There’s no denying it – personal finance is not the sexiest category of New Year’s resolution. That’s why most people choose to focus on image goals, like dieting and exercise.
But while improving your health is a worthy goal, few things will impact your future more than getting your financial ducks in a row. In fact, graduating college with a stable financial situation will make it much easier to focus on those other goals. After all, it’s harder to get fit and eat well when you can’t afford a gym membership and healthy food.
Getting your finances in order may sound intimidating, but you don’t have to do it all at once. Just pick one or two of the options listed below and you’ll be on the right track.
1. Improve your credit
The purpose of college is to get prepared for the future. When it comes to your finances, building a strong credit score is one of the best ways to do that.
Think of your credit score as a financial GPA. The higher your score is, the easier it will be to qualify for a loan or to receive a low-interest rate. A better credit score could save you thousands or even tens of thousands less in total interest over the course of a loan.
Having a good credit history will make it easier to be approved for an apartment lease without needing a cosigner. It can also lead to a lower rate on car insurance.
Thankfully, you can start building your credit score in college. Begin regularly checking your credit score at a free site like Credit Karma and sign up for email notifications to see how your score changes over time. Your bank or credit card company may also provide a free credit score.
The best way to improve your credit score is to make all your payments by the due date. Payment history counts for 35% of your credit score and is the biggest single factor.
The next most important factor is the credit utilization ratio, which is how much credit you’re using on a credit card compared to the total credit limit.
If you have a credit card, log on and calculate the utilization ratio by taking the current balance and dividing it by the total credit limit. For example, if the current balance is $200 and the total credit limit is $500, then the credit utilization ratio is 40%.
To build good credit, the ideal credit utilization ratio should be 10% or less. If the ratio exceeds 10%, just pay down part of the balance until the ratio dips below 10%.
If you don’t already have a credit card, you can open a student credit card. Always make your payments on time and keep the utilization ratio at 10% or less. If you follow those two rules consistently, your credit score will increase over time.
2. Track your expenses
There’s a common saying in business: “You can’t manage what you can’t measure.” If you want to manage your personal finances better, you have to start measuring how much you spend compared to how much you earn. This year, set aside time each week to track your purchases and your income.
Looking through your transactions regularly will ensure that you notice instances of fraud or mistakes, like a clothing return that didn’t go through. It will also be easier to spot recurring subscriptions or services that you don’t need anymore – like that Disney+ membership you thought you canceled after “Wandavision” ended.
You can also start a budget with set spending limits on categories like eating out, clothes, and groceries. It can be helpful to use a free app like Mint, which syncs to your bank and credit card accounts. If you’re more old-school, use a spreadsheet or physical notebook.
Budgeting will help you learn how to live within your means, preventing you from running a balance on your credit card and falling into debt. Like any other life skill, budgeting can take months to master. Just be diligent about monitoring your expenses regularly and you’ll get the hang of it soon enough.
3. Find a side hustle
Every college student needs extra cash, and these days there are plenty of ways to make money on the side. Finding a side hustle that works for your schedule and fits your talents is one of the best resolutions you can make.
Avoid delivery and ride-share side hustles like driving for Lyft or delivering for DoorDash. The wear and tear on your car can eat away at your profits and leave you earning less than minimum wage.
Think about what skills you have and how to monetize them. For example, if you’re a graphic designer, you can create designs on sites like Society6 and RedBubble or take on commissions through sites like Fiverr or Upwork. If you love animals, you can offer dog walking and pet sitting services on sites like Rover.
If you were an excellent test taker in high school, you can tutor high school students studying for the SAT or ACT. Many colleges also hire peer tutors, where you tutor fellow students in a subject you’re an expert in.
Look at the jobs available on campus as well, like working at the front desk of a dorm, participating in psychology studies or working at the library. Ask your professors or advisors if they know of any opportunities.
4. Start an emergency fund
One of the basic tenets of personal finance is to always have money tucked away in case of an emergency. When you’re in college, emergencies can include paying a speeding ticket, replacing a broken laptop, or fixing your car. If you can, try to stash at least $100 in a savings account. This amount will cover most basic surprise expenses.
Keep the emergency fund in a savings account and don’t touch the money unless you absolutely need it. It may be tempting, but don’t withdraw the money to upgrade your video game console or pay for a spring break trip. This money should only be used for the “oh crap” moments in your life.
5. Learn about investing
With the proliferation of free fintech apps like Robinhood, investing has gotten easier and easier for college students. But it’s important to learn about the basics of investing before you start buying shares of Tesla or the hottest cryptocurrency tokens.
Start by reading popular books like Erin Lowry’s ”Broke Millennial Takes On Investing: A Beginner’s Guide to Leveling Up Your Money” or Bola Sokunbi’s “Clever Girl Finance: Learn How Investing Works, Grow Your Money.” If you want more bite-sized information, find reputable investing experts to follow on social media like @HerFirst100K, @dumpsterdoggy and @mrsdowjones.
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