College Students Avoid Debt and Build Positive Credit at all Costs

college spendingWhen you’re in college, you have different problems and challenges than you had while you were in high school. The freedom of college is both refreshing and scary.
Credit can be a very big hurdle for many college students. You probably have a job, either part-time or just during the summer months. But you probably don’t make much money. Just enough for the essentials: gas, car insurance, movie night, pizza night, clothes.

But you’re starting to hear that you need to build credit so when you do get out of college and land your first real job, you can get a car and a decent place to live.
How do you build credit? And how do you keep it under control once you’ve got it? You’ve heard the horror stories, mostly from your parents, about college kids ruining their credit history by splurging on pizza and lattes, movies every Friday night, and designer clothes.

But you’re different, and you need to build credit. It’s a “right of passage”. And it’s important.

Here are some relatively simple ways to build your credit, and keep it under control while you’re in college.

1) Get a department store credit card, preferably with a small spending limit

Ironically, department store credit cards are a great way to build early credit history, when used properly. They’re considered a revolving credit account so they rank well in your score. But it is imperative that you do not go hog-wild and max it out on clothes, shoes, or holiday gifts for the family. Wait for a sale, use any coupons that came with it (perk!), and buy one or two sensible items that complement your wardrobe. Then pay the bill off when it comes in. Don’t extend the payment over more than two months – period. Then repeat next quarter. Wait for sale; buy good, sensible items; pay your bill and avoid personal loans for bad credit. And one more thing, don’t keep the credit card in your wallet. Keep it locked up safely in your room. Only take it out once a quarter for a sensible purchase to help build your wardrobe and your credit.

2) Get a gas station credit card

Use it once a month for a tank of gas, pay it off the next month. Always. Use cash the rest of the time for your gas. If you get in the habit of putting all your gas on the card every month, and then trying to pay it off when the bill comes in, you may just find that you’ve already spent the money you had set aside for gas on something else when the bill comes in (food, movies, clothes). This is an extremely dangerous habit and should be avoided at all costs – and at all ages. This rule isn’t just for college students.

3) Get a bank credit card

This one can be really small, a $500 spending limit works great. Just like the department store credit card, don’t keep it on you. Repeat: don’t keep it in your wallet! But once a quarter, take it out and use it for your gas tank or a coffee or a movie (notice it’s or, not and). Then pay the bill in full when it comes in. The reason you need a bank credit card is because you may find yourself in need of car repairs, and unless your department store credit card is Sears, you’re out of luck!

One additional note when deciding which bank credit card to apply for, do some homework first and choose one with a $0 annual fee and a low interest rate. Forget about points and rewards for now. That’s just another cycle people find themselves getting into where they use their credit card for everything ‘just to get points’ so they can buy a low-quality mp3 player and pay $19.99 for shipping and handling. You don’t need a rewards card in college. Wait until you get your first job and you’re traveling, that’s where rewards cards win out.

The important thing to remember is that when you’re in college and on a tight budget, you can slowly and carefully build your credit history (obtain credit, use credit sparingly, pay bills on time, every time). One missed payment can mess up your burgeoning credit history – and if no one ever told you this little factoid – having too many credit cards in relation to your current salary hurts your credit score.

So choose wisely. Don’t open a credit account just to get a coupon somewhere. Choose a department and gas station credit card where you think you will shop frequently over the years and will reap the best benefits over time from receiving their coupons and special savings mailers.

Soon enough you’ll be out of college and applying for your first car or home loan and your good credit history will serve you well.

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Why Business and Personal Finances Must be Separated

pie chartThe nature of your business really doesn’t matter when it comes to keeping your personal and professional finances apart. You might have an established enterprise, or you may just be starting out, but whatever the case, you have to keep in mind that keeping your finances together is not a good idea.

A number of people who work from home somehow come up with the idea that it is okay for them to keep both their personal and business finances in one account as that is so much easier. Once again, as a business or company owner, you need to know that whether you have a part time business or a full time one, it is mandatory that you keep separate bank accounts. There are some major pitfalls if you continue to mix up your business and personal finances.

Easy to track

People who have had one account for both their business and personal lives have always regretted it sooner or later. The truth is that with a single account, no matter how closely you monitor it and note down the transactions and what not, you will still not be able to get to know the exact amount that is going into the business or coming out of it for that matter. This is one of the primary reasons why you need to start thinking about separating your accounts.

Saves you from coming under the radar of the IRS

Even if you think you are tracking your account pretty nicely, you need to consider switching because of the IRS. Now even though they do not ask you to keep separate accounts, they do need to know exactly how much you are profiting from the business. Having a different account for business purposes will ensure that your personal money doesn’t end up being thought of as business money. Another thing to add here is that separating accounts becomes all the more necessary if you are incorporated or if you plan to be, because a company is required to pay taxes.

The Image of your company

It might not seem like it if you have just started your business, but you and your company need to have a professional image. The truth is that having a joint account will make it look like you are not running a business at all but that it’s simply a hobby for you which you enjoy. When building up a company or business, you have to make sure that people take you and your work seriously. Having a single account for two very different purposes will not help you in this regard.

Manageable expenses

With a separate bank account for your business, you or anyone else who is handling the expenses will have a much easier time doing it. Dividing these two very different aspects of your life will ensure that you aren’t exceeding on the taxes and are managing things very nicely. Plus, because everything will be on a different account, you will have no difficulty in making transactions as there will be no confusion.

Avoids getting you in trouble

Okay, so let’s say that along the way, while you are successfully running your company, you are suddenly slapped with a law suit. The rule is simple, having separate accounts will keep you safe and will provide you with the legal protection you need. If you have the proof of a company as a separate entity, the law says that the blame goes on the corporation and not on you as a person. On the other hand, if you do not keep two accounts, you will be held responsible for the error that has been committed.

Therefore, as a conclusion, you can say that it is a good idea to keep separate accounts for business and personal matters is because it will be easier to track, you’ll be saved from the IRS, you will maintain a good image of the company and lastly, you will avoid getting into any kind of legal trouble.

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How to Manage & Control Your Finances

financesManaging your finances in these trying times is hard no matter where you live. At first, if you haven’t handled anything like it before, you will probably also be overwhelmed with the things that you have to take care of. Finance is a huge topic and only some of the areas that it covers are: Electricity bills, credit card bills, mortgage payments, loans, travel costs and of course the monthly expense as well. You must remember that although there is a multitude of information online, everything is scattered and going through all of them will be quite hard and impossible. Continue reading

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