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Developing a new view about credit
Mary Ann Campbell, CFP, founder of
MoneyMagic.com and a money educator, cites unrealistic expectations
as a major reason for high student debt.
Campbell, who teaches personal finance courses, says “Many students’
expectations of their earning potential after college far exceeds what
their actual income will be.” She notes that some students use their
credit cards with abandon during college, planning to pay off their debt
when they land that great job after college. Indeed, some students
forget that in order to get to the top of the career ladder, there are a
few rungs, i.e., less paying jobs, they have to climb first. And the
expense of starting a new job and life on your own can just add to
existing debt.
Manning’s website,
CreditCardNation.com, contains a great resource for students seeking
a more realistic view of the first few years after college. Using the
‘Budget Estimator,’ a module designed by Manning, students can identify
an average yearly or monthly starting salary for jobs in their
particular major. The program automatically figures in estimates for
taxes and social security payments. Students can then plug in expenses
for housing, car payments, utilities, food, insurance, telephone and
internet bills, clothing, credit card bills, student loan payments, and
entertainment, etc. The module lets you know when you have spent more
money than you make, and allows you to adjust payments as necessary
until you get the hang of how your money is best distributed.
Students that seem to have the most credit woes? Those who believe their
standard of living during and after college should not vary from when
they lived at home on their parents’ income. Cable television, cell
phones with cameras, and new cars become ‘necessities’ instead of nice
extras.
Advice to grow on
When it comes to credit cards, students have great advice for other
students. Heather, a college junior from Arkansas, recommends getting
one card with a low limit. “This limits the amount of credit you have
access to and therefore removes the temptation to spend more than you
have or more than you can pay off immediately,” she says.
Another student recommends selectivity. “Don’t sign up for a card that
charges an annual fee to use it, and read the terms of the card before
applying. You wouldn’t believe how many people don’t know what an APR
rate is.” For more information on finding the best rated cards, check
out
CardRatings.com. You can read reviews of cards from other students
and get the lowdown on perks of various credit cards.
Campbell has three recommendations for students: The first is open
communication. Campbell says students who are educated about financial
matters seem to have a better overall attitude regarding credit cards.
Students should find a trusted source to talk openly with about money
issues. Second, students should switch from spending behaviors (such as
shopping) to activities that help you achieve the same feeling of
gratification or reward, such as intramurals, exercise or campus
organizations.
Last, but
certainly not least, enroll in a personal finance course as soon as your
schedule allows. Says Campbell, “If it’s not required coursework, take
it as an elective. You will learn a set of life skills that will not
only help you right now, but also after college and for the rest of your
life.”
This article is the property of
www.bestcreditcardsonline.com,
which has been offering credit cards services since 2002.
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