Balancing Your
Budget
Paying For College
• Financial Aid
• FAFSA: pay attention to deadlines!
– Usually due by end of June
– Priority
– Numerous types of loans/grants
• Loans: must pay back, accrue
interest
• Grants: don’t have to pay back
Paying For College
Scholarships
• NIU Scholarship Office
– Help find scholarships (NIU & private)
– Provides computers and assistance
• Find you own!
• Not Financial Aid
Paying For College
• Parents/Relatives
• Private Loans
• Employment
• Last options: consider less hours or
take semester off
What is a Budget?
• A budget is itemizing your income against
your expenses for a given period.
• A budget allows you to
better visualize your
financial picture.
How does a Budget Help Me?
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Stay out of debt
Save for the future
Attain goals
Trim spending
Relieve Stress
Lifelong money management skills
BUDGETING 101
The first step is to know how much
money is coming in so you know how
much money you can spend.
Budgeting Basics
• Determine WANTS vs. NEEDS
• Determine your goals
– Short term
– Long term
• Do the Math
Budgeting: Easy as 123
Step 1: Add up all of your income
Step 2: Add up all of your expenses
Step 3: Calculate the difference
Common Budgeting Questions
• Converting Annual expenses/income to
monthly amounts
– Divide the annual income or expense by the number of
months
– Ex/ Car insurance paid every 6 months: Divide that
amount by 6 to get monthly expense
– Ex/ Receive graduation gifts of $500, spread it out over
school year: Divide $500 by 9 months
Common Budgeting Questions
• Converting monthly expenses/income to
annual/semester amounts
– Multiply the monthly expense income by the number of
months
– Ex/ $70/month for cable and internet. Multiply $70 by
number of months
Common Budgeting Questions
• Income and Expenses change during the
summer
– Create a separate summer budget
– Spread out savings from summer job throughout the
school year
• Ex/ Save up $3000 during the summer: Divide by 9
months to get monthly budget
– When calculating yearly budget, don’t multiply monthly
expenses by 12 if you will not have those expenses year
round
• Ex/ $70/month for cable and internet, but cancelling
for summer months: only multiply $70 by 9 months
Budgeting Tips
• Everyone’s budget is going to be unique,
so add, remove, or change any of the
budget categories
• Be conservative with your estimates
When in doubt:
» Overestimate expenses
» Underestimate income
• Start an emergency fund
Assess Goals and Expenditures
• Do your expenses exceed your income?
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Bridge the gap by trimming down your spending
Pick up a part-time job
Take out more loans
Use credit card to cover any short term gaps
• Do you have money left over after
covering your expenditures?
– Attain goals faster, make new goals
– Start paying off student loans, invest for the
future, save for a summer trip
Money Munchers
ATM Fees
Computerware
Home Parties
Cosmetics
Online Services Beauty Parlor Over the limit fees
Cell phones
Dating
Ice Cream
Parking Fees
Gifts
Overage Fees Bottled Water Bounced Checks
Clubs
Cigarettes
Greeting Cards
Tanning
Haircuts Movies
Cable TV
Late Payment Fees
Dinners Out Bar Night
Books
Fast Food Attacks
Dry Cleaning
Car Wash
Lottery Tickets Magazines
Movie Rentals Sports
Lunches Out Gambling CD’s/Music Downloads
Prescriptions
Household Items
Pet Costs
Licenses
Speeding Tickets
Cash Advance Fees
Munchies
Gifts
Souvenirs
Track Spending
• Track your
spending each
month
• Compare to
budgeted
amounts
Importance of Saving Money
• Short-Term:
– Emergency cushion: experts recommend 3-6
months worth of living expenses
– Short Term goals: trips/vacations, household
purchases, new clothes, etc.
• Long-Term: Attain Financial Goals
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Financing a college education
Buying a house
Buying a car
Retirement
Saving Money and Investing
• Always consult with a professional financial
planner to determine your investing goals
• The value of your savings/investments is
determined by 3 basic factors:
– Amount of money you put in
– Interest Rate
– Time
• Hard to control interest rate on your investments, so focus
on the amount of money you are putting in and start
investing for your future early
Importance of Time
Started saving for
retirement at age 20:
Started saving for
retirement at age 30:
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Initial investment: $2,000
Annual contribution: $500
Interest rate: 10%
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Initial investment: 2,000
Annual contribution: $500
Interest rate 10%
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Years until age 65: 45
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Years until age 65: 35
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Value of investment at 65:
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Value of investment at 65:
• $541,178.63
• $205,268.28
Waiting ten years could cost you hundreds of thousands of $
Saving Money
• First – Make a goal
• Understand the
sacrifices needed to
attain that goal
• Develop a timeframe
Saving Money
Add your saving goal to your budget
How to add to your monthly budget:
• 1. How much do you want to save?
