[MUSIC PLAYING]
Next up in getting good with money as a college student
is going to be making your life budget friendly.
If you feel like it's very difficult
to manage the flow of money in your life
and make it something affordable,
you are definitely not alone.
And especially in college, when you're
budgeting school and oftentimes work, a busy social life,
tons of different obligations all coming down at you at once,
it can feel very easy to start justifying little purchases
here and there, often on the borrowed
money of student loans, in order to make
your life seem more doable--
things like Ubers, a quick bite to out eat,
a coffee on the way to class, et cetera.
In college or not, it's often easy
to just default to the most convenient and accessible
purchase, even if it's not the financially smartest one.
According to a Finder.com survey, 74% of American adults
spend about $4,000 per year on these conveniences
like ride shares, food deliveries, cleaners,
pet sitters, and subscription boxes.
You may also be surrounded by other people who
make similar decisions financially,
or even more frivolous ones, and often
pressure you into doing the same, knowingly or not.
Learning to establish a budget-friendly routine
and getting the tools to stick with it
is key to a financially healthy future,
as well as good mental health.
First, you have to know how to setup a healthy living
situation.
Having a healthy routine that works for you
can help you save money and feel more in control.
The Journal of Abnormal Child Psychology
found that having a regular routine
helped curb impulsive behavior and improve attitude.
And that's true for adults, too.
Having a plan for the day, week, and month helps prevent
decision fatigue, that state where you feel like you cannot
make one more decision and decide to take the path
of least resistance, which usually costs you money.
Taking a half hour at the start of each week
to plan your meals, your exercise times,
your study times, and so on helps set you up for success
and takes one or more stressors off your shoulders.
And it's important, at the beginning,
to power through these new habits,
because a habit is truly formed when it becomes automatic.
You just know to do a certain thing at a certain time,
and it doesn't really take much energy, which helps stave off
that decision fatigue.
Habits can be hard to stick, though,
when you're just starting out.
Experts at UNC Chapel Hill use something
called a habit loop to explain how this works.
The habit loop consists of a cue leading
to a behavior or routine, which leads
to a reward, which then leads to the cue,
and restarts the cycle.
Habits that have immediate rewards, like let's say
you get a ding of a notification on your phone, which opens up
to a text from a friend you're looking forward
to hearing from, that creates an immediate reward.
And so you very easily get in the habit of prioritizing
looking at your phone.
But a lot of the best habits, including
things that will save you money in the long run,
have a delayed reward.
So it's very difficult to keep to these habits
when you're not immediately getting that feedback.
So to trick yourself, you have to find
ways to make those good long-term habits feel more
rewarding in the immediate.
So, for example, if you want to start meal prepping
to help you save money on food month after month,
you can start to dedicate your meal prep time to the time
that you allow yourself to watch your favorite TV show
or listen to your favorite podcast.
That way, you'll start to look forward to that time,
and you will get a quick burst of reward
from the act of having done it.
In the long term, then, of course,
the meal prepping week after week
will help you save money on your grocery bill.
And speaking of meal prep, one of the biggest life
choices that you can make to help you save money
over the course of your entire life
is to get comfortable in the kitchen.
Knowing how to cook for yourself will mean you
can be more creative with what you have on hand,
because you can shop according to meal planning and not just
according to what you need at any given moment.
And will allow you to gain some control over what
you're actually eating.
You won't constantly be having to default
to take out or delivery or going to restaurants
or getting premade foods, which will save you tons in both
the short and long term.
But if you didn't grow up cooking,
it can feel very, very difficult to get started,
which is why a few key things are important for everyone
to do while they're in college so they can establish control
over their cooking and eating habits, which for most of us
will represent the biggest section of our budget
after things like rent and utilities.
Number one, you need to make sure
that your kitchen is stocked with a few basic essentials
for cooking--
things like basic herbs, oils, sauces, pots, pans, tools.
I'll link you guys in the description
to a pretty comprehensive list that we've
created at TFD that will help you get started in the kitchen
and give you enough options for turning
most basic ingredients into a pretty
serviceable meal in a pinch.
You'll also want to get a good knowledge of the kinds of foods
you can make in bigger batches and freeze easily.
Some of the obvious ones are things like soups or pasta
sauces, but you may not know that things like quiches
or frittatas also freeze amazingly
and can use almost anything you have
on hand that's about to go bad.
