Recently, budgeting was listed as one of the most important skills we should be learning in school, along with leveraging compound interest and investing for long-term goals. Unfortunately, most college students are stuck in core classes required to graduate, such as astronomy, algebra, and even basic writing courses. 

Now, we’re not saying those aren’t useful classes to take, but chances are pretty high that you’ll get more out of learning how to budget in the real world than you will from learning about how to structure the citations of an MLA essay. Personal finance is just so important.

To make things even worse, studies show that financial literacy rates in the US are declining as savings rates decline and debt increases. This sounds like a recipe for disaster for the next generation of workers who will, one day, need to start investing in their futures. If that’s you then here are a few personal finance tips that can help you get started.

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Keep a Budget

Aside from learning how to use credit wisely, we’d argue that learning how to budget effectively is one of the best skills for college students and recent grads to learn as they navigate the real world on their own. Why? Budgeting is a skill that allows you to take control of your finances. After all, you can’t plan ahead and control your financial future if you don’t even know where you’re currently at.

Lucky for you, numerous free budgeting apps like Mint and Goodbudget exist to help you learn the basics. However, they don’t teach you everything. 

First, you’re going to need to learn about variable vs. fixed expenses. Fixed expenses remain the same for some time, such as rent, car payments, and even certain subscription payments (gym, Netflix, etc.). Basically, you can count on the fact that they’re the same each month. Variable expenses are expenses that, well, vary. This includes your utility bills, groceries, and any spending on things like entertainment and food.

How do you budget for expenses that vary each month? Track them all in a budgeting app and then average them out. It’s helpful to budget at least that average amount plus 10% for unexpected costs.

Once you’ve got a handle on those areas of budgeting, we suggest figuring out which budgeting method works best for you at this point in your life. It’s okay if this changes as you get older. It’s just important that you find a method that you’re able to work with and that helps you reach your goals.

Set Realistic Personal Financial Goals

This is actually a pretty common mistake, especially as you’re just starting to manage your own finances. Setting unrealistic goals can cause you to lose momentum and interest in saving for your future. Instead, focus on setting realistic goals so that you can not only learn how to be patient in taking baby steps towards them but also learn how great it feels to achieve them.

What does a realistic goal look like for a college student or recent grad? It could mean:

• Saving $200 each month to put towards paying your student loans while you’re still in school.
• Starting a side hustle that allows you to earn $500 of passive income per month.
• Making a habit out of paying your credit card bills on time.
• Reducing your expenses by a specific amount each month so that you don’t always feel like you’re struggling to make ends meet.

While we do suggest starting to think about long-term goals such as investing in retirement accounts and learning how to invest in stocks, it’s also a good idea to start small when you’re just learning how to manage your finances. It’s the same reason why you don’t take upper-level classes as a freshman; you gotta learn the basics first.

Build an Emergency Fund

Now that you’ve set some nice goals and have learned how to budget, we suggest building an emergency fund for yourself. Why? Well, as you’ll quickly learn, life happens. Sometimes your laptop stops working or you get a flat tire on the way to a lecture. That’s just how it goes. And, the quicker you learn how to plan ahead for those things, the less stressed you’ll feel when they happen.

It’s recommended that you have about three to six months worth of living expenses saved up for an emergency or rainy day fund. But, as we mentioned above, it’s okay to take things slow while you’re still in school and not working.

The goal with saving while you’re in college is more about making a habit out of saving rather than striving for any specific monetary goal. Work towards developing the habit of putting 10% of your earnings (if you’re working) into a high-yield savings account. Or, simply make a habit out of saving $100 each month. If you do that, after four years of college, you’d have $4,800 to start off with!

Set Up Autopay

If you have trouble remembering to pay bills on time then we definitely suggest setting up autopay. Not only does it help you be more mindful of ensuring that you have enough cash in your accounts to cover your bills, but it’s just a great way to make sure you never miss a payment.

We’ll talk about this more in-depth below, but this is especially important if you have a credit card. Missed payments are the biggest factor that affect your credit score, meaning that you’ll never want to miss a payment if you can avoid it. 

Build Your Credit Score

Now here’s where things start to get serious! We could not recommend this one more. Seriously. Pay attention. In college, you should start thinking about building your credit score! Credit is the foundation of your future wealth and will open quite a few financial doors for you.

While you’re likely not thinking about buying a home any time soon, the actions you take today in terms of your credit could massively benefit you in the future. Trust us, the 35 year-old you will thank you! Here’s what that looks like:

Let’s say you decide to borrow $200,000 in the form of a 30-year fixed mortgage loan. If your credit score is in a higher category, let’s say between 760-850, a lender can charge you 3.307% interest on that loan. That equals a total payment of $877 per month. Now, let’s say that your credit is lower, between 620-639, for example. A lender now might charge you 4.869% on that loan. While this might not seem like that much of a difference, your monthly payment would now be $1,061. 

That’s the difference of a total of $66,343 in savings over the lifetime of the loan! 

The lesson here is that you should start building credit now, whether that’s through a student credit card or by being added as an authorized user on your parents’ or family members’ accounts. Be smart about how you spend, starting with only groceries and gas if you need to. Set up autopay so you always make payments on time. And, keep your credit utilization rate under 30% (more on that here).

Start Saving for Retirement

It’s never too early to start saving for retirement. Actually, the earlier you get started, the better. Because you’re likely not working yet and can’t contribute to a 401(k), a Roth IRA is a great option for young savers. Not only can money be withdrawn penalty-free for education, but there are tons of other great benefits as well.

Retirement accounts are tax-advantaged, meaning that it grows tax-free until you retire. The money you put into a Roth IRA is already taxed. As a college student or recent grad, this likely means it’ll be taxed at a much lower tax bracket than you’ll be in when you’re in your 60s. However, because they already taxed it, you don’t have to pay taxes on it when you withdraw it. And, as long as you wait until at least five years after you opened the account, you can withdraw the money without penalties (although we don’t recommend doing that).

Read more on compound interest here  to see why we suggest investing early and letting your wealth grow for you over the years.

Invest in Yourself

You’re never too young to invest in yourself. How do you do that? You learn how to truly implement all of the tips and tactics mentioned above. Then, you start learning how to invest.

Understanding how compound interest works and learning about which stocks are best to invest in as a beginner can be fundamental in setting yourself up for long-term success. Wealth Stack is here to help you with that.

Through our app, we’ll guide you through personal finance basics while also teaching you everything you need to know about investing for beginners. The app also acts as an invaluable investment tool itself as it allows you to create a brokerage account for stocks, ETFs, and crypto investing while you track all of your investments in one place. 

Ready to invest in your future? Wanna learn from the pros? Download Wealth Stack for free.