Survive and thrive financially

Always pay your bills on time

It's the most important rule in personal finance: Pay on time, every time. You will not only save money on fees, you'll avoid damaging your credit rating. A single late payment can affect your credit history for up to seven years.

70-20-10 Plan

Ideally, your income should be allocated so that you:

  • spend 70 percent on necessities like housing, transportation, food, and clothing;
  • save 20 percent, broken down to 10 percent for your future; 5 percent for emergencies; and 5 percent for vacations;
  • pay no more than 10 percent to cover monthly debt obligations, including student loans, credit card payments, and all your bills (excluding a home mortgage).

Pay yourself first

Start early to invest in your future. The sooner you begin, the better your chances for a secure financial future. When you create your spending plan, remember savings. Don't try to save more than your income can sustain. Paying down debt is just as important and can sometimes be the more prudent choice. Just try to remember that you'll need a nest egg for retirement, or unexpected car repairs, or to join your friends if they suddenly decide to go to Mexico. Having savings can prepare you to handle emergencies and open up opportunities.

Freeze that card

Credit cards make impulse purchases too easy. That item you so desperately want is suddenly on sale but you don't have cash and a credit card seems the best way to save (after all, it is on sale, you rationalize). STOP. If you cannot pay your balance in full by the end of the month, that sale price will no longer be a bargain. You could end up paying the original cost plus much more in finance charges. The way to avoid frivolous purchases you may later regret is to freeze your credit cards in a bowl of water. When you decide you want to purchase something, thaw the card in the refrigerator, which should take a day or two. Use this time to decide if the purchase can wait, or if you must have it now.

Get your credit report

You are entitled to one free credit report every year from each of the three major credit bureaus: Expedia, Experian, and Transunion. You can request all three reports at once or stagger them over a year. Go to annualcreditreport.com to get your free report now. Be sure to have all your account information handy as you will be required to verify your identity. If you want more copies during the year, you will have to pay a fee. The free report does not include your credit score, for which you pay an additional fee (usually $9).

Keep your debt in check

Don't charge up to your credit limit of your credit cards; maxed-out accounts will lower your credit score. Keep your balances below 30 percent of your available credit line. Do not apply for every card offer that comes in the mail. You lower your credit score every time you apply for credit.

Think before you borrow student loans

Before accepting all the financial aid you are offered, do a spending plan to determine how much you actually need. If you use loan money to pay for things like pizza, you will be paying unnecessary interest. Are you willing to pay $100 for a pizza? Determine how much you'll need for each semester and stick closely to your budget. Remember that your starting salary will need to be double your total loan debt upon graduation. That means, if you take out $19,000 in loans, you must start at $38,000 annual salary to afford that level of debt.

Increase income, decrease expenses

The best way to pay down your debt quickly is to increase your income by taking on an additional job, get a better paying job, or reduce deductions from your paychecks. Decreasing expenses is often the better choice and can be done with little pain. Entertainment spending is the easiest to reduce, since so much free entertainment opportunities can be found. Look at utilities and consider living without cable, cell phones, or Internet for a while. Cars are expensive, so see if you can live without one. Find cheaper housing options or get a roommate. Ask creditors for lower interest rates or consolidate your debts under one lower payment. Use your credit card only for emergencies. For items that you really want, set a goal and save until you can pay with cash.

If you can't afford it, just say no

Track your spending habits closely. While it's hard to say 'no' to friends and fun things to do, you have to be realistic about what you can afford. Not all of us can afford to go to Mexico on spring break. You need to know where you stand financially so you're prepared to say no when necessary or to suggest a cheaper trip that you can afford. Get creative and come up with some less expensive alternatives that allow you to enjoy your friends without compromising your priorities.