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Author: christyne

How to Make the Most out of Your Internship: Financially

As the semester winds to an end, many K-Staters look forward to a summer full of sun, friends, and internships! Internships are an excellent way to gain valuable experience for your future career and to begin applying what you have learned in the classroom to the real world. Depending on your field and the location of your internship, an internship can range from unpaid to beaucoup bucks. Whether you are struggling to make ends meet or don’t know what to do with all that excess money, here are some tips to help reduce your financial stress over the summer so that you can make the most of your internship!

So Your Internship is Unpaid, Now What?

Unpaid internships are the norm in some industries and may be your only option to get the experience needed to jumpstart your career. An unpaid internship may seem scary, however, here are several ways to make help make ends meet. Remember, there are countless other ways to reduce your cost of living during an internship that can be found in the resources listed below.  The main ways are budgeting, eating in, and commuting differently.

Budget

Budgeting is a key skill that helps eliminate unnecessary stress in your daily life, especially when you’re tight on money. By being aware of how much money you have, whether that is through savings, a part-time job, or another source of income, and how much your expenses are expected to be, you can reduce the stress that comes with uncertainty. With budgeting, you can also establish your needs versus your wants and start cutting back in your “wants” category or by finding less expensive ways of obtaining these wants. For instance, without school in session, you may not need internet. You might be able to fulfill your social media and web browsing desires by taking your laptop to a location with a free Wi-Fi spot. For help finding free Wi-Fi, download the Free Wi-Fi Finder from the app store! To help make some of your “wants” easier to obtain, there are several discount sites, such as Groupon out there that offer daily discounts for up to 90% off of fun things to do in many cities.

Eat In

When you’re working all day, it can be really tempting to grab some fast food or dine out. Eating out can cost over 50% more than eating the same meal at home. It may seem impossible to cook at home, however, there are several options to help ease this burden! First off, if you prepare meals in advance and in bulk, you can have meals ready to eat in seconds of coming home from your internship! Depending on where your internship is, you may not have enough time to go all the way home for your lunch break. Instead of vending machines or fast food, bringing your lunch to work can save you money and give you more time to relax.

Commute Differently

Driving might be the quickest and easiest form of transportation, but gas can add up, especially if you have a long commute. If you live close, you can try biking or walking to your internship, both of which are free and great for you and the environment! If you live farther away, you can opt for carpooling with a fellow intern, or utilizing public transportation such as a bus system or subway.

What to Do With a Paid Internship

On the other end of the spectrum is the paid or partially-paid internship. With this, you probably are not worried about how to make ends meet over the summer, but you may have questions about what to do with the extra income. Below are some few smart ways to not allow these dollars to go to waste!

Create An Emergency Fund

You never know when something unexpected might happen and it’s important to establish an emergency fund before that time comes. An emergency fund is money you set aside that would cover approximately 3-6 months’ worth of living expenses. You would only tap into this fund in an emergency such as unemployment or car troubles. Saving up for this now will save you debt and stress in the future.

Reduce Your Student Loans

Whether you have $50 in excess or $5,000, any amount you can put towards your student loans will help you in the long run. Most student loans start racking up interest the minute you accept the loan, so the more you pay off now, the less you will owe down the road. You can also put this extra cash towards your tuition, which means fewer loans you’ll have to take out over all. Both of these options are great ways to reduce your student loan debt!

Obtain Your Financial Goals

If you’ve had a goal in mind that you’ve been working towards, it’s okay to treat yourself! Whether that’s paying off a car loan, getting a pet, studying abroad, or finally buying that Apple Watch you’ve had your eyes on…  It’s okay to splurge a little as long as you are still able to meet your expenses.

Paid or un-paid, an internship is an amazing opportunity to take advantage of! These once in a lifetime opportunities will allow you to apply your knowledge and get a leg up when it comes to a future job. With your finances in check, you will reduce your stress and be able to maximize your internship experience.

