Financial Health

Financial Health Click to launch module

Module Transcript

If you've ever tried to get in shape, you know that there's no magic formula for exercising and eating right. But it can be harder than it sounds. You need the discipline to put your knowledge to work in the real world – even when it would be so easy to grab a supersized burger and skip that trip to the gym.

Becoming a financially healthy student is not so different. There are just a few things to know, but mastering your own behavior can be the greatest challenge.

Being financially healthy means being free of crushing debts, especially from high interest credit card debt, while planning for the future. Imagine having to get an extra part-time job just to make the minimum payments on your credit card - it happens all too often to college students.

So how do you become financially healthy?

• First of all, create a realistic budget. As we'll learn in a few minutes, a budget is simply a spending and savings plan you follow that's based on your personal financial situation.

• Next you'll want to minimize your total debt, especially high interest credit card debt.

• Finally, don't forget about the future, keeping in mind that your current behavior will affect how much money you have in the years to come.

Spending Money is Easy...

We mentioned before that getting in good financial shape could be a challenge. And this is not true just for college students - Americans are going deeper and deeper into debt. In fact, the credit card debt of the average family has doubled in the last few years alone.

Excessive debt can happen for a variety of reasons, from unexpected medical bills to the loss of a job. But a major source of debt is simple lack of planning - most people make uninformed and potentially wasteful spending decisions all the time. In fact, marketers spend billions of dollars per year to convince us to part with our hard-earned money through television ads, catalog mailings, and a host of other strategies. And many students also feel peer pressure to keep up with the spending habits of their friends. For a student supported by their parents, a daily latte at Starbucks has no consequences whatsoever. For others, that habit could result in an extra $5,110 of debt over four years.

Common Financial Problems

And when the desire to buy presents itself, it's never been easier to put your purchase on a credit card - from a pack of chewing gum to a plasma television - regardless of your ability to really afford it. And if you don't already have a card, credit card solicitations are perhaps the most prominent thing you'll notice on many college campuses these days.

Here are some common problems we all face in our financial life:

	Overspending - As we mentioned before, spending decisions can add up in ways you wouldn't expect. Even small purchases can add thousands to your total college debt.
	Buying on Credit - Not only does buying on credit cost you extra money in interest and fees, but credit encourages you to spend more money than you really have.
	Peer pressure - Keeping up with your friends can be a source of trouble depending on your financial situation.
	Procrastination - Waiting until after college to take control of your finances could cost you thousands of dollars.

Before we continue, let's take a moment to think about your own long term financial goals and the potential obstacles you may face in realizing them.