Financial Fitness Basics

Done wisely, borrowing money can help you establish and build credit. However, interest, fees, and over-borrowing can be detrimental to your financial future.

Spend less than you earn

Understanding debt, and how or when to use it, is one of the biggest challenges for consumers. As you build your personal financial strategy, it is wise to educate yourself on borrowing basics and common credit pitfalls. Some of the most common financial mistakes can be avoided if you take the time fully understand debt and its power. 

Understanding Credit

Understanding credit cards and credit scores is essential to establishing credit and using credit cards wisely. Your ability to get a loan for larger purchases (houses or cars) generally depends on your credit score, which is made up of different factors that show lenders your track record with debt. Remember, you pay interest on borrowed, or credited funds. The longer you take to pay back the money you borrowed, the more interest you will pay to your lender. Lenders love a consumer who borrows and does not pay off the balance in 30 days. Find out how to utilize credit/lenders as a consumer by attending a BSU Financial Fitness Literacy session.

To Borrow or Not to Borrow

The first thing you should determine is whether your budget supports your ability to pay your credit card bill in full and on-time. If not, establish a budget and control your spending before opening any lines of credit. Keep the following tips from the National Consumer Law Center in mind to avoid credit card problems:

1. Do not use credit cards to finance an unaffordable lifestyle.
2. If you get into financial trouble, try to avoid making it worse by using credit cards to make ends meet.
3. Do not get hooked on minimum payments.
4. Do not run up the balance in reliance on temporary “teaser” interest rates.
5. Make your credit card payments on time.
6. Beware of unsolicited increases by a credit card lender to your credit card limit.
7. Do not max out.

Picking a Card

Debit Cards vs. Credit Cards
A debit card is linked directly to your checking account, and it requires available funds to make purchases. A credit card is linked to a line of credit, which a lender has extended to you. Using credit cards build a credit history, while using debit cards does not.

General vs. Private
General purpose credit cards can be used anywhere, while private label retail cards can generally only be used at the retailer that issued them.

Secured vs. Unsecured
Most general use credit cards are unsecured. This means that the issuer extended you a line of credit based on your credit history, with nothing used as collateral in the event that you stop making payments. Conversely, secured cards are backed by funds you deposit in an account that the lender can claim if you default. Secured cards can help you establish credit if your activity is being reported to credit bureaus.

Understand Your Interest Rate

Interest rates on credit cards vary dramatically. To set your Annual Percentage Rate (APR), creditors can look at your credit score, income, assets, debt load, inquiries, and payment history. Consumers with a positive history in these categories are more likely to receive lower interest rates.

Establishing Credit and Score

As creditors determine the risk associated with lending to you, they will reference your credit score. The FICO score is a commonly used number, and is made up of five categories:

1. Amounts Owed – 30%
2. Payment History – 35%
3. Length of Credit History – 15%
4. New Credit – 10%
5. Credit Mix – 10%

According to myFICO.com, the minimum requirements for a FICO score are that a credit report must have:

• At least one account opened for six months or more,
• At least one account that has been reported to the credit bureau within the past six months, and
•  No indication of deceased on the credit report (If you share an account with another person this may affect you if the other account holder is reported deceased.)

For more information on scores, go to the Federal Trade Commission site .

Check Your Reports

You are entitled to a free copy of your credit report every 12 months from each of the three nationwide credit bureaus — TransUnion, Equifax, and Experian. Go to Annual Credit Report  to get your report.

Understanding Student Loans

Borrowing to finance education is a hot topic. While you are in college, understand that you are investing in yourself and increasing your future earning power. If you borrow to finance your education, be aware of how much you are borrowing and well-versed in the details of your loans and repayment options. The Office of Financial Aid is your resource for any and all student loan questions.

Financial Aid Counselors

Virginia Meleedy, Assistant Director
vmeleedy@bridgew.edu
Financial Aid files: Last names A - C

Marco Monteiro, Assistant Director
m11monteiro@bridgew.edu
Financial Aid files: Last names D - H

Assistant Director
finaid@bridgew.edu
Financial Aid files: Last names I - N

Linda Sennott, Assistant Director
lsennott@bridgew.edu
Financial Aid files: Last names O - R

Diane Place, Associate Director
dplace@bridgew.edu
Financial Aid files: Last names S - Z

Hints and Tips

• Your financial aid counselor is happy to answer your questions and provide guidance. Make sure you take advantage of this resource.
• Always remember BSU has a scholarship season every spring for matriculated student with an established GPA 
• If you have graduated and are having trouble making student loan payments, you may be able to reduce your monthly payment amount. Talk to your servicer to discuss your options.
• Consider working part-time instead of taking a refund from your student loan.

Student Loan Resources

Federal Student Aid  
Familiarize yourself with the types of student loans you have, how they work, and repayment plans.

Estimate Your Repayment  
The student loan repayment estimator. Remember to always work with your servicer on specific repayment amounts and plans.

