sure you review the documents for the loan and you come up with your own agreement with the main borrower. For instance, if you are helping them to finance a business, ask to own a part of that business until your name is cleared from the loan. Only then will you relinquish the rights to whatever collateral they will put on the line. If it is a home or a car, get the title of the car and a signed document that says you get to make decision about that asset. You can decide to sell the asset or tell the lender to sell it in case the borrower fails to make payments.

Only agree to co-sign if you have the money to risk for that particular loan. If not, then just say no.

8 Signs That You Could Be Headed For A Financial Catastrophe

man holding multiple credit cardsYou’ve probably heard that old story about ostriches and how they stick their heads in the sand when they feel they are in danger. Well, that’s a myth. The reason why ostriches stick their head in the ground is to find water. But you could be sort of an ostrich when it comes to your debts – sticking your head in the ground and refusing to face up to them. This is one of the most serious mistakes you can make when it comes to your personal finances because the earlier you realize you’re having a problem with your debt, the better are the odds that you will be able to fix it. Here are eight signs that you could be headed for a financial disaster and that you might start looking for help.

Banking on a windfall

If you’re counting on a future windfall such as a bonus, a big tax refund or an inheritance, your finances could be in real trouble. Plus, it can be a symptom of a larger problem that you’re rationalizing when it comes to your debts. For example, if you’re planning on a big bonus to bail you out, you’re in real trouble if it doesn’t materialize.

Using credit card hocus-pocus

Credit cards can be useful tools if you use them sensibly. It’s an easy way to make purchases without having to carry cash all the time, plus these days you can probably earn rewards by using them. However, if you see that your credit card debt is consistently getting larger and you can’t make more than the minimum payments, your balances will continue to rise. Your interest rate could take a big jump if you fail to make a minimum payment for more than 60 days. This would make your financial condition even worse. You might be able to hold off trouble temporarily by making your minimum payments or by moving your balances to new cards. But then any sudden change in your finances could cause things to spiral out of control

Juggling fees and paying late bills

Most experts feel that this is a clear sign that you have financial trouble ahead of you. If you’re paying those late fees simply because you’re lazy, you’re basically throwing money away. If you’re juggling monthly bills by making payments large enough to keep things going – but without paying balances on time – this is even more of a symptom of a coming financial disaster.

Constantly arguing with your partner over finances

Just about every couple has fights occasionally over debt. But if you’re doing this regularly with your spouse or partner this can be a sign that you don’t have enough disposable income to cover your spending. Also, if you’re continually stressing out over your debts this can be a sign that your finances have become unsustainable.

Continuously paying overdraft fees

You could be on the very brink of a catastrophe if you’re constantly having to pay fees for overdrawing your checking account. In fact, you can actually compare NSF (nonsufficient funds) fees to those nautical signs you see that are raised to warn of a coming hurricane. In fact, if you’re getting a lot of NSF notices, this is beyond being a warning. It shows that you have a real problem. If you don’t have enough income available to cover your debts and are required to write NSF checks, you could actually be on the verge of having to declare bankruptcy.

Using retirement savings to cover expenses

Unfortunately, it’s common for people to borrow or withdraw from their retirement funds such as a 401(k) to cover their expenses. This is a bad idea under any set of circumstances but if you do this more than once, it shows you’re not managing your cash flow effectively. If you find that you’re withdrawing regularly from your retirement savings, this is more than just a warning sign that you’re living beyond your means. It will have very serious consequences for your retirement as it lessens the effects of the compounding interest that would help your retirement funds grow.

Having a savings rate of zerowoman with help sign

Your finances are definitely in bad shape if you are unable to put aside even a small amount of money every month. You should budget for savings just as you would any other expense. You can just count on something coming along such as an unexpected car or home repair and if you have not savings to tide you over, you may find yourself in a very bad place. Most experts say that if you have no savings, you’re basically standing on the edge of a financial cliff. While you could use credit as your emergency backstop, this isn’t as good as having an emergency savings fund. If you want to be financially healthy, it’s important to set aside money for those unexpected emergencies as well as your retirement.

Using your home as a piggy bank

You may also be headed for a financial disaster if you’re using your home equity as a financial crutch. It may be okay to take out a home equity loan if you have a serious financial need but not for a “want” such as an elaborate vacation. It’s also not a good idea to use one of those loans to pay for a new automobile. It just doesn’t make any sense to use a homeowner equity loan that you would be amortizing over 15 or 20 years just to pay for something you can’t afford or are not willing to save for.

Finally, here’s a video with more information about dealing with debt, including why its dangerous to make only minimum payments.

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