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Financial Literacy – What is it?

What is financial literacy?  Dave Ramsey, a money management expert, defines financial literacy as “the possession of skills that allow people to make smart decisions with their money”.

The effects of a student’s financial decisions can last a lifetime. As a result, many universities across the country are implementing financial literacy programs on their campuses to provide learning opportunities and resources for students.  UW-Whitewater is no exception, and as a result, the Financial Literacy Center (FLC) opened for students this past April.

The Financial Literacy Center is a financial outreach program, committed to the education of students and the campus community on effective personal money management.  The FLC provides individual financial coaching to any student on campus (free and confidential) and presentations for classes, dorm residents, and student organizations.  Additionally, online learning opportunities are available through our website, Facebook and this blog.

Students are encouraged to become financially literate by visiting the Financial Literacy Center today!

 

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8 Misconceptions About Student Loans

Many students need them, but misconceptions exist surrounding student loans.  To make the best financial decisions, students should be aware of common student loan myths.

  1. Student loan debt is good debt. Potentially, it could be upon graduation and landing a job.  If you leave college prior to receiving a diploma, you are still required to pay back your student loans.
  2. Interest on my student loans does not start to accrue until after I graduate.  This may be true of federal subsidized loans, but this statement does not apply to federal unsubsidized loans and most private loans.  Interest starts to accrue upon receiving the unsubsidized loan; however, the interest does not need to be paid until the student drops below half-time status or after the 6 month grace period after graduation.
  3. My student loans automatically renew each year.  Generally, both federal and private loans are only good for one year.  If loans are needed again, students should reapply each school year.
  4. Since I am going to be a teacher, my students loans will be forgiven.  This statement applies to teachers who meet all the loan forgiveness program requirements.  To qualify, teachers need to have worked full-time for five consecutive years in a designated school or service agency that serves students from low income families.
  5. If I can’t pay my student loans, I can file for bankruptcy.  Only in rare extreme hardship cases will student loans be forgiven due to bankruptcy.  The collateral on student loans is your ability to earn in the future.  For this reason, even upon bankruptcy, you still have the ability to earn and the ability to pay something towards your student debt.
  6. My grades are not high enough to receive student loans.  Federal financial aid programs do not have any initial grade requirements.
  7. My parents have not filed their taxes yet, therefore I cannot complete the FAFSA.  Students can complete the FAFSA application using estimated tax information.  When the parents eventually file their taxes, students can go back and edit the application information.
  8. I am responsible to pay back the student loans my parents took out for me.  Ultimately, if a parent takes out the loan, the parent is responsible for repayment of the loan.

For additional resources on student loans,  visit the UWW Financial LIteracy Center or schedule a free and confidential one-on-one coaching session.  We look forward to working from you!

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Warhawk Emergency Fund

(Source:  Investopedia)

Financial setbacks are a reality of adulthood.  For college students, unexpected financial emergencies could result in the added risk of withdrawal from the University.  UW-Whitewater has an emergency aid program to provide students with monetary aid to help them stay in school and graduate, which ultimately, should lead to a better financial future.

The Warhawk Emergency Fund awards up to $1,000 for eligible expenses such as child care, auto, medical, and food.  Interested students need to complete the online application process.  When approved, the monetary aid is usually available within 2 business days.

The Financial Literacy Center provides financial literacy education and resources to students who receive aid through the Warhawk Emergency Fund.  Students are encouraged to attend a group presentation or schedule an individual coaching session to receive these services.

For additional questions or information, students should contact the Warhawk Emergency Fund  (smithlb@uww.edu) or the Financial Literacy Center (finlit@uww.edu).

 

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Tracking Expenses Doesn’t Have to be Difficult

It’s the end of the month, and you can’t figure out where all your money went.  You should have enough to cover your expenses, but your bank balance is creeping closer and closer to an unacceptable number. Does this sound like a situation you have ever been in?

Keeping track of your spending can provide insight as to where your money goes each month, and it provides information on where changes may be needed in future budgets.  Fearing the results or lack of motivation may be reasons some choose not to track, but finding a method that works best for your lifestyle might make the task a bit easier.

  • Spreadsheet. Set up a spreadsheet register with income and spending categories to record all transactions.  This setup has the ability to total the categories at the end of each month, and it can keep a running tally of credit card balances.
  • Apps.  Enter income and expenses into a phone or tablet app each month.  Convenience is the major advantage to this method, and there are free financial apps, like mint.com, that have the ability to monitor expenses.
  • Pencil  and Paper.  For some, going ‘old school’ is the preferred method.  Each day, write down all income and expenses into a notebook or calendar, being sure to identify categories.  Add up category totals at the end of each month.  Keep pencil and paper readily available in purse, wallet, car, or pocket.
  • Envelope Method. Label  a separate envelope for each of your spending categories. At the beginning of each month, place the budgeted amount of cash into each envelope. Throughout the month, take out the cash for expenses, and return the receipts to the appropriate envelopes. If no receipt for an expense, simply record on a sheet of paper or directly onto the envelope.  Add up receipts at the end of the month for summary totals.
  • Other.  Additional methods include tracking expenses by store (as opposed to spending category), and waiting until the end of the month to label and total categories.

There is no right or wrong way to keep track of your expenses.  Utilize a system that works best for you!  For more information on budgeting or tracking expenses, visit the UWW Financial Literacy Center or schedule a one-on-one coaching session.  We are here to help!

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How is a FICO Credit Score Determined?

FICO CREDIT SCORE BREAKDOWN

When wanting to establish credit or raise your credit score,  a basic understanding of the comprising elements can assist you when making financial decisions.  A higher credit score leads to future benefits including lower interest rates, higher loan limits, and overall approval to credit card and loan applications.

How is a FICO credit score determined?

