Financial Literacy

What is Budgeting?

Budgeting can be simply defined as living within your financial means. A budget can be a simple written list of basic monthly income and expense amounts or a more detailed worksheet with spending information for each day of the week.

Guidelines for Creating a Budget:

• Track your expenses for at least one month so you know exactly where you are spending your money.
• Pay major bills first. Set aside money for your tuition, books, student fees, and other large annual or semiannual costs. Once these amounts are subtracted from your bank balance, you'll have a more accurate starting point from which to plan your budget for the rest of the semester.
• Evaluate your income versus your expenses.
• Never spend more than you are bringing in!
• Classify your expenses into needs and wants.
• Determine if the expenses in the 'want' category can be reduced or eliminated completely. 
• Write down your short-term and long-term financial goals
• Create a budget and stick with it. You can use a simple written budget worksheet or calculate your budget online.

What Type of Card Should I Get?

Below are descriptions of different types of credit cards.

• Co-signed card: This is a card that a parent and student apply for together. The issuer uses the parents' income as proof that the loan will be repaid. Parents are liable for the debt incurred by the student.
• Secured card: This is best for first-time credit card users. The limit on the card is whatever you give the bank as collateral. You cannot go over the limit of the card.
• Department store or gas company credit cards: These cards typically have low spending limits that can allow you to start small and build your credit.

Tips for managing credit card use:

• If your bill is due at an inconvenient time of the month (if it's due on the 10^th and you get paid on the 15^th), contact your credit card company to see if it can change your billing cycle to fit your situation.
• Pay more than the minimum payment. If you can't pay your balance in full each month, pay as much of the total as you can. Over time, you'll pay less in interest charges, and that's money you'll be able to spend on other things. Also, you'll pay off your balance sooner.  
• Keep your balance below your credit limit. Keeping your balance at or below 20 percent of your available limit can ensure you can continue to pay it efficiently.
• Keep a record of your spending or check your balance online.
• Avoid unnecessary fees. Credit card companies not only charge fees for late payments and when your balance is over the limit, but also for cash advances, transferring balances and returned payments. Some companies also charge a fee when you pay your bill by phone. Read your credit card agreement to learn more about the fees that your credit card company charges.
• Read notices regarding changes to the terms of your account. Credit card companies can change the terms and conditions of your account including fee amounts, interest rates, billing procedures and other features. Reading these notices can help you decide whether you want to change the way you use the card or close the account completely. If you have a card with a variable rate or if you have an introductory rate that is ending, be aware that the credit card company is not required to send you a notice prior to raising your interest rate.
• Set a low minimum balance. This helps you control your spending habits. Spending an amount close to your credit limit or maxing it out entirely may make you appear to be a credit risk, as it shows you may be likely to overspend.
• Review your monthly credit card statement for errors.

 

What is a credit rating?

Every month, each of your lenders (your bank, department store, landlord, etc.) reports your recent credit history to one or all of the three major credit bureaus - Experian, Equifax and Transunion. The bureaus then compile and save these reports to determine your credit rating. Credit rating information that may appear on your credit report includes:

1. Date each account was opened, current balances and credit limit
2. Whether you paid on time or missed payments
3. Whether your account has been turned over to a collection agency
4. Any judgments or tax liens
5. Any court judgments from small claims
6. Delinquent civil and child support payments
7. City, county, state and federal liens for unpaid taxes and bankruptcies

This credit rating creates a credit score, which is the numerical value calculated from information in your credit file. It is used by lenders and landlords to assess your "credit risk." It helps to predict how credit-worthy you are, i.e. how likely you are to repay a loan and make payments on time.

There are many reasons to learn about your credit score. Having good credit:

• Determines whether you will be approved for auto or consumer loans. This includes private and graduate PLUS loans to pay for your education.
• Determines whether you will be able to rent an apartment. Many landlords use your credit score to determine if you are a worthy risk and may even reduce your security deposit if you have good credit.
• Influences the interest rates and fees that are assessed on some loans.
• May determine whether or not an employer extends a job offer to you. Some employers use credit to assess a person's character.

Building and Maintaining Good Credit

The two most important things you can do to maintain a good credit rating are:

1. Paying at least the total minimum monthly payment on or before your payment due date. A history of on-time payments is one of the best things you can do for your credit.
2. Maintaining a balance that is 20 percent or less of the overall credit card limit. Having a high credit card balance may indicate to lenders that you are a higher risk.

Staying Informed

You are legally entitled to a free credit report every 12 months from one of the three major bureaus. Make sure to request a free copy of your credit report once a year at Annual Credit Report to stay informed about what your creditors are saying about you.

You can also monitor your credit score, which is a three-digit number generated by using information in your credit report, on a variety of free websites, including Credit Sesame and Credit Karma.

You can also quickly estimate your credit score here.

 

First, define your financial goals:

1. Short-term goals are those that can be achieved in three months or fewer.
2. Medium-term goals are those that will take between three months and one year to achieve. For example, you might choose to save for six months to take a trip or pay off a credit card.
3. Long-term goals take more than one year to accomplish. One of your long-term goals could be to pay off your student loans early by paying an extra $300 per month or to pay off your mortgage.

Basic Rules to Money Management:

1. Determine your living expenses, periodic expenses and monthly debt payments. Compare your expenses to your monthly net income. 
2. Determine the difference between needs and wants and create a realistic budget by first taking care of your needs (food, housing, clothing, transportation) and then spending on wants.
3. Always pay bills on time to maintain a good credit rating and avoid late charges. If you are unable to pay your creditors, call and explain your situation and they'll help you set up a payment agreement.
4. Do not wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.
5. Determine what you can comfortably afford to purchase on credit by reviewing your budget. Don't allow your credit payment to exceed 20 percent of your monthly paycheck.
6. Pay more than the minimum on charge accounts. If possible, add a few extra dollars to your payment. Remember that there are consequences for not paying your bills.