Resources:

http://college.usatoday.com/2011/06/02/5-ways-to-live-on-an-unpaid-intern-budget/
http://internjustice.com/2013/07/11/how-to-survive-the-unpaid-internship/

Jillian Taylor
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

Be Your Own Business

We continually look for ways to grow as individuals and establish ourselves. The world we live in now revolves around us going to school, getting a job, buying a car, buying a home, getting married, and possibly creating a family. We are surrounded by our family, friends, and millions of businesses. A business is considered an entity that is either commercial, industrial, or professional. When we hear the word ‘business,’ we typically think of an organization that offers a product or service. But has anyone ever thought of themselves as their own business? As an entrepreneur? We go our whole life trying to make a living to take that next step towards our short and long term goals. We generalize ideas, take steps, create a process, and attempt to follow through with those ideas like any business would. To successfully be your own business or an entrepreneur, you must think logically and take careful considerations when thinking about your financial position and how to obtain your goals.

To be your own business or an entrepreneur, one must start early to plan their short and long term goals. Develop a realistic plan of how you want to obtain your goals and when it could possibly be reached.  For an example, if you have student loans, you can start paying them off now while in school and become that much closer to paying your debt off. The closer you are to that, the closer you are to buying that first home, or the car you have always dreamed of.

Start thinking early about your credit. To get any kind of loan, one needs good credit. Some employers even look at your credit to see if you are financially responsible. That one number can say a lot about someone and can even be a factor that contributes to your employability. To start establishing credit, you can ask to be added to a relative’s source of credit until you have enough to get a credit card of your own, or you can apply for a secured credit card.

Although you are young at this point in your life, you also need to start thinking about retirement and savings for the future. Start contributing a small amount of your paycheck to your savings each month, or make sure to max out the contribution your employer will offer to your 401(k) plan when you get a job.

If you need help to get on the right track of becoming your own business or an entrepreneur, Powercat Financial Counseling will assist you in a free, friendly, and confidential environment.  You can create an appointment at http://www.k-state.edu/pfc/services.

Doni Lee
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

Importance of an Emergency Fund

Along with making goals, creating a budget, and managing debt, it is very important to establish and maintain an emergency fund. Most people at some point in their life, have heard from their grandmother or some other person “save it for a rainy day.” This may seem cliché because it is said very frequently, however, in the world of finance and money management, there is a 100% chance, at some given time in life, it will rain. By having an established emergency fund you can save yourself a lot of pain and hardship when faced with a financial or life emergency.

Getting Started

The first step in establishing an emergency fund is calculation and saving. Many experts agree that a well-established emergency fund should be between three to six months living expenses. This is because many financial emergencies involve loss of income in some form. By having three to six months saved, this will give you ample time to find a new source of income while still paying all of the bills you may normally have to. Similar to budgeting you must calculate your monthly living expenses including mortgage or rent, vehicle or other loan payments, utility bills, groceries, gas, or other expenses essential to living month to month. Once you know the amount you will need monthly you can multiply it by three to six and start saving. This money needs to be somewhere safe but it must also be liquid, meaning it can be converted to cash quickly should you have an emergency and need it. Saving accounts are safe, however, once you begin to have a bigger savings you may want to think about putting that money where it has a better chance of making money through interest such as a money market account or a short-term certificate of deposit (CD).

It Takes Time

Your emergency fund does not need to be established overnight; in fact, it is very unrealistic to establish one overnight. Although, if you have the ability to establish one overnight, such as an inheritance or bonus, it is important to put that money away in savings and do not look back. If you have a hard time putting away or saving money, do not be afraid to start smaller and work up to a larger amount. Start with $10 per month, or per paycheck, and do this for a couple months. It will not be a lot of money, but you will develop a habit and eventually will not miss the $10 you have been putting away. Once this happens you can think about bumping the number up to $15 or $20. These small numbers will eventually turn into big numbers as long as you keep working hard toward reaching your goals.  You can set up automatic transfers or direct deposit so that the money is put aside before you even see it!  Remember:  always pay yourself first.

Emergency Means Emergency!

