Guest Post by Steven Smith

Most common financial mistakes for many students are caused by inexperience and the lack of understanding of basic financial principles. Combine that with large student loans, and you have a disaster waiting to happen.

Pausing and taking a look at these four simple questions will help you prepare, plan, gain understanding and protect yourself from a possible financial fiasco.

Money

Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Am I ready to discipline my habits and live within my means?

This question will help you determine and set the financial boundaries you’ll have to set in order not to overspend. Once boundaries are set and you have a spending plan that outlines how every dollar of your income should be allocated, you’ll be able to live within your means and protect yourself from accumulating debt.

There are great FREE online apps, such as Mvelopes, to make this process easy and fun. Mobile-friendly apps with frequent reminders and warnings will let you stay on top of every penny spent or overspent. Having a written plan is just the beginning. In order for the plan to work, you need to measure the plan against real results. Check your online budget every day in order to make sure that the budget categories and the funds available in the bank account are aligned.

Do I have enough saved up?

Thinking though savings will allow you to prepare for unexpected life events. It will also help you set short and long-term saving goals. Savings is one sure way to break the debt cycle and to create financial margin in life. Do a little pre-planning. Think about your personal worst-case financial scenario, whether it is losing your current job, being forced to cut your hours or needing to urgently purchase a plane ticket across the country to visit a parent.

Be sure to have enough “back-up” money in your savings account to cover that emergency. Knowing your personal worst-case financial situation and thinking ahead about how you will react can ultimately save a headache, or even financial debt, down the road.

Do I know how much this will REALLY cost?

Understanding the true cost of our purchases and taking the time to “do the math,” will help you develop smart buying habits. Do you know how much you’ll end up paying for the item you just purchased with credit?  Do you understand how interest really works?

Making informed buying decisions will save you money and heartache in the long run. Consider using a budgeting tool to track what you are spending now so you’ll know how much money you have to spend on rent, food and utilities once you move out. Don’t forget to ask around, too. Your parents and others in your life should answer cost questions honestly, so you can grasp what it takes to live on your own.

Can I say NO to my wants?

This is a great question to ponder and a great habit to develop. The ability to delay gratification, developing the emotional “guts” to say NO, will give you a great financial upper hand in life. It will give you the financial freedom and financial options later on in life while those who fail to develop this habit will most likely live from paycheck-to-paycheck, stressed over debt and over their financial future.

Unless you plan to live in your parents’ basement, eating your parents’ food and living off of your parents’ income for the rest of your life, finances should be your top priority. Why? Because everything you’ll do in life from now on will be impacted, one way or the other, by your financial habits and your financial decisions. Your financial decisions will impact your health, your relationships, your ability to find a job (did you know that most employers will run a credit report before hiring you?) and your financial future.

I would encourage you to look at both equations of your finances: the income side and the expenditure side. Work on developing a solid work ethic and on honing your gifts and talents, which will, in turn, allow you to grow professionally and to generate secondary sources of income.

Educate yourself about credit; make sure you build a good credit history. Commit to living within your means, resist the social pressures to keep up with the latest and greatest, be diligent in saving and if you have debt, create a debt repayment plan and commit to live debt-free. If you do this, you will build a solid foundation for a lifetime!

Steven Smith is Finicity’s Chairman and Chief Executive Officer, as well as, the Author of Money for Life: Successful Money Managementand Financial Fitness in Just 12 Weeks! and the Money for Life Success Planner: A 12-Week Companion to Achieve Financial Fitness. He has strong strategic and tactical business skills and combines them with a passion to develop products and services that make a positive difference in people’s lives.

Prior to co-founding Finicity™, Steve served as a senior member of the executive team at Megahertz Corporation, the world’s leading supplier of data communication products for mobile computers. At the close of his nine-year tenure, Megahertz had more than 1,200 employees and claimed more than 50 percent of the North American PC Card market. Most recently, Steve led the acquisition and management of an industrial engineering and manufacturing firm with offices in Canada, Europe and the United States. Under his direction, the company became a leading supplier of critical service control equipment for chemical and petrochemical plants.

Steve holds a Bachelor of Science degree in Finance from the University of Utah.

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