Why should I build an emergency fund?

It’s easy to spend all the money in your budget (even if you don’t have one), but what happens when you have an expense you can’t anticipate? Whether you have a flat tire or need to make a surprise purchase, having an emergency fund can be a financial lifesaver.

Of course, some emergencies don’t impact the amount of money that you spend, but the amount that you earn. A common issue people face is losing their job. Suddenly, you have little or no income, but your fixed expenses stay the same. Any surprise that causes you to spend more money than you earn is an emergency.

So, what is an emergency fund? Simply put, an emergency fund is an amount of money that you set aside to cover expenses that you can’t anticipate. Generally, an emergency fund is kept in a bank account to accumulate interest until it is needed, as well as to ensure that the money is safe, both from being lost and from accidentally being spent. The best part is that starting an emergency account is easy!

  1. Know your Needs and Wants: The first step is knowing how much money you would need if an emergency occurred. If you lost your job, how much would you need to live your life for a month? Two months? Also, be realistic about your needs. You might be able to cut back on your trips to the movies if money is tight, but it’s unlikely that you can instantly move to pay lower rent.
  2. Know How Long to Prepare For: Do you feel safe having one month of expenses on reserve, or do you need more? After the Great Recession, many people agree that you need between three to six months of expenses to be completely safe.
  3. Get Started: This is the hardest part. Start with small goals and add to it over time. If you can only start with a few dollars a week, it will grow over time and be a lifesaver when you need it!

Written by Collin Smith, Financial Wellness for College Students Peer Educator, University of Illinois Extension, 2017.

Reviewed by Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension.

What are some ways to reduce spending in college?

The first way to reduce expenses is to avoid making impulse purchases when shopping. People can be subject to impulse buying when they are upset, feel pressure from their peers, or even when an item is on sale. Before making a purchase, ask yourself if the item is something you need, if it will last for a significant amount of time, and if this item will off set your financial goals or budget. If the answer to these questions is anything that will make the item not worth purchasing, then don’t.

Another tip to help reduce spending is to keep track of your expenses with an app on your phone. Often times, mainly in college, we are too busy to write down a list of everything we have spent and this can make it very hard to manage our money. An app can make it very easy to track income and expenses to make sure you are living within your means. If you see that you are reaching your spending limit for the week or month, re-evaluate your budget to fit your needs.

The last spending tip is to take advantage of what your college campus has to offer. Instead of going out to bars and spending an excessive amount of money, spend time with friends in an apartment or dorm. Go to your campus gym instead of paying for a membership at a gym in town. Many stores and restaurants offer student discounts, so make sure to take advantage of your status as a student in regards to saving money. A great tool to reference that offers even more saving tips is the 55 Ways to Save Money handout that can be found by clicking on this link! http://web.extension.illinois.edu/cfiv/fwcollege/5402.html

Written by Jessica Rosenberg, Financial Wellness for College Students Peer Educator, University of Illinois Extension, 2017.

Reviewed by Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension.

How do I lower my weekly food costs?

If you’re struggling to keep your personal food costs down, there are several ways to cut your spending while still getting the most bang for your buck.  A good way to start reducing your own personal food costs is to first track your spending on food for a period of time—week, month, etc.—and see the amount of food you spend.  Ask yourself a few questions such as how much you spend on at-home cooking and eating out?  What do you spend more on?  Do you find yourself in need of eating out more or eating at home?  Once you figure out your personal expenses and answer these questions, you can start to sort out way to minimize them.

There are quite a few ways you can cut your costs on food such as:

  • Going out to eat less. According to The Huffington Post, the third largest way students waste their money is by eating out too much. If you cut back on your expenditures while you eat out or become more aware of the prices of food you are eating that is a large point of spending for many people.
  • Cooking with a friend. If you are eating meals with more than one person it is typically more economical to cook food, reducing the cost per head for food.  If you live with roommates, shop together and buy certain items together that you know you would not finish on your own which can also reduce food waste.
  • Utilizing sales and coupons. Saving a few cents on several items can quickly add up and give you more money to spend elsewhere.
  • Buying staple items in bulk. Many non-perishables can be bought in bulk at cheaper prices thus reducing your average costs on them and resulting in you visiting the store less often.
  • Shopping at cheaper retailers. This can give you the opportunity to buy most traditional items for a cheaper price.
  • Freezing fresh produce. This can extend how long fresh produce lasts and can reduce food waste in general.

If you take small steps in your day-to-day life it is very possible to reduce your food costs resulting in an overall reduction in your expenses.  Good luck!

Written by Libby Cocagne, Financial Wellness for College Students Peer Educator, University of Illinois Extension.

Reviewed by Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension.

How can I successfully achieve my goals?

Creating a savings goal is commonly confused with creating a dream. For example, when people are asked to create a savings goal for a vacation trip or a car, their response is “I want to go to [location]” and “I want to have a [car model]”. This only represents what the individuals want (a dream) without creating a reasonable process (savings goal) to achieve this end product.

That being said, we peer educators at the Financial Wellness for College Students program advocate S.M.A.R.T. Goals. When creating a savings goal, it is important that you incorporate all five of these components: Specific, Measurable, Agreed Upon, Realistic, and Timely.

Specific: Make your goal well defined so that it can be clear to anyone who has a basic knowledge of your project.

Measurable: Create an easy way to keep track of your goals that allow it to be motivational to achieve.

Agreed Upon: In cases when your goal involves others, collaborate and make sure that everyone acknowledges the goal.

Realistic: This allows your goal to be results-oriented and a reasonable-seeming accomplishment.

Timely: Create a timeline when this goal will be achieved. Being able to track your progress encourages you to continue and see that the effort is effective.

Download a handy form to write your own S.M.A.R.T. goals.

Written by: Rex Wang, Financial Wellness Peer Educator, University of Illinois Extension, 2017.

Reviewed by: Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension, 2017.

What is a discount broker?

A discount broker is somebody (typically a stock broker or brokerage firm) that charges a small fee on orders they carry out for you. An order is the process of submitting a request to buy or sell a stock. Below are the main pros and cons of a discount broker.

Pros

  • Small fee (typically less than $10 per transaction)
  • Simple

Cons

  • No additional services

As you can see, the disadvantage to a discount broker is that the only thing they do is carry out the order for you. On top of carrying out the order, a full-service broker offers investment advice, retirement planning, tax tips and more for their clients. But remember, those extra services come at a price. Depending on your needs, it may be in your best interest to consider a discount broker. They are simple and relatively inexpensive. Just be sure to research your investment choice!

 

Written by: JT Donahue, Financial Wellness Peer Educator, University of Illinois Extension, 2017

Reviewed by: Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension, 2017