When it comes to spending, having a plan and shopping for the best value can make a big difference to your bottom line.

Controlling your spending is a skill that takes practice and discipline. It is normal to struggle when first starting out but if you take advantage of setting smart financial goals you will succeed and have a health financial portfolio.

What’s Your Style?

Different people have different relationships with money. Some are natural savers with more money left at the end of the month. Others are spenders with more month left at the end of the money. If you have not yet, spend thirty days recording your spending activity and determine your style. Keep a log, journal, or notes on your phone on what you are spending every day and what you are buying. Tracking your expenses will help with your next step.

Every Dollar on a Mission

You have probably heard people say to live on less than you make. Once you know your expenses, use a free budgeting tool like the Bear’s Budget to record your income and plan your spending for the upcoming month. Assign a task to every dollar you earn. Budget to save money, but be sure to set funds aside for entertainment, shopping, and other miscellaneous items. When every cent has a predetermined destination and income minus spend equals zero, you have created a zero-balance budget; this is the goal.

Banking Basics

Choosing a bank or credit union is an important step in establishing your financial foundation. When choosing a bank, consider the following:

1. Convenience – It is generally easiest to work with a bank or credit union that is close to where you live or work, as a physical location is more convenient when making transactions. As you shop for banks or credit unions, ask yourself: 
   • How is the customer service?
   • What are the hours and accessibility policies?
   • Do I prefer to write checks or pay most bills online?
   • Do I prefer to use an app or talk to someone in person?
2. Cost – Avoid fees on your accounts. Common charges include ATM fees for withdrawing cash at an ATM not associated with your bank, overdraft fees, and monthly maintenance fees. Take note of your bank or credit union’s fee schedule as it outlines of the different fees and costs. Many banks have accounts that do not cost any money to use so long as you maintain a positive balance. Others can charge fees for service that can add up over time. Be sure to understand what costs are associated with your accounts before you sign up.
3. Legitimacy – You will want to make sure whatever institution you choose is insured by the FDIC (Federal Deposit Insurance Corporation) for banks, or the NCUA (National Credit Union Administration) for Credit Unions. Use FDIC BankFind or the NCUA Credit Union Finder to explore options in your area.

Once established, most of your daily transactions will go through a basic checking account, but you can use other accounts for emergency savings and saving for larger purchases, like a basic savings account or money market account. Ask questions, and do not put your money into any account that you do not fully understand. Explore more information on The Pros and Cons of a Credit Union Versus a Bank  on U.S. News & World Report.

Resources

Bank Accounts  
Find answers and solutions to all of your bank account questions.

Credit Card vs. Debit Card  
Get to know the difference between the two to develop your spending strategy.

Bears Budget  (BSU login required.)
Download this free tool to start budgeting today. 

Federal Trade Commission  
The FTC’s free budgeting worksheet to help make your plan.

EveryDollar | RamseySolutions.com  
Another popular online budgeting tool.

It is never too early to begin thinking about your career. Help ensure a smooth transition to the working world by learning about your future salary and paycheck.

Explore Careers and Salaries

While in school, explore potential career paths and salaries using free resources like payscale.com  and salary.com . Connect with Career Services to talk with a counselor about your job search. After all, you need to make money in order to manage it!

Consider Pay Structures

Do you want to work a traditional nine-to-five job, or are you looking for work that is flexible? The structure of your work schedule can greatly impact your pay.

• If you have a commission-based position, your hours and pay could vary and may require you to save for months when income may be a little lower.
• If you work a more traditional 40-hour workweek, your income is likely to be fixed.

Understand the difference, build a budget specific to your situation, and avoid living paycheck-to-paycheck as much as possible.

Compare the Cost of Living

“Cost of living” is defined as the scope of living expenses in a certain area. These expenses vary, but cost of housing is nearly always a significant factor.
Online cost of living calculators, like the bankrate.com Cost of Living Comparison Index Tool , offer free cost of living statistics for cities and allow you to compare while you explore.

Understand Your Paycheck 

It is always something we look forward to, Pay Day! However, what you see is not always what you get when it comes to your paycheck. You are required by law to pay taxes to the federal government and, in most cases, to the state in which you reside. These taxes are withheld from your paycheck. Taxes for Social Security and Medicare (FICA), your contributions for retirement savings, and any payments for health insurance as part of your benefits package, are also withheld.

Free, online paycheck calculators, such as paycheckcity.com, can help you determine your net pay. Use the IRS withholding calculator to further explore your potential exemptions. Consult a Certified Public Accountant for all your tax questions.

If your employer offers a retirement savings plan, you can directly allocate funds to it from your paycheck. Many employers will match a portion of the dollars saved this way. Ask your employer about their match options and work with a plan administrator to develop the best strategy. The IRS lists retirement plans online .

Additional Resources

U.S. Department of State  
Salary, costs of living & relocation resources.

On-Campus Employment
Explore work study and internship opportunities on campus.

