Seminar stresses importance of money management skills

For the majority of broke college students, a penny saved is a miracle. On Nov. 8, Paul McMillian, a branch manager for Wells Fargo, talked to over 80 Kent campus students about how to make money management less painful. McMillian helped participants demystify the important but often incomprehensible credit score and tackled the challenge of making a budget that any student can stick to. Our nation's high unemployment rate is no secret, and college students are among the hardest-hit by the job shortage. For this reason, budgeting is a critically important skill for struggling students.

If you have plans of getting a place of your own, you might want to put down the classified ads, and read the next sentence. According to McMillian, your rent or mortgage should not exceed 30% of your income. To put this statistic into perspective, if you make $8.00 an hour, and work 30 hours a week, you would make about $960 a month. 30 percent of 960 is $288. In other words, you might want to find a roommate. Or two. Unfortunately, rent is only the tip of the iceberg.

Herein lies the value of a budget. Do yourself a favor, and sit down with a pen and paper, and start making a list of your expenses. A good example should include something like: rent/mortgage, utilities, car payment, car insurance, gas, food, entertainment, credit card bill, educational expenses, and health care. List how much you spend per month on each item. Some of these expenses will have fixed values, for example, your rent, car payment, and car insurance, will probably be the same amount each month.

Other expenses will be variable, meaning that you can adjust the amount you spend on these items every month. After taking inventory of your expenses, compare the total you spend to the total you bring in every month. If you have some money left over, you are probably in good shape, but if you find yourself in the red, you might have to adjust some of your variable expenses.

Keeping track of your spending and sticking to your budget can go a long way toward establishing a good credit score. Credit for a college student can be headache-inducing. You need a good credit score to get a credit card with an affordable interest rate, but you can't establish a good credit score until you get a credit card. A good way to start establishing credit is to open one line of credit, and begin by charging amounts that are small enough that you can pay off quickly. Making large purchases that will take several months to pay off will subject you to interest.

Here's a reality check: if you buy a laptop for $500, and your credit card has a 14% interest rate, you will pay $70 a month in interest. If it takes you 4 months to pay the laptop off, you will have paid an additional $280 in interest on top of the cost of the laptop. It's better to save for larger purchases, and use your charge card for things that you know you can pay off quickly, at least until your credit is good enough to earn you a lower interest rate. McMillan stressed the importance of having a good credit score. Your credit score affects more than just your interest rate- companies will check the credit scores of job applicants to determine their eligibility for employment, landlords are more likely to rent to tenants who have good credit, and banks will lend money at lower interest rates to those with higher credit ratings. 

College can be a scrape for many students, as 60 percent will graduate with a student loan balance of about $20,000 or more and a continuing credit card balance of about $2,000 or more as outstanding debt. If you want to make it out alive, you might want to get into the habit of budgeting now. Creating and adhering to a budget will help you keep your monthly bills paid on time and keep you from falling into debt and potentially damaging your credit. Sit down and itemize all your expenses. Your future self will thank you.