“Adulting 101” is a series of six blogs to help make your transition from college to the real world a little easier! So far we’ve covered job and apartment searches, eating right, health care, and taking care of your car. In this last installment, we're breaking down taxes, credit scores, bank statements, and everything else to keep track of your personal finances.
Personal finance: the one thing we all might have paid attention to in high school because, unlike the powerhouse of the cell, there’s a very concrete answer to "when will we use this in real life?" (deepest apologies to all high school science teachers). If you were lucky enough to have a personal finance class in high school or college, you may know the basics of banking, budgeting, and paying bills—but not everyone was so lucky.
The most fundamental part of managing your finances is your budget. This is where you write down all the money that goes in or out of your possession. You can create a spreadsheet or a fancy chart in your bullet journal, or simply write out several columns on a plain sheet of paper.
In essence, you'll put down all your sources of income (like paychecks from a job) on one side and everything you spend money on on the other. These expenses might include rent, utilities, groceries, gas, subscriptions, insurance, money to put in your savings account, and a little set aside to have fun. Sum up how much each of these sides is in a usual month or week and compare. If you have more money going out than coming in, you'll have to cut back somewhere, and if you have some extra money left over after your expenses, you might be able to put more money into your savings or another category.
If your expenses and income aren’t so regular, you might benefit from simply tracking what money does go in and out after the fact so you have an idea of where your money is or should be going. The most important thing to remember if you're on a tight budget is to be realistic and stick to it.
Related: 8 Ways to Save Better as a Student
Balancing a checkbook
If you're like me, you heard this phrase a lot growing up but had no idea what it meant. But it's not as scary as it sounds! It's a bit like budgeting: if you have a checking account, you'll want to balance your checkbook at the end of each month when your statement comes in.
After each time you write a check or use your debit card (or take money out of or put money into your checking account in any other way), you'll write it down in your checkbook, a little book you can keep in your wallet that has spaces for what the expense was, how much it was for, whether it went into or out of the account, and how much is left in your account.
Your bank will usually send you a statement once a month, which is their record of what went in and out of your account. Balancing your checkbook is simply comparing your record with theirs and making sure everything matches.
Writing a check
Speaking of checking accounts, you'll also need to know the basics of writing a check, should you ever use them. The date goes in the top right corner; the name of the person or business you're writing the check to goes in the top line in the center; the amount, written out in words (e.g., One hundred dollars), goes right below that; the amount, written numerically ($100.00), goes to the right of the written-out amount; and you sign the check in the bottom righthand corner. If you want to, you can write what the check is for on the line in the bottom left.
In addition to a checking account and debit card, you may also spend money using a credit card. There are several benefits to having a credit card but also some serious drawbacks to consider before getting one.
Credit cards can be more secure than debit cards. If your debit card information is stolen, the thief has access to your bank account and all the money in it, and charges can be difficult to dispute. But with a credit card, charges that you know you didn't make are much more easily disputable, so you're more easily protected.
Having a credit card can also help you build credit, which you'll need if you want to apply for a loan or a mortgage in the future. You can build good credit by using a credit card to make a couple purchases each month that you know you already have the money for and paying it off entirely at the end of the month.
This is where the drawbacks come in. If you use a credit card but don't pay it off, you can rack up interest, which means you're paying more money on the bill than you originally spent. There are lots of different options when it comes to credit cards, so be sure to look for low interest rates, no annual fees, and if they're offered, points or perks that sound appealing to you.
Related: Examining Your Financial Health
We saved the best for last: taxes. Everyone dreads taxes, but you have to file them anyway. In most circumstances, federal, state, and local income taxes will be taken out of your income throughout the year. When it's time to do your taxes, your employer will send you a W-2, which states how much you made in that year and what taxes were withheld.
“Doing your taxes” is taking that information, putting it on a different form, and sending it to the government. Filling out this form will tell you if too much money in taxes was taken out of your income and the government owes you some of it back—or if not enough money was taken out and you owe money to the government. You usually have to file two forms, one for the federal government and one for your state. If you need specific help, there are tools online from the IRS and sites like H&R Block and TurboTax.
Managing your money can be a pain, but it's a necessary one. Once you have your finances in order, you'll have some peace of mind with your money and can face adulting head on.
That’s it for our “Adulting 101” series! For more advice on how to survive in college and after, check out our Student Life section.