It's easy to become overly dependent on the meal
plan or the campus cafeteria when you're in college,
but starting to form those good cooking, meal planning,
and big batch prepping habits is one of the best ways
to ensure that you will have a lot of control
over your discretionary spending all through your adult life.
Plus, not knowing how to cook and bragging
about how you store your shoes in your oven is not chic.
Beyond cooking, you're going to also want
to learn the art of shopping smart.
When you buy almost anything in life, from a pair of shoes
to a backpack, to a chair, you're
going to want to start thinking of it in terms of cost per use.
It's easy when we're on a budget or we don't really
know how to pick items to just automatically default
to whatever may be the cheapest option.
But for many items, this is going
to mean a much lower quality item that
will have to be replaced or fixed more frequently,
which will ultimately result in a higher cost per use.
To calculate cost per use, you're
simply going to divide the price of the item
by the number of times you use it.
A really good pair of shoes, for example,
could end up in the pennies per use
if you're able to get a ton of great wears out of them.
And when it comes to prepping for things like your first
office job out of school, investing in a few high-quality
staples that you're going to wear again and again--
things like a great blazer that will work for everything
from interviews to the big meeting to a work bag
that you can use every day and look sharp in--
are going to pay dividends.
Now, this doesn't mean you're always
going to opt for a very expensive option.
Because in many cases, you may not be able to.
But it will get you thinking in a much more productive way
with your money.
It's very similar to how you'll often
assess the cost of something in terms of volume,
like a bottle of hand soap that may be cheaper on the label,
but when you break it down to how many ounces that bottle has
is actually more expensive per ounce than that bigger bottle.
Even if you're not always able to make the highest quality
choice, it's important that you start to at least understand
your choices and can make more informed decisions about when
it's good to invest versus when it's OK to scrimp.
And do remember that for some of these bigger ticket items,
like, let's say, a really nice winter coat,
they are often easily available to buy at thrift stores
or outlet stores or factory stores
at a fraction of the cost that you might have paid retail.
And do keep in mind that between thrift and consignment
stores, outlets, and all of those various coupon
programs and plug-ins and alerts you
can set up for when things are on sale,
you should almost never have to buy something at full price
anymore.
Apps and browser extensions like RetailMeNot or Honey
make sure that you're always getting
the best deal at checkout.
And planning to buy things when they're off season
ensures that you can get the best quality
items at the lowest possible price,
because stores are trying to clear their shelves
for the next season.
You should generally be buying your winter coats in March,
for example, and your swimsuits in September.
You can also look into various no-buy groups on your campus
or in your city, where people are swapping things or giving
them away, to make sure that you're always checking
whether something might be available for free
before deciding to actually pay for it.
This is especially true with things like furniture.
Of course, you should also learn a few basics of mending things,
whether it's sewing back on a button
or hemming a skirt if it might be a bit too long
but was on a great sale, so that you ensure that you're always
able to tweak something to your liking
before necessarily opting for a different item
or throwing it away.
Almost every item of furniture I have in my house,
for example, I've tweaked in some way.
Because when it comes to things like a color
of an item or the fixtures that it might have,
it's so easy to transform an item completely while barely
having to lift a finger.
And one of the elements that's going
to be most helpful in building a budget-friendly life
is learning how to utilize credit.
Many college students feel an inherent fear
of things like credit cards or the whole credit system,
either because they don't have a credit history
or they don't really understand what credit is.
As I mentioned in the intro video,
I ruined my credit when I was young.
At 18, I got a credit card.
I maxed it out, and I literally threw it away and never paid
the bills.
I had a credit score in the high 400s for several years.
And even to this day, I'm still fixing some
of the damage I did years ago.
So what's important to understand
is that using credit in a responsible way
can help you live a more budget-friendly life,
but using it in a dangerous way can actually really harm you.
So it's important to understand, first
of all, what a credit score is.
And basically, a credit score is a number
that allows lenders to assess how likely you
are to be responsible with something
like a loan or a credit card.
The scores range from 450 to 850,
and there are multiple credit reports, which will sometimes
differ slightly in the score that they
give you, but generally paint a picture of how timely you've
been on things like repayments, how long you've had credit
history open, and how responsible you've
been with your various credits.