It is important to remember why you have this emergency fund and define what it should be used for. There will be times when it is tempting to use this money for expenses such as vacation, down-payments, going shopping for seasonal clothing, getting a new game system, paying down other debts, or other things along those lines, but try to abstain from this activity. Your emergency fund is for financial emergencies, which can come in many forms.:  you can make a list of acceptable emergencies and only use the money on the things on that list. Everyone’s list will look a little different, however, here are some of the common things emergency funds may be used for: unemployment expenses, medical emergencies, unexpected repairs such as vehicle or household (due to unforeseen causes), unexpected tax bills, emergency veterinary bills, to name a few. It is important to remember the purpose of this account is to keep you from adding debt as a result of trying to come up with money quickly. Plan for worst case scenario so when smaller emergencies arise they are easily covered.

Revise and Maintain

It is essential you maintain your emergency account. There will be times you draw money from the account because emergencies happen, but remember that the money you use on emergencies is money that can no longer be used on other emergencies. This goes back to starting small, if it has been a while since you have contributed a portion of your paycheck to saving, you may have to go back to saving $10-$20 per paycheck until you get your emergency fund balance replenished. You will also have to reevaluate your emergency fund throughout life to adjust to life changes such as marriage, children, etc. Choosing a number that will give you three to six months of living straight out of college could be significantly smaller than three to six months of living expenses when you are married with children. If in doubt, save more.

This concludes the Financial Literacy Month series on money management.  Look for other posts for more tips on both saving and spending money wisely.

Resources

http://financialplan.about.com/od/savingmoney/a/emergencyfund.htm

http://www.investopedia.com/financial-edge/0812/why-an-emergency-fund-is-important.aspx

 

Shannon Vaughan
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

Debt Management

Over the last two weeks, Powercat Financial Counseling has been providing you with some useful financial tips on how to better manage your money. So far, we have discussed the importance of having financial goals and why people should integrate budgeting into their everyday lives. This time, we are going to talk about debt management as a necessary step for your overall financial success.

Borrowing money and having debt are a part of life. And, for the most part, debt is unavoidable. For many people, obtaining a quality education and purchasing your first house would be a daunting task without some kind of debt. In fact, capitalism was built on the extension of credit. Responsible borrowing to a very large extent is what drives the economy; higher spending leads to the creation of more jobs and higher incomes, which in turn is correlated with higher spending.

As you can see, debt can be our friend, but it can also get us in trouble. As of December 2014, total consumer debt in the U.S. is $11.7 trillion. (eg. mortgages, credit card debt, student loans, etc.).  Debt can be problematic when it used to buy unnecessary things we don’t really need, and especially when we don’t have enough income to cover our debt expenses. Debt requires a degree of self-control to avoid getting caught in the debt cycle that can last a lifetime if you are not careful.

Know How Much and Know Who You Owe

Start off by making a list of all of your debts. This list needs to include all of the creditors, total amount of the debt, due dates, and what your monthly payments are. One easy way to confirm the debts on your list is to get free credit report from www.annualcreditreport.com. You can select a free credit report from each of the 3 credit bureaus once a year (TransUnion, Equifax, and Experian).  Pulling free credit reports periodically will also ensure that there aren’t any unknown debt charges under your name.

When To Stay Away From Debt

Stay away from compulsive buying. Avoid financing a long term asset, such as a home or even a car, with a short term loan from your credit card company. The value of your home or your car will not benefit you when paying your monthly credit card bill. Moreover, borrowing long-term for a short term asset such as a home appliance can get you in trouble as well. If you take a 10-year loan to buy a brand new computer with extremely low monthly payments, you will still be paying long after the computer is obsolete.

Timely Payments

The crucial step is to pay all of your bills on time. Late payments make it harder to pay off your debt and you will be charged with a late fee. If you miss multiple payments in a row, your interest rate and finance charges will increase while your credit score will be negatively affected for up to 7 years. To make sure you are not missing payments, use a calendar system on your computer or smartphone. You can also set an alert several days before your payment is due or you can even have automatic payments withdrawn from your account so that you are never late on payments (but be sure to have enough in the bank to cover the payment). In case you miss a payment, don’t wait to pay outstanding charges until the next due date; rather, pay as soon as possible to avoid ‘missing payment’ reports to the credit bureaus. As a matter of fact, 35% of your credit score is determined by your ability to pay bills on time.

