Adding It All Together: Kappa Delta’s Quick Tips for Financial Literacy
by TeAira Williams, Kappa Delta Headquarters Accounting Specialist
If you combine a passion for making smart decisions with knowledge of money, you get financial literacy. My name is TeAira Williams, and I studied accounting at the University of Memphis. While there, I fell in love with how the knowledge could not only be applied to my vocational life, but personal life as well. Here are 5 financial tips to implement this year:
Get on a plan!
Sometimes the word “budgeting” scares people. Let’s change it up a bit and not call it a budget, but instead, a spending plan! Because guess what? While getting organized in your finances, you can still spend! Shocker, right? Budgeting does not stop you from spending money on the things you enjoy, it simply gives you a sense of a control. In reality, budgeting can help you afford more of what you love.
The first step is to write it all down. This is a must. In personal finance, there are two major categories: income and expenses. The first thing that needs to be written down on your spending plan is how much money you make weekly, bi-weekly, or monthly from your job, allowance, or any other place you receive funds from.
Secondly, write out all the things you spend money on, especially the items that require your money (bills, for example). You may think you know what you’re spending simply because you see the total at the cash register, but some of us don’t realize how those numbers add up quickly! This can range from insurance to car payments, to subscriptions services. Also incorporate the necessities that are pertinent to your living: gas, food, clothing, etc.
Next, you’ll need to identify the average amount you spend on these each spending category. You may need to look back at your bank statement. From here, look at your list, and take note of where your spending is high. You may realize you need to cut down on spending in some categories, while others need to be increased (savings!) Again, a spending plan simply shows where you can reallocate funds to live a more financially responsible life. Stick to your spending plan, and you won’t be stressed about money when random expenses arise! Imagine being able to take a spontaneous girls’ trip with KD sisters because you were mindful of your money.
I highly recommend designating one bank account specifically for bills and another account for “fun money.” Identify two local banks that can easily be found in the states you visit/live in. Oftentimes, banks offer personalized checking accounts for individuals in different stages of life. For instance, student accounts waive monthly fees while still allowing the student to participate in features such as online banking, ATM access, direct deposit, etc. (The important thing to remember when opening an account anywhere is to be mindful of fees. Fees can be pesky and small but have an impact. A $5 monthly/ maintenance fee is sixty dollars a year that could have been directed toward a savings account.)
Your primary bank should be the account where your income consistently flows via direct deposit, check deposit, or cash deposit. This account can also be simultaneously used for your “fun money” after all your bill money is deducted. Thankfully, we live in an electronic age where most bank runs can be cut out due to online features such as mobile deposit and external account transfer. With the external account transfer feature, you can link two of your personal bank accounts so that you can easily transfer funds from your income account to your bank account specifically held for bills. Once you are consistently and responsibly putting money aside for bills, using bill features such as autopay isn’t so scary. (Depending on the company, enrolling in autopay will give the user a discount for the associated monthly bill.)
Pro tip: For every checking account I acquire, I require myself to add another savings account. This does not have to be an electronic savings account. Hard-cash saving methods such as envelopes, piggy banks, safes, etc. can also be used as a form of a savings account.
There is a reason it is called “personal” finances: every financial tip may not work for you For instance, experts say that you should save at least 20% of your income. But perhaps according to your spending plan, this tip simply doesn’t work for you right now. The best way to approach financial tips (including the ones in this blog!) is to pay attention to the principle of the advice. The principle of the 20% savings rule is to get you to remember this advice: don’t forget to save when you get paid! You can take the principle of the tip and be just as successful as someone who applied the full concept. Maybe all you need to do to up your savings is cut out 2-3 Starbucks visits per week, while someone else who skips the coffee line will still not results because there was more to be considered in their financial activity. Remember, what works for someone else may not always work for you! Personalize financial advice to fit your situation and goals.
Money doesn’t change people. It simply magnifies the habits and characteristics they already possess. I’m going to say something controversial: you don’t need more money. So many people think that if they only had more zeroes in their bank account, all their financial problems would disappear. This is the biggest misconception about money. I know it’s hard to believe, but if you cannot handle the small, then you will not magically know how to handle more, and the more you have, the more difficult it becomes to manage. It’s all about your mentality! If you’re not satisfied with your money, bad spending habits may be the culprit. Participate in a money saving challenge such “No Spend November.” There are lots of strategies out there, and not every one will be feasible for you, but can help you build a habit of proactively working towards financial freedom.
Get some credit!
Your credit score is a number that will be issued to financial institutions and lenders as a grade report of how financially responsible you are. There are multiple factors that contribute to your credit score, but successfully implementing the tips above will help you use credit responsibly. Credit assesses the following things: what you’d do if you were given a lump sum of money, when you would pay back borrowed money and/or if you would ever pay back borrowed money.
Credit is tricky to care for at a young age because not being mindful of how it works can lead to debt or a damaged credit score. Because credit does not show its power until later in life when individuals are ready to settle down or make big purchases, oftentimes, this is where people pay for the actions of previous years. Credit determines the final price an individual will pay for an item. Credit also determines which of those items an individual can be approved for. A group of individuals can look at the same house or same car, but depending on their credit score, one may pay exceedingly more or less than the next person. College is the best time to begin building a credit history. Upon graduation and entering the real world, you’ll already have a good history to your name.
Remember: care for your credit now, and your credit will care for you later.