Read personal financial management expert Shahar Ziv’s top pieces of financial planning advice specifically for graduate students.
1. Plan. Budgeting equals awareness. Create a financial plan to help you cultivate awareness of how you spend and save, and to ensure that your spending aligns with your goals and values.
2. Find your system. Pencil and paper, Microsoft Excel, Mint, YNAB, MVelopes: there are many tools that can help you manage your finances. Use the one that best helps you live below your means and understand how you are spending your money.
3. Harness the time value of money: Your most valuable financial asset is time. Start saving early to take advantage of the power of compound interest and allow your money to grow exponentially. If saved today, $1,000 could be worth more than $10,000 in thirty-five years, but only about $5,000 if you waited ten years to start saving (assuming 7 percent annual return and yearly compounding).
4. Learn the money value of time. As life gets busier, try to keep your finances simple. Automate as many routine financial tasks as possible: schedule direct deposits to automate savings, and set up auto-pay on important bills to prevent late payments that could damage your credit. Check your account statements regularly to avoid letting debt creep up or unknown transactions sneak past you.
5. Protect yourself. Most graduate students forget to obtain renter’s insurance. It is inexpensive (usually less than $200 a year), can be shared with a roommate, and covers items both inside and outside of your apartment. Get “replacement cost coverage,” and visually catalog your items with a phone or video camera to have documentation in case of a claim.
6. Remember that stuff happens. Create a three-to-six-month emergency fund to cover the unexpected. Whether facing a large medical bill, an accident, or something else, having a buffer will help keep you afloat without resorting to more expensive options, such as paying with your credit card.
7. Maintain your financial reputation. Good credit can lead to thousands in savings. Conversely, bad credit can cost you thousands. Ensure that you maintain a solid credit rating. On a thirty-year mortgage for $500,000 in New York, dropping from a credit score of 760 to 650 could mean paying more than $110,000 in extra interest and fees.
8. Stagger your credit reports. You are entitled to one free credit report annually from each of the three major credit reporting bureaus (Equifax, Experian, and TransUnion). Spread these out: pull a report every four months so you have more frequent checks on your credit and avoid identity theft. To check your report, go to AnnualCreditReport.com. (Avoid FreeCreditReport.com, as it enrolls you in other services that most people do not need.) Want to check your credit score? Many credit cards and banks offer this service for free. Otherwise, websites such as Credit Karma can give you a good approximation of your credit score—with no strings attached.
9. Take the time to research your options for paying off student loans. Find out whether you qualify for federal income-driven repayment programs, and whether they make sense for you. Here is a good place to start.
10. Recognize that money is a means to an end, not an end in itself. Do not forget about the journey, and buy experiences that make you happy!