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In the fifth episode of The College Student's Guide To Money, Chelsea covers all the basics of building credit: why credit matters, what your credit score actually is, and how to use credit responsibly and maintain a budget-friendly lifestyle.

What is credit: https://www.equifax.com/personal/education/credit/score/what-is-a-credit-score/

Spending on convenience: https://www.finder.com/cost-of-convenience

How to find a budget-friendly routine: https://www.psychologytoday.com/us/blog/the-gen-y-psy/201810/the-power-routines-in-your-mental-health

Changing your habits: https://learningcenter.unc.edu/tips-and-tools/changing-habits/

SMART goals: http://geekgirlstrong.com/about-robyn, https://www.ucop.edu/local-human-resources/_files/performance-appraisal/How%20to%20write%20SMART%20Goals%20v2.pdf

Home cooking resources: https://thefinancialdiet.com/3-cheap-easy-weeknight-recipes-that-are-even-better-as-leftovers/
https://www.moneycrashers.com/cooking-college-students-easy-recipes-dorm/
https://thefinancialdiet.com/17-delicious-snacks-you-can-find-at-whole-foods-for-under-3/

Cost per use: https://www.forbes.com/sites/nancyanderson/2019/05/31/how-not-to-waste-money-use-the-cost-per-use-formula/#345f340b4cb9

Sustainable shopping: https://www.mckinsey.com/business-functions/sustainability/our-insights/style-thats-sustainable-a-new-fast-fashion-formula

Building a wardrobe: https://thefinancialdiet.com/how-to-build-a-wardrobe-from-scratch/

Splitting expenses with roommates: https://www.forbes.com/sites/trulia/2016/11/08/how-renters-with-roommates-should-divvy-up-expenses/#216e911ece74
https://www.collegexpress.com/articles-and-advice/student-life/articles/living-campus/how-make-your-own-college-roommate-agreement/



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Next up in getting good with money as a college student is going to be making your life budget friendly.

If you feel like it's very difficult to manage the flow of money in your life and make it something affordable, you are definitely not alone. And especially in college, when you're budgeting school and oftentimes work, a busy social life, tons of different obligations all coming down at you at once, it can feel very easy to start justifying little purchases here and there, often on the borrowed money of student loans, in order to make your life seem more doable-- things like Ubers, a quick bite to out eat, a coffee on the way to class, et cetera.

In college or not, it's often easy to just default to the most convenient and accessible purchase, even if it's not the financially smartest one. According to a Finder.com survey, 74% of American adults spend about $4,000 per year on these conveniences like ride shares, food deliveries, cleaners, pet sitters, and subscription boxes. You may also be surrounded by other people who make similar decisions financially, or even more frivolous ones, and often pressure you into doing the same, knowingly or not.

Learning to establish a budget-friendly routine and getting the tools to stick with it is key to a financially healthy future, as well as good mental health. First, you have to know how to setup a healthy living situation. Having a healthy routine that works for you can help you save money and feel more in control.

The Journal of Abnormal Child Psychology found that having a regular routine helped curb impulsive behavior and improve attitude. And that's true for adults, too. Having a plan for the day, week, and month helps prevent decision fatigue, that state where you feel like you cannot make one more decision and decide to take the path of least resistance, which usually costs you money.

Taking a half hour at the start of each week to plan your meals, your exercise times, your study times, and so on helps set you up for success and takes one or more stressors off your shoulders. And it's important, at the beginning, to power through these new habits, because a habit is truly formed when it becomes automatic. You just know to do a certain thing at a certain time, and it doesn't really take much energy, which helps stave off that decision fatigue.

Habits can be hard to stick, though, when you're just starting out. Experts at UNC Chapel Hill use something called a habit loop to explain how this works. The habit loop consists of a cue leading to a behavior or routine, which leads to a reward, which then leads to the cue, and restarts the cycle.

Habits that have immediate rewards, like let's say you get a ding of a notification on your phone, which opens up to a text from a friend you're looking forward to hearing from, that creates an immediate reward. And so you very easily get in the habit of prioritizing looking at your phone. But a lot of the best habits, including things that will save you money in the long run, have a delayed reward.

So it's very difficult to keep to these habits when you're not immediately getting that feedback. So to trick yourself, you have to find ways to make those good long-term habits feel more rewarding in the immediate. So, for example, if you want to start meal prepping to help you save money on food month after month, you can start to dedicate your meal prep time to the time that you allow yourself to watch your favorite TV show or listen to your favorite podcast.