  1. Payment History (35%).  The most important factor in calculating credit scores is payment history. History is used to forecast future behaviors.  Making consistent and on-time payments to your credit cards and loans is one of the best ways to improve your credit score.
  2. Amounts Owed (30%).  FICO views those who habitually max out their credit cards as people who cannot handle debt responsibly.  Borrowers should maintain low credit card balances, and although there is no exact utilization ratio, many financial experts refer to the ‘30% rule’.  Example – If your credit card limit is $1,000, try not to charge over $300.
  3. Credit Length (15%).  A longer credit history offers more information on financial behavior.  It is impossible for a person who is new to credit to have an excellent score, as it takes time.  Those with credit should maintain their long-standing accounts.
  4. Types of Credit (10%).  A mix of credit (accounts, credit cards, and installment loans) is taken into consideration to determine a credit score.  A borrower with a good mix of credit generally represents less risk for lenders.
  5. New Credit (10%).  Borrowers should avoid opening too many credit lines at the same time, for such financial behavior might suggest financial trouble.  Consumers are encouraged to apply for and open new accounts only when needed.

For more resources and information on credit, visit the UWW Financial Literacy Center.

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What is a Credit Score?

What is a credit score?

A credit score is a three-digit number that calculates the risk a lender takes when you borrow money.  This score is based on your credit report, and is generated by a mathematical algorithm.  The Fair Isaac Corporation (FICO) credit score is used by 90% of lenders (source:  myFICO.com).

Why is your credit score important?

Your credit score is an important piece of your personal finances.  It helps lenders accurately predict your ability to repay a debt on time.  FICO scores range from 300 to 850, and a higher number indicates a lower risk to lenders.

If your credit score is low/poor, it may be difficult to find a financial institution or credit card company to lend you money, and if they do, most likely the interest rate will be unfavorable.  An increasing amount of landlords and potential employers are starting to check credit scores before leasing or hiring, and insurance companies may check credit scores when determining your premium costs.

How can I access my credit report and credit score?

As a consumer, you have access to a free annual credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) using annualcreditreport.com.  Unfortunately, your credit score is not included on your credit report.  To obtain your credit score number, you would need to purchase it from a score provider or one of the major credit bureaus.

For additional information on credit and credit management, students should visit the UWW Financial Literacy Center’s website or schedule a financial coaching session today!

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Subsidized vs. Unsubsidized

When discussing financial aid, commonly used terms include subsidized and unsubsidized, but what is the difference between those two words in regards to student loans?

Direct Subsidized Federal Loans are available to undergraduate students who demonstrate financial need.  The US Department of Education pays the interest on your loan while you are in school (at least half-time status), for the first 6 months (grace period) after you leave school, and during any deferment (postponement) periods.

Direct Unsubsidized Federal Loans are available to undergraduate and graduate students.  Demonstrating financial need is not a requirement.  You are responsible for paying interest during the life of the loan.  While in school, during the grace period, and during deferment or forbearance, you may choose to let your interest accrue, as opposed to making payments. The accrued interest is added to the principal of the loan.

For more information, visit the Federal Student Aid website, the UWW Financial Aid Office, or the UWW Financial Literacy Center.

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Success! 4 Simple Tips for College Budgeting

Starting to budget while in college can result in learning how to manage money and plan for the future.  Here are 4 simple tips to creating and maintaining an effective budget:

  1. Track spending.  Record every penny you spend for at least a month before creating a budget.  Be honest about where you are spending your money, and keep a spending log.
  2. Identify Income and Expenses. Use a budgeting worksheet to document your income, then expenses. Income sources would include student loans,  job earnings, gifts, and more. Expenses should come directly from your spending log, and broken into categories like housing, food, entertaining, etc.
  3. Do the Math.  Calculate income minus expenses.  If you have money left over, consider adding to your savings account or an emergency fund.  If you calculate a shortage, start identifying categories where you can cut back.  This is a good time to question your needs versus wants.
  4. Reexamine and Adjust.  Income and expenses change over time.  Maybe you received an additional scholarship, or your landlord raised the rent.  When changes occur, it’s time to reexamine and adjust your budget to stay on track.

The UWW Financial Literacy Center has many free budgeting resources available to students.  Visit our website, or schedule a financial coaching session today!

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What is the Cost of Attending?

It’s now August, and many families are seeking the total price tag for this upcoming year’s college education.  Here at UW-Whitewater, the Cost of Attending Calculator allows students to select personalized options to obtain an estimated total cost of attending dollar amount.  Variable choices include student status, type of housing requested, meal plan purchase, and parking.  Although just an estimate, this information can be used by families when making financial plans.

 

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What If I Didn’t Get Enough Financial Aid?

Whether you’re starting your last or first year of college, what are your options when financial aid doesn’t stretch far enough?

  • Seek Scholarships.  Apply for additional state, local, and private scholarships.  Use these tools from the NASFAA, the US Department of Labor, and UW-Whitewater to apply for additional gift aid.
  • Appeal Award.  An appeal to the UWW Financial Aid Department is an option; however, your appeal will be more successful if there was an error on your FAFSA application or there has been a change in family circumstances.
  • Part-Time Work.  During the school year and summer, work a job.  Many students work to offset the cost of their education. Be sure to balance your job with your academics.  Check out the UWW Handshake job board for employment opportunities both on campus and around the Whitewater community.
  • Live at home.  If you are within commuting distance, consider saving on room and board fees by living at home.
  • Take Out Student Loans.  Generally, federal student loan interest rates are lower and have more flexible repayment options compared to private student loans.  However, when federal aid isn’t enough, private loans through financial institutions may be obtained.

College is expensive, and paying your bills is a part of the process.  Decide on a plan of action, and follow through.