By Laura Harrop
When I moved away for university, I was thrilled by the amount of freedom I suddenly had. As exciting as my novel independence was, I still had a ton of questions. An area that was a major question mark for me at the time was financial literacy. If you are entering university and feeling lost about personal finances, I know that 18-year old me would have benefited from the following money tips:
1) Managing your first credit card
Set a reminder to pay your bill on time, in full, every month
Set a monthly reminder to pay your bill ahead of the due date just to be safe. Don’t get into the habit of paying your bill late, because you will start to rack up fees that do add up! You will have the option to pay either the full amount or the minimum amount – if you can, pay the full amount to keep your balance at 0 at the end of each month. If you pay the minimum amount indicated by your bank, the remaining balance will carry over to next month, and interest will begin accruing.
Use credit wisely
For my first credit card, the spending limit was pretty low, around $1000$ per month.That being said, try to use less than 35% of your available credit, and use your debit card for any other payments. As with your debit, only charge to your credit card what you can pay right now. This is how you can build a good credit score and avoid going into student debt.
If it’s tempting, leave it at home
If you are in a situation where you are shortchanged and can’t afford to spend any money, leave your card at home! While it’s always good to have emergency cash on you when you leave the house, no need to tempt yourself with your credit card’s presence. I find that setting boundaries for myself before going out makes a big difference!
2) Build a credit score
According to Equifax, a credit score is a number that represents your credit risk, or the likelihood you will pay your bills on time. The higher the credit score, the more favorable credit terms you receive, translating to lower payments and less interest over your life. Here are some specific tips to establish a good credit score:
Monitor payment history
Keep track of your month-to-month history to make sure you are making payments on time and in full. If you can’t pay the full amount that you owe, contact the lender right away. Even if you are disputing a bill, don’t skip a payment.
Increase the length of your credit history
Your score improves the longer you have credit open and in use. The Government of Canada advises to keep older account opens and use it from time to time to keep it active. Check your credit agreement to make sure there is no fee if the account is open but you don’t use it.
3) Make a budget!!
If you’ve never made a budget before, start by compiling a list of all expenses and income. Intuit Mint is a handy app that enables you to divide up all your expenses into different months and different categories.
Essential categories would include ‘rent’, ‘utilities’, ‘groceries’, and ‘transportation’ and non-essentials would cover things like ‘entertainment’ or ‘eating out.’ Another critical expense to include is savings, which can go toward paying back student loans, emergency funds, or retirement plans.
When assigning values to each category, be realistic. Consider your past spending as well as your month-to-month needs to ensure that you adhere to the allocated amounts. Pay close attention to your spending patterns in different areas, so that you can adjust your future budget if need be.