That way, you'll start to look forward to that time, and you will get a quick burst of reward from the act of having done it. In the long term, then, of course, the meal prepping week after week will help you save money on your grocery bill. And speaking of meal prep, one of the biggest life choices that you can make to help you save money over the course of your entire life is to get comfortable in the kitchen.

Knowing how to cook for yourself will mean you can be more creative with what you have on hand, because you can shop according to meal planning and not just according to what you need at any given moment. And will allow you to gain some control over what you're actually eating. You won't constantly be having to default to take out or delivery or going to restaurants or getting premade foods, which will save you tons in both the short and long term.

But if you didn't grow up cooking, it can feel very, very difficult to get started, which is why a few key things are important for everyone to do while they're in college so they can establish control over their cooking and eating habits, which for most of us will represent the biggest section of our budget after things like rent and utilities. Number one, you need to make sure that your kitchen is stocked with a few basic essentials for cooking-- things like basic herbs, oils, sauces, pots, pans, tools. I'll link you guys in the description to a pretty comprehensive list that we've created at TFD that will help you get started in the kitchen and give you enough options for turning most basic ingredients into a pretty serviceable meal in a pinch.

You'll also want to get a good knowledge of the kinds of foods you can make in bigger batches and freeze easily. Some of the obvious ones are things like soups or pasta sauces, but you may not know that things like quiches or frittatas also freeze amazingly and can use almost anything you have on hand that's about to go bad. It's easy to become overly dependent on the meal plan or the campus cafeteria when you're in college, but starting to form those good cooking, meal planning, and big batch prepping habits is one of the best ways to ensure that you will have a lot of control over your discretionary spending all through your adult life.

Plus, not knowing how to cook and bragging about how you store your shoes in your oven is not chic. Beyond cooking, you're going to also want to learn the art of shopping smart. When you buy almost anything in life, from a pair of shoes to a backpack, to a chair, you're going to want to start thinking of it in terms of cost per use.

It's easy when we're on a budget or we don't really know how to pick items to just automatically default to whatever may be the cheapest option. But for many items, this is going to mean a much lower quality item that will have to be replaced or fixed more frequently, which will ultimately result in a higher cost per use. To calculate cost per use, you're simply going to divide the price of the item by the number of times you use it.

A really good pair of shoes, for example, could end up in the pennies per use if you're able to get a ton of great wears out of them. And when it comes to prepping for things like your first office job out of school, investing in a few high-quality staples that you're going to wear again and again-- things like a great blazer that will work for everything from interviews to the big meeting to a work bag that you can use every day and look sharp in-- are going to pay dividends. Now, this doesn't mean you're always going to opt for a very expensive option.

Because in many cases, you may not be able to. But it will get you thinking in a much more productive way with your money. It's very similar to how you'll often assess the cost of something in terms of volume, like a bottle of hand soap that may be cheaper on the label, but when you break it down to how many ounces that bottle has is actually more expensive per ounce than that bigger bottle.

Even if you're not always able to make the highest quality choice, it's important that you start to at least understand your choices and can make more informed decisions about when it's good to invest versus when it's OK to scrimp. And do remember that for some of these bigger ticket items, like, let's say, a really nice winter coat, they are often easily available to buy at thrift stores or outlet stores or factory stores at a fraction of the cost that you might have paid retail. And do keep in mind that between thrift and consignment stores, outlets, and all of those various coupon programs and plug-ins and alerts you can set up for when things are on sale, you should almost never have to buy something at full price anymore.

Apps and browser extensions like RetailMeNot or Honey make sure that you're always getting the best deal at checkout. And planning to buy things when they're off season ensures that you can get the best quality items at the lowest possible price, because stores are trying to clear their shelves for the next season. You should generally be buying your winter coats in March, for example, and your swimsuits in September.

You can also look into various no-buy groups on your campus or in your city, where people are swapping things or giving them away, to make sure that you're always checking whether something might be available for free before deciding to actually pay for it. This is especially true with things like furniture. Of course, you should also learn a few basics of mending things, whether it's sewing back on a button or hemming a skirt if it might be a bit too long but was on a great sale, so that you ensure that you're always able to tweak something to your liking before necessarily opting for a different item or throwing it away.

Almost every item of furniture I have in my house, for example, I've tweaked in some way. Because when it comes to things like a color of an item or the fixtures that it might have, it's so easy to transform an item completely while barely having to lift a finger. And one of the elements that's going to be most helpful in building a budget-friendly life is learning how to utilize credit.

Many college students feel an inherent fear of things like credit cards or the whole credit system, either because they don't have a credit history or they don't really understand what credit is. As I mentioned in the intro video, I ruined my credit when I was young. At 18, I got a credit card.

