How Not to Move Back in With Your Parents

Listener Mailbags Podcast Episodes

Student Mailbag: Building Habits
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Pete and Alex are visited by special guests for this week's mailbag: IU students Brooke, Megan, and Jonathan from the IU MoneySmarts Team.



Read the Show Notes

There are a number of things that can be confusing when it comes to managing your personal finances, and even more that are just difficult to handle, especially for students and recent college alumni. The goal is to keep your financial situation from getting away from you to where managing it becomes a nightmare. When it comes down to it, in many cases, it’s not about the financial background you come from or even how much money you make. It’s about how you think about your finances, the values you have built around your spending habits, and the control you maintain of your financial situation.

The student mailbag questions this week on managing and repaying debt and creating a budget bring up great topics, as they are some of the fundamental elements to building MoneySmart habits. While maintaining healthy spending and saving habits are often easier said than done, that doesn’t have to be the case. Here are some keys to getting started on the right foot to maintaining healthy, sustainable, MoneySmart financial habits.

Debt Management

Pete mentions a few ways to that people tend to think about and enact debt repayment. But the key to it all, no matter what your plan, is to maintain control over your debt situation by first being knowledgeable on what your debt actually looks like. If you’re thinking in terms of credit card debt, spend time learning about your APR (annual percentage rate) on your card(s). For student loans, go beyond the entrance and exit counseling to find out about how loan repayment works and how your future earnings are affected when you factor in the compounded interest rates associated with your loans. Find ways around discouraging yourself because of the amount of debt you may have, and instead build dependable plans to keep you on track to lowering it.

The biggest benefit to educating yourself about your personal finances is that you can have a better handle on your situation – and you can gain a basic knowledge to ask questions when you have them. Learn about your credit history by reviewing your credit report, and understand what creditworthiness is to potential lenders and what it means based on your credit report and scores. Then, you can use your credit report as a means of encouragement to build better spending, repayment, and savings habits and create a sustainable plan to help you stay along that path.

Spending Habits

If you have the knowledge to better understand your finances and the control to spend more wisely, you can avoid bad habits like spending money you don’t really have or spending based on the amount you bring home each paycheck, without first adjusting for your major bills and expenses. And while credit cards are nice in a pinch or for short-term time frames, it’s still leant money. Your objective should be to gain independence from debt and not to allow your loans to determine your lifestyle for you when it comes to spending and your overall future, including the type of job you have or your career field. This is why working to buy things tends to (excuse the expression) pay off, as opposed to incurring more debt.

Accountability

Alex mentions building actionable habits in order to keep you accountable for how you spend. This is the key to sustaining healthy financial habits. It comes down to tempering your spending to where you can handle paying for your expenses or well manage the debt to cover them, building responsible habits like saving more and spending less, and maintaining those habits so you stay away from financial distress. Your accountability to your own spending habits will help you better manage your money and appear more reliable in the eyes of lenders. Not to mention, the more MoneySmart you are and more sustainable your plan is when it comes to handling your money, the less you have to stress about your financial situation. So, get MoneySmart-er, and start building better habits.