With 2011 only hours away and since most college students are off on winter break, now is a great time to focus on your finances for the New Year. Follow these three simple steps to ensure that your finances are safe for 2011:
1. Credit Cards: If you have credit card debt, determine exactly how much debt you're in. Gather all of your credit cards and write down the amount you owe and the card's interest rate. Next, call the credit card companies and ask them to lower the interest rate -- speak to a supervisor if necessary. This phone call will usually result in your rate being lowered by 3-5%.
Next, try to pay more than the minimum payment on each card, even if it's $10-$15 more -- this will get you out of debt sooner.
If you don't have a credit card, consider opening up a secured credit card, where you make a security deposit on the card, typically around $500. There are some fees involved, but after a few years of using the secured credit card responsibly, the credit card issuer will likely extend you a more traditional line of credit. Most secured credit cards report to the three credit bureaus: Experian, Equifax and TransUnion. This will ensure that you're actually building credit history.
Remember, use the secured credit card for small purchases and pay the balance off in full and on time.
To ensure that you never forget to pay your credit card bill, ask the credit card company to automatically withdraw the money from your bank account each month. And always remember to review your credit card statement to ensure that there are no errors or suspicious activities.
Also, don't open up more than one credit card. According to Sallie Mae, 50% of college students have over 4 credit cards! Opening up several credit cards within a short period of time hurts your credit score. The more credit cards you have, the more tempting it is to rack up thousands of dollars in debt.
2. Retirement: Even though you're 35-40 years away from retirement, the earlier you start saving and investing for retirement, the more money you'll end up with. Open a Roth IRA from a discount brokerage firm. In a Roth IRA, you deposit money that you've already paid taxes on! And since tax rates will most likely increase in the future, because of the high deficits and national debt, it's better to pay the taxes now, rather than when you retire.
3. Expenses: Last semester, chances are you spent hundreds of dollars on restaurants, bars, coffee and shopping. Make it your New Year's resolution to stop spending money on frivolous and useless items. Instead, use this money to pay off your credit card or student loan debt, or simply save the money! To help track your expenses, use this free Expense Calculator.
Managing your personal finances while in college is a daunting task. However, if you implement the suggestions above now, you will be in excellent financial shape by the time you graduate from college and enter the real world.
Scott Gamm is the founder of the personal finance website HelpSaveMyDollars.com and a finance major at NYU's Stern School of Business. He has appeared on NBC's TODAY, MSNBC, Fox Business Network, Fox News, ABC News and CBS.
For more info on managing credit cards in college, check out my appearance on ABC News from yesterday.