It’s good to graduate prepared for handling finances as a young adult. If you feel like you’re getting overwhelmed by financial decisions though, don’t worry! Finances make for a difficult subject. One good way to look at that difficulty though is that there are some important financial lessons you can begin to teach yourself in college, even with limited financial means.
Let’s take a look at four specific lessons you can learn before you graduate so that you head into the “real world” ready to achieve financial independence.
Getting Health Insurance
With the possibility of astronomical medical bills looming over all of our heads, it’s no surprise that health insurance is no longer a recommendation –– it’s a must. Now, you do have some help here. Under the Affordable Care Act, you can stay on your parent’s plan until age 26; additionally, the No Surprises Act is helping patients avoid surprise medical bills from out-of-network doctors (which can spring up if you’re in school away from home). There’s also the possibility of obtaining student health insurance. Whatever option you go with, however, the process of figuring out, obtaining, and maintaining health insurance is a valuable one to go through. You’ll always have to factor health (and health insurance) costs in as a “real adult,” so why not start now?
The importance of paying off your debt
Most of us can’t actively make huge dents in debt while we’re still in college, but we still get an aggressively hands-on lesson in the challenge it poses. First and foremost, we know that debt accumulates thanks to interest, so making only the minimum payments every month is a surefire way to promise you’ll still have that debt by the time you retire. In order to avoid that, our piece on “4 Questions To Ask Yourself When Paying Down Debt” expressed that it’s important to figure out how much you can put toward debt –– not just what you have to put toward it. Basically, if you want to burn through any type of debt – be it a credit card, a student loan, or even a mortgage for your first house –– it’s important to make the highest payment you can reasonably afford each month.
How to balance a budget
If you want to pay off your debt and still have money left over for bills, groceries, entertainment, and rent, you also need to know how to balance your budget. AskMoney recommends starting with the very most basic elements: how much money you bring in each month, and how much you spend (and on what). From there, decide what your absolute necessities are, and divide your income across those necessities, starting with all bills and debts first. And don’t forget savings! This process will tell you what you might have left over, at which point you can decide how to spend or save it.
Save for a rainy day
Emergencies happen, and they’re often expensive. While saving a bunch of money every month isn’t always feasible, it’s still extremely important to set aside what you can in order to have an emergency fund. It’s sometimes recommended to set aside as much as three-to-six months’ worth of expenses to establish a proper emergency fund. This is extremely difficult to accomplish in college, and frankly in real life as well –– but it’s still not a bad goal to aim for. In the meantime, an LA Times piece on the subject recommends starting smaller and aiming to set $400 aside. You can then build from there if possible.
Making good financial decisions while you’re still in college is the perfect way to set yourself up for success later on. Every cent that you can save or throw at debt is going to help you more than you might expect.