 

Identity theft occurs when someone uses another person's identifying information, such as name, Social Security number, or date of birth to commit an unlawful activity. Thieves can obtain personal information from many sources, such as lost or stolen credit cards, Social Security cards, checkbooks, or health insurance cards. To get you started, PennWest California's University Technology Services has provided some helpful Tips to Prevent Identity Theft.

• Don't carry your Social Security card with you.
• Don't give your PIN or Social Security number to anyone.
• Know what information you're putting on your social networking sites.
• Learn about how to stay safe on social networks, courtesy of UTech Services. 

Shred or tear up anything containing your personal information, credit card information, or bank account numbers before putting it in the trash or recycle bins. This includes unused credit card offers.

Beware of shoulder-surfers - people who look over your shoulder at the ATM to obtain your PIN or other personal information. 

Keep documents and statements in a safe place.

• Write down all of your current credit cards and store the information in a safe place so that you can contact the correct companies if they get stolen.
• Monitor account activity closely.
• Use only secure websites for credit card transactions.
• Never disclose personal information over the phone or Internet with companies or people you do not know. Tell anyone who calls asking for your Social Security, credit card, or bank account numbers that you don't give that information over the phone and that they can contact you by mail.
• You can call back the company and ask if they have asked for your information to double check.
• Opt out from pre-approved credit card offers. Identity thieves can use them to set up fraudulent accounts in your name. To put a stop to having prescreened credit offers mailed to you, call 888-5OPTOUT (888-567-8688) or go online to www.optoutprescreen.com.
• Don't leave your purse or wallet unattended anywhere: a party, lunch table, bathroom, etc. Use a zippered purse to prevent pickpocketing.
• Never open up e-mails from people or companies you do not know.

What to Do if it Happens to You?

Replacing Credit, Debit, and ATM Cards:

Report the loss or theft of your credit cards and your ATM or debit cards to the card issuers as quickly as possible. Many companies have toll-free numbers and 24-hour service to deal with such emergencies. You will need to know your account number and when you noticed your card was missing. Make a note of the date you first reported the loss.

Dealing With Credit Card Loss or Fraudulent Charges:

The government provides protection for credit card holders in the event that their card is compromised:

• If you report the loss of your credit card before anyone uses it, the card issuer cannot hold you responsible for any unauthorized charges. Also, if the loss involves your credit card number but not the card itself, you have no liability for unauthorized use.
• If you notice unauthorized charges on your statement after they've occurred, you still have protection. As long as you report the charges within 60 days of receiving your statement, you are only liable for a maximum of $50-regardless of the amount charged.

Dealing with ATM or Debit Card Loss or Fraudulent transfers:

• If you report the loss within two business days after you realize your card is missing, you will not be responsible for more than $50 of unauthorized use.
• If you don't report the loss within two business days, but do report it within 60 days, your liability is capped at $500.
• However, if you wait longer than 60 days to report the loss, you become at risk of complete loss of all assets in your account.

Reporting and Replacing Your Missing Driver's License:

If your driver's license has been lost or stolen, report the incident to your local police department's nonemergency line. The local police likely will have forms you need to fill out to report the incident. Be sure to get a copy of the report.

To replace your driver's license, you will need at least one proof of identity and you'll be charged a fee. Contact the Department of Motor Vehicles for the state that issued your driver's license for office locations and additional information.

Reporting Your Passport as Lost or Stolen:

Once you report your passport as lost or stolen, it becomes invalidated and you no longer can use it for travel-even if you find it.

You can find more information about reporting your passport as lost or stolen or replacing your passport at the U.S. Department of State website.

Tips to avoid deceptive offers:

1. If you must pay money to get money, it might be a scam.

2. If it sounds too good to be true, it probably is.

3. Spend the time, not the money.

4. Never invest more than a postage stamp to get information about scholarships.

5. Nobody can guarantee that you'll win a scholarship.

6. Legitimate scholarship foundations do not charge application fees.

The Federal Trade Commission cautions students to look for these phrases used by scam artists:

• "The scholarship is guaranteed or your money back."

  • No one can guarantee that they will get you a grant or scholarship. The refund guarantees that are offered usually have so many conditions or strings attached that it is almost impossible for consumers to get their money back.

• "You can't get this information anywhere else."

  • Scholarship information is widely available in books, from libraries, financial aid offices and the Internet.

• "I just need your credit card or bank account number to hold this scholarship."

  • This is never a requirement for a legitimate scholarship offer. Don't give out your financial information in this kind of situation.

• "We'll do all of the work."

  • Only parents and students can determine and provide the financial information needed to complete the forms.

• "The scholarship will cost some money."

  • Legitimate scholarship offers never require payment of any kind.

• "You've been selected by a 'national foundation' to receive a scholarship" or "You're a finalist in a contest (that you never entered)."

  • If you have not applied for a scholarship sponsored by the foundation, be skeptical about this claim.

• SAVING FOR COLLEGE
• Quick Reference Guide to Repaying Student Loans

 

• http://nslds.ed.gov/ - This federal government website that allows students to view a summary of all of their federal student loans and federal grants.  -This summary is labeled as "Financial Aid Review."
• http://www.annualcreditreport.com - This secure website allows you to pull credit reports from all three credit reporting bureaus annually for free.

 

• How Much Would My Loan Payments Be?
• How Long until My Loan is Paid Off?
• What's the Impact of Making Extra Payments on a Loan?
• Loan Consolidation Payments/Interest Estimator

 

• Financial Literacy in College
• 5 Ways to Prevent Identity Theft (FTC.gov)
• Dealing with Debt Collectors (FTC.gov)