Career Services
Talk to a counselor about building your resume and discovering career opportunities.

IRS.gov Retirement Plans Frequently Asked Questions  
Explore retirement plans options on this thorough website.

Why do you need a savings account? The reason it is a key to a successful financial plan is because you can protect your wealth and reduce financial stress by building an emergency fund/savings account. A savings account is the safety net that will ensure you are able to weather unexpected financial situations.

Be proactive with your money instead of reactive. In addition to having emergency savings in the bank, cover yourself by having insurance, being vigilant for identity theft, and checking your credit report.

Be Prepared for a Rainy Day

An emergency fund in a savings account is your “insurance” against using credit or debt in the event of a short-term emergency. This fund is for emergencies such as unforeseen car repair, replacing lost or stolen items not covered by insurance, or having to take an emergency trip home. In college, aim to have at least $800 in a savings account or money market account at the bank. After college consider upping the amount you have in liquid savings to cover at least three to six months of cost-of-living expenses. This money is not invested, and not kept in accounts that have a penalty if you take the money out early, as is the case with CDs or retirement accounts. This is your “rainy day” fund, your safety net. If you don’t have an emergency fund of at least $800, start one today.

What is Insurance?

Insurance is an agreement in which a person makes regular payments to a company and the company promises to pay money if the person is injured or dies, or to pay money equal to the value of something (such as a house or car) if it is damaged, lost, or stolen.
As a student, the types of insurance you will probably be most concerned with are health (for medical expenses), renters’ (to replace stolen goods), automobile (to cover your car if you have one), and identity theft (to help settle cases of identity fraud). To learn more about insurance types, talk to a coach.

Identity Theft

According to the 2021 Javelin Strategy & Research Identity Fraud Report , college students are most severely impacted. Javelin Strategy & Research recommends the following six strategies to protect yourself from fraud:

1. Secure your mobile device by updating regularly and locking with a passcode or fingerprint technology.
2. Exercise good password habits by using strong, unique, regularly updated passwords.
3. For your debit and credit cards, take advantage of EMV chip technology and make use of mobile payment.
4. Sign up for account alerts with your banking, credit, and brokerage institutions.
5. After a data breach, be aware that you may receive dubious solicitations for monitoring services. If it sounds like the service, you are being offered is not reputable or related to the original breach, contact the provider to see if an alternative service is available.
6. Seek help as soon as fraud is detected. Be vigilant and report to the FTC .

As always, access your free credit reports using Annual Credit Report  to scan for suspicious activity.

Resources

Investopedia  
Savings vs. Money Market accounts video.

Practical Money Skills  
Emergency fund calculator.

University Health Plans, Inc.  
Bridgewater State University Student Health Insurance Plan

Property Insurance Tips  
ID Theft Risk Calculator  
Guide to Recovering from Identity Theft  

Kick-start your financial future by saving early and often. It is never too soon to put away money for a home or retirement.

By paying yourself before others, you are building the habits and discipline it takes to gain peace of mind with an emergency fund, save for large purchases and trips, and invest for long-term wealth building. Learn these steps now so that you can be ready to apply them when you transition to a career.

How Do I Start?

1. Open a savings at your local bank or credit union of choice.
2. Each pay period, create your budget and title the first expense “savings.” Set a fixed amount or a percentage that you are going to save right away.
3. Once you are paid, immediately transfer the money into your savings account manually or via auto-transfer.
4. Build up emergency savings for unexpected events in this account.
5. Once your emergency fund is fully funded (three to six months’ cost of living expenses), identify your most important short, medium, and long-term goals. Estimate how much each of these goals will cost.
6. Set up a separate savings or investment account for each of your major goals. When you are ready, talk to an investment professional to help determine your investment plan based on your time frame and tolerance for risk.

Saving and Investing 101

Once you have your emergency fund in place, start thinking about retirement savings and investments. To save for large expenses like a down payment on a home or a car, consider starting a separate savings account outside of your regular checking and emergency fund accounts. Label the account and allocate a fixed amount to it every month until you hit your goal. To save for longer-term goals like your children’s education and your retirement, talk to a licensed professional about your tolerance for risk and your investment strategy. Take the time now to read up on stocks, bonds, mutual funds, and further your saving and investing knowledge.

Resources

Investor.gov  
The site for the Security and Exchange Commissions’ investor education.

Compound Interest Calculator  
The SEC’s long-term investment calculator.

Savings Calculator  
Use this tool to find out how much you can end up with by saving and investing your money over a given time period.

Retirement Plans  
Explore this IRS website on retirement plans and learn about IRAs, 401(k)s, and more.

Saving for College  
The Financial Industry Regulatory Authority’s (FINRA) site with college savings plans and tips.

Saving and Investing  
A roadmap to your financial security through saving and investing. (Can be downloaded in English and Spanish.)

Retirement Calculator  
FINRA’s retirement calculator to help start planning your retirement investing when you’re ready.