If you don't build a credit history by not having things
like loans that you're repaying or credit cards that you're
using responsibly, that can be often just
as damaging or hindering as having a bad credit score.
Because basically, what it's saying
is that they don't really know how you're
going to be with lending.
And obviously, many people automatically
assume that having a credit card is just
going to be an excuse to spend wildly.
But if you remember the golden rule of credit cards--
to never treat it as money beyond what
you can afford to pay in full at the end of the month--
then you can keep yourself in check
and use them to your advantage.
I, for example, travel quite frequently,
so I use credit cards that are geared toward travel points
and miles and rewards.
By using the credit card to cycle
through payments of things that I have to be buying anyway,
I am able to rack up those points and miles
and take advantage of the benefits of money
I would otherwise just be spending.
Multiple times a year now, I pay for trips entirely
on points and miles, which represents a huge savings
in the long term.
In addition, by being very responsible with my credit
cards, I am able to build up that great credit score
so I'm credit worthy for things like if I one day need
a loan for my business or want to potentially buy a home.
I used my credit score to get approved
when my husband and I moved into this apartment
that we're renting.
If you feel that you might be in danger of going over
your budget-friendly lifestyle with your credit card,
remember that you can always just set it up
to make a few recurring purchases for things
that you need and to be paid off in full automatically
every month so that you never even have
to worry about missing a payment or being late.
And then you can just leave the credit card at home.
Some people even freeze them in a block of ice.
And when it comes to building your credit score--
which is hugely important for living
that budget-friendly life, because you
want to have control over your cash flow,
and credit will help you do that.
While there are multiple factors that
count toward a credit score, the three most important to keep
in mind are timely payments-- and that
means timely, consistent payments on your credit cards
or your loans or anything you're having to pay back.
Your credit utilization ratio, which is basically
how much credit you have available to you
versus how much you're using--
for example, if you have $10,000 as a limit on a credit card,
you want to stay under 30% of that, if possible.
So spending less than $3,000 a month across your cards.
This basically just shows the banks
that you're not using as much credit as you possibly can.
And the length of time which your accounts have been open.
Having much older accounts and older credit lines
will show that you've consistently, over the years,
been able to demonstrate this credit worthiness
and you're not just bouncing around from card to card.
And yes, some of you may have heard
that things called a hard check on your credit
can have a negative impact.
And that's true if you're doing too
many in a short period of time.
When you're just checking your credit online with something
like Credit Karma, that's not a hard check,
because you're not inquiring on your credit
for possible lending.
You're just checking it.
But when a lender--
like, let's say, a mortgage lender or a credit card
lender--
is looking into your credit to see
if you're able to qualify for a certain product,
that is called a hard check.
And doing too many of those in a short period of time
shows you as kind of credit shopping, which
can have a negative impact on your score.
Living a budget-friendly life means a lot of things,
but one of the biggest things that it entails
is getting control over your various financial decisions.
And credit cards, when used properly,
and a good credit score are two of the biggest tools
to having total control over the financial decisions you
want to be making.
Buying a house, for example, if you
want to move from renting to buying someday,
is going to depend on a pretty good credit score,
in most cases.
And if you want to start turning some of your monthly spending
toward your advantage, like I do with my airline rewards
and miles, you're going to need to be able to use
credit cards to do so.
A lot of people assume that the most budget-friendly choice
is to just avoid credit altogether,
but that's actually a very ill-informed opinion.
The most budget-friendly choice is
to have total control over how you use credit
and to always spin it to your advantage.
Opting out of the system only hurts you in the long run.
College is, for many of us, the first real taste
of financial freedom and having the ability
to set our own terms for the lifestyle that we're living.
And it's really easy, in so many different ways,
to get suckered into a life that costs more than you can afford
or more than it should.
Learning how to eat well, how to shop well,
and how to handle all of those potentially awkward
social situations means that you get
to regain control over the budget
that you're setting for yourself and ensure that the life you're
living lines up with the income you're bringing in.
There is no shame in living a budget-friendly lifestyle.
In fact, if you ask me, it's rather chic.
Don't forget to check out the next episode
in our "Guide to Getting Good With Money
for College Students."
And for all things talking about money,
don't forget to check out The Financial Diet here
on YouTube or all around the internet.