Personal financial literacy has become increasingly popular in college and high school, and in response universities across the country are implementing classes (even some required for graduation) to help students with the challenges that come with prudent money management. Dr. Jared Pickens, a CERTIFIED FINANCIAL PLANNER™ professional, is the Director of Personal Financial Planning and an Assistant Professor in the Department of Economics/Finance and teaches ECO 233: The Economics of Personal Finance. This semester he tasked many of his students to work on a project to increase financial literacy at the university.

Budgeting, student loans, and identity theft are just a few of the subjects that students need to understand to create and maintain a solid financial plan. The tips provided in this column can give a student some important information about managing their money. The students’ advice follows below.

BEWARE OF FINANCIAL THIEFS

Protecting personal information is very important as a college student and when entering the workforce. College students tend to forget about the risk associated with identity theft, but luckily, there are a few easy things that can help lower the risk.

One easy way to prevent identity theft is to protect personal information. Do not leave out personal documents, and make sure that they are in a safe place if they are not in use. Even though a big part of college is meeting new people, make sure that personal information is not available for all to see. Even if an individual is not connected to public Wi-Fi, be sure not to get on websites that have sensitive information. When using your debit/credit card, be sure to protect your Personal Identification Number (PIN). Do not be afraid to protect your PIN because it is always better to be safe than sorry. If a person finds themselves changing addresses frequently, one way to avoid scattered junk mail is to keep their addresses up to date. Another way to prevent this is to opt out of junk mail at optoutprescreen.com, which is a secure way to prevent creditors from sending junk mail. Even with mail that people do receive, make sure to shred these documents to protect home addresses because an address is easy to obtain but also easy to protect.

FIVE WAYS TO PROTECT PERSONAL IDENTITY

• If a student changes addresses frequently, one way they can avoid scattered junk mail is to keep addresses up to date.

• An easy to reduce junk mail such as credit card offers is to opt out of that junk mail in the first place at optoutprescreen.com, which is a secure way to prevent lots of creditors from sending junk mail.

• Watch out for skimmer-devices that will collect your credit card information. These are typically found installed at gas pumps by financial thieves.

• When on public Wi-Fi, be sure not to get on websites that have exchanges sensitive information such as banks and credit cards accounts.

• There is no reason to carry your Social Security card so leave it at home in a safe place.

BUDGET LIKE A BOSS

The sweet pursuits of college life: the crunchiness of a chicken strip from Chick-fil-A that comes with the satisfying juiciness of chicken bursting with flavor in each bite, the delight of having a McFlurry after long hours of craving and self-debate at 2 in the morning! These are some of the most cherished and sweet moments of the otherwise hectic college life. But these cost money, and contribute a great deal to our monthly expenses. It is not uncommon for a college student to go broke before the end of nearly every single month. But why does that happen? Why do people go broke? Is it possible for one to save themselves from getting broke over and over?

To begin with, the underlying reason behind financial struggles is the simple fact that expenses tend to be greater than income. Most of these expenses are so minuscule that people barely notice the impact they have cumulatively on our finances at the end of each month. For most people, they do not have a steady source of income. Further, only a very small percentage of college students have jobs. Others are simply reliant on financial support from their parents.

The solution is to keep track of spending and prioritize the different spending categories. A written budget is always better than a mental budget. Students should write down what they plan to spend each month. Also, it is important to keep in mind that students are about to embark on the ultimate and longest-lasting phase of the adult life called the “never ending struggle for financial stability”. Thus, keeping a budget from now on will be a good practice for what inevitably awaits in the future.

Currently there are many free online tools which allow individuals to budget their finances for free, and keeps track of spending. One of the most commonly used free online personal finance tool available is www.mint.com, the online budget tool that started a revolution. This tool can link multiple financial accounts — savings, checking, and credit cards — to Mint. Personal information is automatically updated as it appears in bank accounts. In many cases, categories are automatically assigned based on transactions. Progress tools track the progress toward retirement goals and Mint can be used to create a debt pay-down plan. Visual tools, including graphs and reports, clearly illustrate the user’s situation. Using technology in budgeting is a great way for students to stay on top of their budgets and become more financially responsible.

THE SKINNY ON STUDENT LOANS

Many students will encounter student loans at some point in their college career. Student loans can indeed be a tricky thing, and in this case, what people don’t know may actually hurt them. It is highly important to understand this specific type of debt. Student loans can help a student attend college who otherwise wouldn’t be able to afford to do so. However, this type of debt is one that an individual must repay, and even filing bankruptcy can’t erase student loans because it is protected under U.S. laws. Further, if someone fails to pay back their student loans in full, the government can actually garnish their wages in order to make payments on your debt. As astonishing as that sounds, it is very true.

While there are strict rules about paying back your loans, there is some flexibility. There are many different repayment options for loans to help students starting off with a lower income. Forbearance allows a borrower to delay or reduce one’s monthly payments due to financial difficulties. It is important for a borrower to never just avoid paying their student loans. A simple phone call to a loan servicer can help tremendously. There are some ways a student can help reduce a future financial shortfall related to student loans. Finally, another benefit is that up to $2,500 of interest paid per year during repayment may be used as a tax deduction to help lower a borrower’s tax liability.

The most important concept that a student should understand is to only borrow what they need. Student loans should pay primarily for tuition and fees. While this type of financial aid can be used on room and board, it is recommending to use saved money or work part time. Students should also look at their anticipated earnings for their respective degree. The state of Texas suggests that a student shouldn’t borrow more than 60% of their first year wages. For example, if a student is expected to earn $40,000 per year, then the maximum balance upon graduation should be no more than $24,000. This ratio is part of the new 60×30 plan promoted by the state of Texas which hopes to see 60% of the state population to have two- or four-year degrees by 2030. This is just a rule of thumb when planning for borrowing and each student’s situation may vary.

Identity theft, student loans, and budgeting are just a few of the important parts of a solid financial plan. If a student would like to learn more about personal finance, Dr. Pickens offers multiple sections of face to face and online sections of ECO 233.