Are you tired of feeling overwhelmed by debt or is it becoming hard to keep track of the various lines of credit you have established? As a student, managing debt and maintaining financial responsibility can be particularly challenging. With the demands of academic life, the temptation of coming across easily accessible credit, and the constraints of limited income, settling a balance on time can be a difficult task. In the following paragraphs, we will explore various strategies and tools to help students or graduates manage debt responsibly. From zero-based budgeting to credit monitoring and beyond, we will cover a bulk of information that you should know to take control of your finances and manage your debt responsibly.
Strategies and Tools to Help Manage Your Debt:
Zero-Based Budget: During my internship over the past summer as a Registered Investment Advisor, I learned the importance of assigning a purpose to every dollar earned, especially when it comes to managing debt responsibly. Zero-based budgeting is a powerful tool that supports the principle that every dollar must serve a specific purpose or goal. As the name implies, zero-based budgeting involves allocating all income towards expenses and savings until the balance equals zero. To help bring light to zero-based budgeting, consider the scenario of a student with $3,250 monthly income, distributed across the following expenses and debt payments:
Reference: https://blog.mint.com/wp-content/uploads/2020/11/how-to-create-a-zero-based-budget.png?resize=768,970
This principle is not only crucial for effective budgeting but also holds significant relevance in managing debt responsibly. Understanding where each dollar goes helps in prioritizing expenses, avoiding unnecessary debt accumulation, and ensuring that every financial decision you make contributes to your long-term financial goals.
Credit Monitoring: Managing your debt responsibly can feel overwhelming at times, especially when you have multiple lines of credit established through various vendors. It can then become easy to lose track of credit accounts you have opened, potentially leaving balances unnoticed and affecting your credit score greatly. The good news is that individuals can access their credit reports for free once a year from each of the three major credit bureaus: Ex
perian, Equifax, and TransUnion. By strategically structuring your requests, you can obtain three separate credit reports throughout the year, each from one of the three different credit bureaus. For example, you could pull one report every four months. This approach keeps you consistently informed about your credit status and empowers you to adjust your spending behaviors to positively impact your credit over time.
Budget Tracking & Planning Applications: When it comes to managing debt responsibly, standard budgeting can be just as impactful, if not more so, than zero-based budgeting. Budgeting tools like Goodbudget and NerdWallet offer much assistance with debt management through their free budgeting platforms. Utilizing such tools can allow you to create personalized budgets tailored to your financial objectives and debt repayment targets. Additionally, these tools provide a comprehensive view of all of your accounts, automatically categorizing your monthly expenditures. One feature of these tools is their capability to securely link to your personal accounts, allowing you to monitor and analyze any recurring subscriptions and more. This feature can be very beneficial since it is not uncommon for individuals to overlook subscriptions that they no longer use, resulting in unnecessary payments that can accumulate over time and contribute to their overall debt. These features and budgeting as a whole can play an important role in responsible debt management by providing clarification, control, and direction to your finances and debt. By creating a budget, you can begin to gain awareness of your income and expenses, which can allow you to prioritize debt repayment while also preventing overspending. With a well-crafted budget, you can implement effective debt repayment strategies, build financial discipline, and begin working towards achieving long-term financial stability.
Automatic Payments: Another responsible strategy for managing your debt effectively is to set up automatic payments for your credit cards. By automating your credit card payments, you can ensure that you never miss a due date, allowing you to avoid any late fees and damage to your credit score. On that note, it is important to keep in mind that your payment history or whether you make you payments on time, makes up roughly 35% of your credit score. Setting up automatic payments can help maintain consistent debt repayment, as payments are made on time each month without the need for manual involvement. Additionally, automatic payments can assist in budgeting by including debt repayment into your financial plan seamlessly. By committing to regular payments, you can begin to chip away at your credit card balance, reducing your overall debt load over time.
Powercat Financial: When it comes to managing debt responsibly, students can turn to peer counselors for support and practical tools. Powercat’s peer financial counselors can provide guidance through resource tabling’s and peer-led financial education sessions. Students can use Powercat’s provided spending plan worksheet, a three-step process for estimating and tracking expenses, with counselors to assist along the way. The three-step process includes 1) students estimating their monthly income and expenses, while also distinguishing between needs and wants, 2) students record their actual income and expense, while comparing them to their initial estimates to gain an understanding of their spending habits, and 3) students can then analyze their financial records to identify any necessary adjustments and create a spending plan for the following month. Beyond budgeting, counselors at Powercat Financial can help students reflect on their money attitudes and offer strategies for financial behavior change. By utilizing Powercat Financials resources, students can develop responsible debt management habits and achieve long-term financial success.
Mastering debt and strengthening financial responsibly as a student are important steps towards securing a stable financial future. By implementing strategies such as zero-based budgeting, monitoring your credit, utilizing budgeting applications, setting up automatic payments, or scheduling an appointment with a peer financial counselor at Powercat Financial, students can begin to effectively manage their debt responsibly and work towards achieving their financial goals.
One valuable resource available to students at K-State is Powercat Financial. Here at Powercat Financial, we offer free counseling services to students seeking financial assistance, with one of our most valuable services being budgeting and credit & debt management. To schedule an appointment with a counselor at Powercat Financial, please visit our website using the following link: https://www.k-state.edu/powercatfinancial/. During your appointment, you can discuss your financial concerns, receive personalized advice, and even create a spending plan worksheet or college financial plan tailored to your specific needs and goals. By taking initiative now, you can begin to lay the foundation for a secure financial future both during school and beyond.
Quinton Vlach
Peer Financial Counselor II
Powercat Financial
www.k-state.edu/powercatfinancial
