Budget, wise decisions key to students' financial success

Alliance Credit Union has a branch in the student union building. / VN file photo by Devonne Mccullough

BY BENJAMIN BLAZEVIC / VN STAFF WRITER

Students learned strategies on how to successfully manage and grow their personal wealth during an online, campus-sponsored Zoom call recently.

“The number one key to financial success is budgeting,” said Jessica McCullen, communications coordinator of Alliance Credit Union, which hosted the Nov. 19 Zoom call. The credit union has a branch on campus, which is managed by Christopher Frost.

McCullen described a budget as “a strategic plan to spend your income in such a way that meets your needs, fulfills your obligations, builds wealth and (allows you to) enjoy your life.”

She explained how to make a monthly budget.

Start by writing down your total income, then list all possible expenses. Prioritize your expenses, subtract your income minus your total expenses (including savings) and that should equal zero, according to McCullen.

“Essentially, every dollar amount that you get in should have a place to go, whether that be towards your rent payment or towards your savings. At the end the monthly budget should equal You should redo a budget every month, she said.

McCullen said that this strategy helped her better manage her income once she realized how much she was spending on fast food after checking her monthly budget.

At the online event, branch manager Christopher Frost covered a section comparing credit and debit cards.

Debit cards are used for spending money from your own checking account while credit cards allow you to borrow money instead of spending your own.

Credit cards can have higher annual fees, according to Frost.

He added that the key is to pay the credit card balance within 30 days, so you don’t have to pay interest.

“There are two types of interest – interest that you pay and interest that you can earn,” said Frost.

There is “simple” interest, which is a fixed percentage of a loan's principal amount.

There is also compound interests, which is interest based on principal plus interest, he said.

Frost also detailed how credit scores are calculated.

“No score is not the same as a low score,” said Frost

Five categories help determined a credit score: payment history (35%), amount owed (30%), length of credit history (15%), credit mix (10%) and new credit (10%).

“The misconception is that ‘Hey, if I’m one day late, I’m going to get a bad mark on my credit report,’ ” said Frost. “That is not the case.”

For anything to be reported to your credit bureau it usually must be 30 days, 60 days or 90 days late.

You can be 29 days late and get a late fee, but it won’t be reported to the credit bureau, according to Frost.

A score of 300-629 points is considered bad credit, 630-689 fair credit, 690-719 good credit and 720-850 great credit.

Frost explained how people build credit.

“You really want to have two to three years of on-time payments and clean history,” said Frost.

The longer you can have a clean history, the better the credit score, he noted.

“One thing to help you with that is to dispute any information that you think is inaccurate on your credit report,” he said. “You also want to use your credit card.”

You don’t want to have a credit card you are not using, according to Frost.

Frost recommended using your credit card for something like gas if you need a way to start building credit.

Furthermore, Frost said a good mix of loans (like credit lines, student loans and auto loans) shows financial institutions that you can pay off different loans and that they can trust you.

He also suggested avoiding store credit cards since they usually have high interest rates compared to non-store credit cards.

Some store credit cards charged hefty fees for being a day late, he added.

One tip for managing debt, according to Frost, is to automatically put 10% of your income into your savings.

Other good ideas include saving for large purchases, planning on what you want to buy and negotiating on how to best pay off a loan.

Frost said students can make an appointment with him online to have their financial questions answered.

The credit union is a not-for-profit entity run by its members.