How can one save on college expenses?

College students know firsthand how brutally hard school can be. With so many deadlines and exams to cloud the mind, many students may find it challenging to manage their spending habits. Keeping track of expenses while in school can be overwhelming; however, there are easy ways to track and reduce those unnecessary expenses.

The first thing that you can do to reduce spending would be to create a budget. Budgeting is a great way to reduce spending because it allows you to allocate money to fund various expenses each week. For example, if your goal is to spend $100 per month on groceries, then with the help of a budget, you can track how much you spend weekly on groceries. With this intact, a budget can determine if you need reevaluate the allocation to an expense.

An additional way to save on expenses would be to determine your needs versus your wants. It’s easy to go out and spend $5 on a cup of coffee; however, think about, if you saw a five-dollar bill on the sidewalk would you pick it up? While it may be a weird question to ask, purchasing an unneeded item adds up and after a while, becomes very expensive. If you determine your needs and stick to them, to a certain extent, you may find that you are able to save much more money in the long haul.

For more additional information of budgeting and other ways to save, visit  http://web.extension.illinois.edu/cfiv/fwcollege/5402.html for financial tools related to saving money.

 

Written by: Nicholas Marolda, Financial Wellness Peer Educator, University of Illinois Extension, Spring 2018

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

When do I need to save for retirement?

Retirement seems a long way away for many of us. In fact, many people reading this may still be in school preparing for their first full time job. The average retirement age in the United States is 62. The average life expectancy in the United States is 79. Generally speaking, you will need enough saved to support yourself for around 17 years in retirement. This may not seem like a difficult task, but with the changes in technology and medicine, it is not absurd to think that we could live to well into our 80’s and 90’s. Having enough money saved to support yourself for over 30 years now seems like a daunting and scary task!

Many plan to travel and live a comfortable lifestyle once they retire. The truth is you must allocate your funds effectively for years in order to achieve this. You must plan for all the unwanted expenses, such as medical expenses, that will occur as you age. Many people forget that your expenses will increase during the later years of your life. You will be more likely to get ill, which could cause thousands of dollars in medical bills. You may need to live in an assisted living home towards the end of your life. The average stay in an assisted living home in slightly over two years! This can easily add up to over $100,000 as the average cost of assisted living per month, in Illinois, is $4,050. According to AARP, they project that the average 65 year old couple will occur $240,000 of medical expenses in retirement. If you do not think about what can go wrong right now, you are putting yourself at a major disadvantage.

The short answer to our main question is as SOON AS POSSIBLE. The earlier you fund your retirement and other savings accounts, the more your money will grow. As you can see, the earlier you put your money away, the more you will see the beauty of compound interest. Investing in retirement at a young age will give you a huge advantage, which you will realize later in life. If you start saving for your retirement regularly in your early 20’s, you will be able to accumulate a solid foundation for the future. Saving a few hundred dollars a month and putting it in a retirement account may seem unnecessary to a 20 year old, but you will thank yourself when you begin to think about retirement. It is never too late to save for retirement; someone in their 30’s or 40’s could retire in their 60’s if they fund it efficiently and effectively. One thing is for certain, they will need to increase their average contribution compared to someone in their 20’s, as they will not be able to fully take advantage of compound interest.

To conclude, in order to plan for retirement you must start saving early and often. You will also need to think about unwanted or possible future expenses such as assisted living. Keep in mind the quality of lifestyle you want when you retire. Do you want to buy a new home and travel the world? Or are you content downsizing and living a simpler lifestyle? Hopefully after reading this you are more aware of how to save for retirement and why it is so important.

Written by: Kevin Kawarski, Financial Wellness Peer Educator, University of Illinois Extension, Spring 2018

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

As a recent graduate, how do I determine how much of my income to allocate to emergency savings?

Approaching this question first requires you to determine your critical expenses. Everyone’s critical expenses are subject to variability, but some broad categories would include housing, food, health care, utilities, transportation, and any debt you may have. You should not include anything you’d cut from your budget in the event of job loss or major catastrophe. For example, entertainment, dining out, nonessential shopping, vacations, and saving for a second home are not expenses that are critical to your welfare in the short-run.

