Student with a summer job? How to optimize your earnings
Summer is finally here, and with warm weather and long days comes the opportunity for summer jobs. Whether a student decides to work as an intern, lifeguard at the local pool or fill countless other positions, they all look forward to paychecks. For many young people, money in their pockets offers some degree of independence.
While financial responsibility may not be the first idea that comes to mind, earnings from a summer job provide an excellent opportunity to begin developing smart financial skills.
Regardless of the job, here are some simple tips for getting the most out of a summer paycheck.
Track your spending
When it comes to effectively managing your money, the first step is to know where it goes. With a bevy of budgeting apps easily accessible on your smartphone, it’s easier than ever to start understanding and managing cash flow. By tracking your spending, you can identify areas of overspending and create a realistic budget.
Build your credit
You may have heard about the importance of establishing and maintaining credit, but what is the significance of a good credit score? Three major bureaus compile information on the borrowing and repayment habits of individuals and develop corresponding scores that provide guidance to lenders determining if, and under what terms, they might loan money to prospective borrowers. As we previously noted in this space, if you consistently pay your obligations as scheduled, your credit score will climb higher. Conversely, if you miss payments or default on loans, your score will drop. Your credit rating can affect your ability to qualify for a loan when you want to buy a car or home, and it can also affect how much you’ll pay for those loans.
Poor credit management could even hurt your prospects of landing a job. Credit Karma notes that while employers don’t have access to credit scores, they can and do acquire general information from credit bureaus to determine if job applicants are responsible.
Before worrying that you won’t be able to buy a home or get a job after college, know that, according to U.S. News & World Report, college is the best time to start building credit. The easiest way is by getting a credit card or by asking your parents to add you as an authorized user on their account(s). Department store or student credit cards are both good first options.
With your summer paycheck in hand, now is a perfect time to use your credit card . . . but plan on using it sparingly and paying bills on time. If possible, pay the balance in full each month to avoid interest charges; otherwise, pay more than the minimum required in order to reduce interest charges. Paying on time and in full will help build credit, increase your score and demonstrate that you are fiscally responsible.
Start planning for tomorrow, today
While it’s tempting to spend your summer earnings on fun activities and impulse buys, setting saving goals will help stretch your income. According to CNBC, the sooner you begin building a rainy day fund, the better. When unforeseen expenses arise, you’ll be thankful for savings and will be working toward a brighter overall financial future.
The younger you are when you start saving, the earlier in life you’ll have a nice nest-egg built up. Your “golden years” may seem so far in the future that they’re not worth worrying about today, but money expert and syndicated radio talk show host Dave Ramsey demonstrates why you should think differently.
The longer you delay saving, the less you will have when the time comes that you want to retire and enjoy the fruits of your life’s labor. Start today by setting aside a portion of your summer pay and step it up when you’re out of school and in the full-time workforce.