Pay More and Know Which Debt to Target First

Logically, your goal is to pay off all of your debts as quickly as possible. In order to speed up the debt repayment process, you can pay more than the minimum payment every month! Time value of money is a very powerful concept. Paying just the minimum payment on your credit card won’t get you very far and you will be mostly paying your interest cost while the loan balance won’t change much. For example, if you have a $1,000 credit card balance at 18% interest rate and you pay just the minimum each month (assuming minimum is 2% of your credit balance), it will take you over 7 year to pay off $1000 credit card balance and you will end up paying $1865 ($1000 balance and $865 in interest). If you have multiple loans, paying off the loan with the highest interest rate first would be your priority, while the rest of your debt would be paid in descending order in terms of interest rates. Paying off the loan or credit card with the higher interest rate would be a wise choice because you will be paying less in total interest on your debt. Some financial gurus even suggest to pay off smaller debts first which will drive your motivation to take care of any other outstanding debts you might have.

Understand Interest Rate Risk

Every time you borrow money, the bank will charge you an interest rate. In simple terms, interest is the cost of using someone else’s money. If you are a borrower, it is in your own best interest to get the lowest interest rate possible.  Every time you are borrowing, it is crucial to understand the interest rate risk associated with the borrowing and to understand the interest rate environment. There are variable interest rates and fixed interest rates. Variable interest rates will change and its movement will depend on market forces while fixed interest rates will stay put for the life of the loan. If you are borrowing at a variable interest rate right now and you are expecting interest rates to rise in the near future, the cost of your debt will rise as well. As  of right now, interest rates are at an all-time low, but this trend will most likely reverse in the near future as the Federal Reserve is looking to raise interest rates which will force the overall cost of borrowing to increase for consumers.

Don’t Forget To Save Money Along the Way

Paying off your credit card balance or your student loans is great, but if you are cutting debt at the expense of your retirement portfolio, you will end up disappointed in the future. A lot of employers are offering 401(k)s and they are willing to match a certain percentage of your salary if you are committed to contribute into your 401(k). In a sense, this is free money that you should not pass on.

Available Debt Help

If you have been struggling to pay your bills on time for a long period of time, there is help available. The first step would be to talk to your creditors and try to work out a modified payment plan that can possibly trim down your payments to a more controllable level. The second step would be to contact a debt relief company, like a credit counseling agency.  HCCI is such an agency that can help you get a debt management plan together that works for you.  They can also advise you on other options.  The other debt relief options include debt consolidation, debt settlement, and bankruptcy. These options have advantages and disadvantages so make sure to proceed very carefully.

Be on the lookout next week for more helpful tips about personal financial management during Financial Literacy Month.  If you have any questions about debt management or other financially related questions, Powercat Financial Counseling is here to help. You can make an appointment at our website: www.k-state.edu/pfc.  We provide free and confidential counseling to all K-State students.

Elvis Hodzic
Graduate Assistant
Powercat Financial Counseling
www.k-state.edu/pfc

Creating a Budget

Now that you’ve thought about your financial goals, it’s time to determine how you’ll get there.  Before you can know how much you can save, you’ll need to know how much you have left over each month. Do you ever feel like you work really hard, but never have money? Or, do you wonder how your whole paycheck from two days ago is already gone? Budgeting may be the answer to these questions. For the second article in the four part series for Financial Literacy Month, we at Powercat Financial Counseling (PFC) will be educating you about the importance of budgeting and how to create a budget.

What is Budgeting?

When I think about what budgeting is I think about a famous quote by John Maxwell that says, “A budget is telling your money where to go instead of wondering where it went.”  Budgeting is tracking your cash inflows and cash outflows. It is a process in which you create a plan of how you want to spend your money. After you create this plan, it allows you to determine the amount of money you will have to accomplish goals you want to achieve. Budgeting is a simple yet complex task:  it takes work and discipline. It is a mindset and an attitude.