Once you have determined the total cost of your critical expenses, experts believe you should have enough money in your emergency fund to cover at least 3 to 6 months’ worth of living expenses. In the first few months of your career, the percentage of your income allocated to savings will be high because you will be building your initial emergency fund. Furthermore, it is important to reevaluate your list of critical expenses at least once a year, or after new major life events such as buying a house or having children as your situation may change.

3 to 6 months is a good rule of thumb but sometimes it’s not enough. For instance, during a recession where unemployment rates are higher, and the length of unemployment is often longer, you might want to think about expanding your emergency savings if you’re in a high-risk industry where layoffs are common.

Lastly, always remember something is better than nothing! If you don’t think you can save enough now, don’t panic! You can build up to it by stashing away smaller amounts on a regular basis. The important thing is that you’ve started saving something.

Written by Matt DeLeon, Financial Wellness Peer Educator, University of Illinois Extension, 2017.

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

How can I prepare my apartment for winter break?

Winter break is here again, and most college students couldn’t be more excited! Some much needed rest and relaxation await as soon as that last final is done, and many are headed back home for well-deserved time with family and friends. While a 3-4 week break sounds great when you’ve been working hard all semester, don’t get too wrapped up in the excitement and then forget to prep your apartment before you leave. Apart from packing clothes to bring with you, there are a few other things you may want to get done before you leave to save money and avoid the potential for headaches when you return for the new semester.

  1. Leave your heat on at least 65 degrees so your water pipes don’t freeze. You may also want to leave sink cabinets open so that some heat can circulate. Nobody wants to come home to inches of water in their apartment.
  2. Make sure all doors and windows are locked. Don’t make it easy for someone to get their hands on your stuff while you’re gone!
  3. Take your valuables with you, just to be sure, if the locked windows and doors don’t deter intruders. The last thing you need is to buy a new laptop for the new semester because yours “went missing” over break.
  4. Clean out your fridge and take out all trash. You don’t want a stinky mess when you come back from break!
  5. Unplug appliances like televisions, microwaves, toasters, and other items that draw energy even when not in use in order to save some on your electricity bill. No need to pay for it when you’re not there!
  6. Be sure to turn off (even unplug) those pretty holiday decorations! While they were pretty while you were at your apartment, there’s no need to waste the electricity and leave a potential fire hazard on when you’re gone.
  7. Pay rent for January! Just because you’re not there doesn’t mean you don’t have to pay. Either pay it before you leave or give yourself a reminder so it doesn’t get overlooked in all your relaxing time. Save some money by avoiding late fees.

Written by Brooke Shrewsbury, Consumer Economics Program Coordinator, University of Illinois Extension, 2018.

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

What is the Time Value of Money (TVM) and how does it impact my investment?

The Time Value of Money (TVM) refers to situations involving the exchange of something of value (money) at separate points in time. Basically all investments relate back to the exchange of money at a certain point in time for the rights to the future capital associated with that investment. In very simple terms, the TVM proves the idea that a dollar today is worth more than that same dollar amount tomorrow; it shows the impact that time has on money.

For example:

Say you are considering putting $10,000 dollars into a savings account today that would earn 3% interest.

  • In 1 year that $10,000 dollars would be worth $10,300.00
  • In 5 years that $10,000 dollars would be worth $11,592.74
  • In 10 years that $10,000 dollars would be worth $13,439.16
  • In 20 years that $10,000 dollars would be worth $18,061.11

As you can see above, because interest (earned in one year) continues to earn interest (later years), your original investment grows by just letting the TVM work its course. This is a very basic example, but it shows the importance of the TVM and how it can impact your investment.

So remember, take advantage of time! The more you invest now, the more that investment will grow in the future.

If you would like to see more real life examples schedule a “Steps Toward Investing” workshop with the Financial Wellness Peer Educators where we can talk more about the effects the TVM can have on a portfolio or retirement account. You can also schedule a one-on-one appointment with a peer educator by emailing financial.wellnessuie@gmail.com.

Written by Brandon Wyeth, Financial Wellness Peer Educator, University of Illinois Extension, 2017.

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