I maxed it out, and I literally threw it away and never paid the bills. I had a credit score in the high 400s for several years. And even to this day, I'm still fixing some of the damage I did years ago.

So what's important to understand is that using credit in a responsible way can help you live a more budget-friendly life, but using it in a dangerous way can actually really harm you. So it's important to understand, first of all, what a credit score is. And basically, a credit score is a number that allows lenders to assess how likely you are to be responsible with something like a loan or a credit card.

The scores range from 450 to 850, and there are multiple credit reports, which will sometimes differ slightly in the score that they give you, but generally paint a picture of how timely you've been on things like repayments, how long you've had credit history open, and how responsible you've been with your various credits. If you don't build a credit history by not having things like loans that you're repaying or credit cards that you're using responsibly, that can be often just as damaging or hindering as having a bad credit score. Because basically, what it's saying is that they don't really know how you're going to be with lending.

And obviously, many people automatically assume that having a credit card is just going to be an excuse to spend wildly. But if you remember the golden rule of credit cards-- to never treat it as money beyond what you can afford to pay in full at the end of the month-- then you can keep yourself in check and use them to your advantage. I, for example, travel quite frequently, so I use credit cards that are geared toward travel points and miles and rewards.

By using the credit card to cycle through payments of things that I have to be buying anyway, I am able to rack up those points and miles and take advantage of the benefits of money I would otherwise just be spending. Multiple times a year now, I pay for trips entirely on points and miles, which represents a huge savings in the long term. In addition, by being very responsible with my credit cards, I am able to build up that great credit score so I'm credit worthy for things like if I one day need a loan for my business or want to potentially buy a home.

I used my credit score to get approved when my husband and I moved into this apartment that we're renting. If you feel that you might be in danger of going over your budget-friendly lifestyle with your credit card, remember that you can always just set it up to make a few recurring purchases for things that you need and to be paid off in full automatically every month so that you never even have to worry about missing a payment or being late. And then you can just leave the credit card at home.

Some people even freeze them in a block of ice. And when it comes to building your credit score-- which is hugely important for living that budget-friendly life, because you want to have control over your cash flow, and credit will help you do that. While there are multiple factors that count toward a credit score, the three most important to keep in mind are timely payments-- and that means timely, consistent payments on your credit cards or your loans or anything you're having to pay back.

Your credit utilization ratio, which is basically how much credit you have available to you versus how much you're using-- for example, if you have $10,000 as a limit on a credit card, you want to stay under 30% of that, if possible. So spending less than $3,000 a month across your cards. This basically just shows the banks that you're not using as much credit as you possibly can.

And the length of time which your accounts have been open. Having much older accounts and older credit lines will show that you've consistently, over the years, been able to demonstrate this credit worthiness and you're not just bouncing around from card to card. And yes, some of you may have heard that things called a hard check on your credit can have a negative impact.

And that's true if you're doing too many in a short period of time. When you're just checking your credit online with something like Credit Karma, that's not a hard check, because you're not inquiring on your credit for possible lending. You're just checking it.

But when a lender-- like, let's say, a mortgage lender or a credit card lender-- is looking into your credit to see if you're able to qualify for a certain product, that is called a hard check. And doing too many of those in a short period of time shows you as kind of credit shopping, which can have a negative impact on your score. Living a budget-friendly life means a lot of things, but one of the biggest things that it entails is getting control over your various financial decisions.

And credit cards, when used properly, and a good credit score are two of the biggest tools to having total control over the financial decisions you want to be making. Buying a house, for example, if you want to move from renting to buying someday, is going to depend on a pretty good credit score, in most cases. And if you want to start turning some of your monthly spending toward your advantage, like I do with my airline rewards and miles, you're going to need to be able to use credit cards to do so.

A lot of people assume that the most budget-friendly choice is to just avoid credit altogether, but that's actually a very ill-informed opinion. The most budget-friendly choice is to have total control over how you use credit and to always spin it to your advantage. Opting out of the system only hurts you in the long run.

College is, for many of us, the first real taste of financial freedom and having the ability to set our own terms for the lifestyle that we're living. And it's really easy, in so many different ways, to get suckered into a life that costs more than you can afford or more than it should. Learning how to eat well, how to shop well, and how to handle all of those potentially awkward social situations means that you get to regain control over the budget that you're setting for yourself and ensure that the life you're living lines up with the income you're bringing in.

There is no shame in living a budget-friendly lifestyle. In fact, if you ask me, it's rather chic. Don't forget to check out the next episode in our "Guide to Getting Good With Money for College Students." And for all things talking about money, don't forget to check out The Financial Diet here on YouTube or all around the internet.