Why Budgeting Is Important

Now that we know what budgeting is, let’s discuss the importance of it. Budgeting is important for many reasons. One of the first reasons budgeting is important is due to the fact that it allows you to see whether you are spending more than you are making, or if you are coming out on top. We all want to come out with extra money, right? Budgeting is what helps you come out with extra money or break even at the end of every month. Creating a budget can also help relieve stress when unexpected things happen.  And finally, the budget will help you reach your short and long term goals discussed last week.

Creating a Budget:

If you have never created a budget, or even thought about a budget, don’t worry:  we are here to help. PFC offers an awesome tool called the, “Spending Plan Worksheet.” This worksheet is an excel document that allows you to create your own spending plan for each week, month, semester or year. The amount of time you set your budget for is completely up to you and what would be most beneficial for your situation. Budgeting is typically in the form of a three step process:

  1. First, you will estimate your income and expenses for a monthly period. For a lot of people, this is a major guessing game, because most people don’t know off the top of their head how much they are spending on coffee, eating out, gas, groceries and other expenses each month. After you have estimated the income and expenses, you should go through and decide whether your expenses are needs or wants.  A need can be determined based on what would have a consequence should you not pay it (i.e. rent, groceries to an extent, or tuition) whereas a want is one you can cut back in and deal without month to month (i.e. clothes, eating out, and entertainment).
  2. After your estimation is done, you will then begin the “fun” part, writing down the actual income and expenses. When recording your expenses, don’t forget to add in those “every once in a while” expenses such as getting your oil changed, getting your hair cut, and other activities. When you are calculating these expenses, take the amount you spend in a year on that activity and divide it by 12, since you are using a monthly budget. For example if you are doing oil changes, it costs you $20 every three months, which is $80 per year. Now that we have determined the annual amount, we divided it by 12, which equals $6.67 each month; this is what you should put away so that you are prepared for the expense when it occurs.  There are many ways to track your expenses for a given period (a month in this case). You can use the receipt method, which is where you keep all your receipts and record the transactions. You can also use bank statements, but bank statements don’t account for cash transactions, so you don’t want to forget to include those! You can also use the check register method, which is where you keep a running tab of your checking account. In this process, right after you spend money you write it down (in a register or excel sheet) so that you know exactly what you are spending and why.  You can also use wwwMint.com.  For more information on using Mint, check out our other article on the topic.  These are just a few ways of keeping track of what you are actually spending. Feel free to do what is the easiest and most effective for you. After you have tracked and written down your actual amounts from a month’s time, you will want to go through and prioritize your needs and wants again, to see if it has changed based on what is actually happening, not on what you thought was happening. In this step, most people are shocked because they are spending way more than they thought. For college students, we tend to spend way more eating out than we think we do, or we spend way more on coffee than we really should. The reason we estimate first, and record actuals second is so that you get a good feel for how in tune you are with your spending habits. After you become in tune, you can begin to change your spending habits to better fit your financial needs.
  3. The third step is to start determining what you want to changed, and how to attack those changes. This involves deciding if you want to be spending what you currently are or if you would like to spend more or less in each category.  If you have a deficit, it’s important to address it by increasing your income or decreasing your expenses.  If you have a surplus, you can decide where to put that extra money.  Once you determine where you want to start changing spending habits, you can start to create a spending plan/budget for next month.

Although there are only three steps listed, it is important to frequently update and monitor your budget throughout your whole life. By doing this, you are identifying where you may be wasting money, and where you can be putting that money.  This can help you put your money to better use to help you achieve your financial goals.

Be on the lookout in the next few weeks for more helpful tips about personal financial management during Financial Literacy Month.  If you have any questions about creating a budget or general financial management and would like help with any of those questions, please make an appointment and come see us at PFC.  You can make an appointment at our website: www.k-state.edu/pfc.  We provide free and confidential counseling to all K-State students.

Miranda McMahon
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

Setting Financial Goals

April is Financial Literacy Month, and Powercat Financial Counseling is taking this opportunity to write a series of articles related to basic financial management.  To kick the month off, we’re starting with setting financial goals.