• 2. How long is the timeframe in months?
• 3. Saving Amount ÷ # Months = monthly budget
amount
• 4. Treat this monthly amount as an expense
towards your goal
Money Saving Tips
• Try generic brands
• Master the ten second rule
• Take public transportation
• Go to a matinee
• Make your own coffee
• Save your coins!
• Start emergency fund
• Use ebay/craigslist/freecycle
Credit
WHAT IS CREDIT?
$ It is a loan
$ It is an
agreement
$ It comes with
fees, interests
& other charges
Credit is a debt; it is
NOT income!!!
Build Your Credit
• Credit is called “your second resume”
• Information stays on your credit
report for seven years
• Your credit rating is your reputation
FICO Score
FICO Scores are calculated from a lot of different credit
data in your credit report. This data can be grouped into
five categories as outlined below. The percentages in the
chart reflect how important each of the categories is in
determining your FICO score.
FICO Score / Credit Score
Like your GPA, the higher your FICO
score, the better!
• FICO Scores range from 300-850
– 680 and higher = prime borrower
– 550 and below = lots of work to do!
Getting a Good Credit Score
• Keep account balances
well below 50% of your
available credit
• Think twice about cosigning
• Avoid Excessive inquiries
• Pay your bills on time
Debit Cards
• Allow access to checking account
via ATMs
• Amount is deducted from
checking account
• Not a charge card,
must have the funds
available NOW
Charge cards vs Credit Cards
Charge Cards
• must be paid in full every month (AMEX)
• provides convenience of not having to pay for
purchases with cash, but balance may not be
carried over month-to-month
Credit Cards
• operate on a credit limit and revolving basis
• if not paid-in-full within grace period, interest is
charged on the remaining balance
Paper or Plastic?
Credit Cards
• Interest rate fees--17% - 21% for students
• Annual fee
• Over the limit fees
• Late payment fees
• Transaction fees
Adding it all up…
Table 1: Minimum Repayment Schedule on a $2,000
Credit Card Loan at 19 Percent
Monthly minimum
payment amount
Number of months
to repay
Total interest
payment
$50
64
$1,193
$75
35
$619
$100
25
$424
$40
100
$1,994
Source: Credit Card Minimum Payment Interest Calculator, Daniel C. Peterson,
www.webwinder.com
Interest savings between lowest/highest payment = $1,570;
time saved = 75 months or 6.25 years!
Signs of High Risk Credit Card Use
• Average credit card balances over $1,000
• Owning four or more credit cards
• Carrying a balance each
month
• Using credit cards to charge
tuition or fees
Credit Card Don’ts
• Don’t get more than one
• Don’t use them for cash advances
• Don’t use them to pay for basics: rent, groceries,
etc.
• Don’t charge more than you can pay off in a
month
• Don’t let banks increase you credit limit
Credit Card Do’s
• Use a debit card vs a credit card
• Use a card with no annual fee and low interest
rates
• Know all of your card’s hidden fees
• Always pay more than the minimum each month
• Pay on time, all the time
Good vs Bad Debt
Good debt is debt that returns
something of long term value
Bad debt is often categorized as
short-term “feel good” debt and may
be unwise purchases that you
can’t afford and don’t really
need.
Debt Warning Signs
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Living from paycheck to paycheck
Making late, minimum, or skipping payments
Having credit cards at or near your credit limit
Arguing with family or friends over your spending
habits
Being unsure of how much you really owe
Using cash advances to pay your bills
Having your credit card declined
Having increasingly more of your income paying
for debts each month
Relationship-Secured Support
FAMILY & FRIENDS
• Keep open lines of
communication
• Treat family
members and
financial members
w/ great respect
bankruptcy
• Goes on your record for 10 years
• May hurt parent’s credit rating if co-signed
• Can keep you from getting a mortgage for a
house, credit at reasonable rates, a job, or
from being promoted
It does not discharge student loans, child support,
secured debt, or income taxes
Solutions
• Develop a budget & live within your means
• Redefine the good life your own way
• List your short-term financial obligations and goals
for each month, for the year, and future 5 years
• Focus on paying on the balance with the highest
interest rate
• Lose the credit cards
• Consolidate student loans
Become a Peer educator!
• What is Financial Cents?
• Opportunities to Get Involved
-Marketing Team, Collaboration Team, Junior Achievement
• Why Get Involved?
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Enhance your leadership skills
Build teamwork
Build your resume
Help the NIU community