Planning Ahead

Setting goals, especially financial ones, can be a challenging, and sometimes daunting, task.  Having goals is important, though, in that they give you something to aim for and work towards.  To quote Zig Ziglar, “If you aim at nothing, you will hit it every time.” A good place to start is to think about your life in the future.  How do you want to live?  What do you want your life to look like?  Do you want to be debt free, buy a car and a house, start a family, or travel?  How will you accomplish these tasks and get to the life you really want?  Thinking about these things now is important.  When you graduate and enter the workforce, it is easy to get caught up in your daily routine and not give much thought to your future.  You will probably be inclined to think a few weeks or months ahead, but it might be hard to think a few years ahead.

Short-term vs. Long-term:

A short-term goal is one that is set for two years or less, and a long-term goal is one that is set for five or more years.  Some examples of short-term goals are planning for spring break and summer trips and building an emergency fund, while long-term goals might be buying a car, buying a house, or paying off student loans.  Even if you have trouble coming up with specific savings goals, you should still try to save whatever you can.  A good first goal for everyone, which should be a priority, is an emergency fund.  An emergency fund is a separate store of money which you access only in emergencies (ordering a pizza in the middle of the night because you don’t have food around is not an emergency).  If your car suddenly got a flat tire, how would you pay for it?  If you lost your job all of a sudden, where would the money come from to get you by until you get another job?  These are the types of situations in which an emergency fund would be useful.  It is recommended that you work up to having three to six months’ of living expenses saved up in the event you lose your job or are unable to work due to an injury.  This may seem like a lot of money, and depending on your situation, you as a college student could probably afford to wait a little while to get to the point of having this much saved.  Your parents may be willing to bail you out if something comes up.  But it is still a good idea to have at least $500 to $1,000 on hand in case of emergencies.  Life happens: will you be prepared when it does?

SMART Goals

When setting goals, it is important to define them well.  Your goals should be Specific, Measurable, Attainable, Relevant, and Timely, or “SMART.”  If your goal doesn’t have these characteristics, you will likely give up on it.  This is why it is important to write out your goals with these specifications and keep it somewhere where you will see it on a regular basis.  You will also want to prioritize them.  It is important to note that your goals may change over time and to review them periodically to make adjustments as necessary.  Set a reminder for yourself every few months to review your goals and see if you need to adjust them.  Maybe something came up since you set and prioritized your goals, or perhaps your goals will drastically change once you graduate; if so, you will want to make the necessary adjustments and re-prioritize.

Motivation to Save

Some people find saving to be difficult for them, whether it is because they feel like they are depriving themselves or they have loans to repay that they don’t think that they can save.  One way to save without “missing” your money is to ask your employer or your bank to direct deposit a portion of your paycheck to a separate savings account.  The general recommendation is that you save 10% of each paycheck; however, be careful not to set aside so much that you aren’t able to pay for your immediate expenses.  Every little bit adds up, so save as much as is within your means even if it is only $10 or $20 a month.  If you are able to save more than 10%, that is great too.

“If you are failing to plan, you are planning to fail,” said Benjamin Franklin.  Planning really can be a challenge, especially if you don’t know how to start.  One website that might be helpful is Sorted.org: https://www.sorted.org.nz/a-z-guides/setting-goals#s6.  It helps you to organize your goals with its “goals worksheet” and walks you through the planning and implementation process, offering tips along the way.  It even talks about goal-setting in relationships, which can be even more of a challenge than setting goals on your own.

In closing, it is important to set goals in order to achieve the life you want.  Start thinking about it now and begin developing a plan to get you there.  You will want to evaluate the short term and the long term, but allow for some flexibility in case your desires or values change.  Saving as much as you can now and building up an emergency fund will pay off in the long-run.  Be on the lookout in the next few weeks for more helpful tips about personal financial management during Financial Literacy Month.  If you have any questions about setting goals or financial management and would like help with any of those, please make an appointment on our website: www.k-state.edu/pfc/services.  We provide free and confidential counseling to all K-State students.

Rachel Vogler
Peer Counselor II
Powercat Financial Counseling
www.k-state.edu/pfc

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