4 Ways to Negotiate Like a Pro

With the New Year upon us, we tend to start tackling our resolutions in many areas, whether financial, academic or health related. When it comes to managing money while in college, you’ll have a leg up if you consider these five money moves to make in the New Year. From credit cards to savings to student loans, it’s time for a financial checkup.

1. Credit Cards – Get Them to Work For YOU

First on the list is credit cards. College students have too many – 50% of college students have over four credit cards, according to a 2009 Sallie Mae study. Students only need one credit card. Period.

Why? Because the more credit cards you have, the more temptation there is to spend money, which will put you more at risk for getting into debt.

Credit cards should be viewed as a tool to build up a solid credit history and not as a way to finance a fancier lifestyle. This means: using credit card for small purchases under $50 per month – this is a manageable monthly balance to pay off in full each month.

2. Get Serious About Retirement

It sounds crazy to think about retirement while in college, but the earlier you start, the more you’ll end up with later on, thanks to compounding interest (which is simply interest on interest). Consider opening up a Roth IRA, for example, through an online discount brokerage firm or other financial institution. If you save $1,000 per year for the next forty or so years – that’s just over $33 per month – at age 65, you’ll have $250,000 in your Roth IRA (given an average rate of return of 7%). That’s a lot better than spending that money each year on movie tickets!

This is easier said than done. To take action when it comes to retirement, you want to set aside a certain amount of money each month that will be entirely devoted to your Roth IRA – and not clothes or yogurt.

3. Pay Interest on Your Student Loans

Unless you have subsidized direct loans where the government pays the interest while you’re in school, interest will accrue during your college years, as opposed to simply starting to accumulate once you graduate.

If you have student loans, do everything you can to pay the interest on those loans while you’re still in school. This will dramatically reduce the time it’ll take to become debt-free and you’ll save thousands in interest over the life of the loan.

4. Think About Repayment Plans

If you are graduating in May, start thinking about how you’re going to repay those loans. With Federal loans, you’ll be automatically enrolled into a 10-year repayment plan. If that monthly payment is too high, consider switching into the 25-year payment plan, which will result in a lower monthly payment.

But there is a catch – with that lower monthly payment, you’re actually paying more in interest over the life of the loan, compared to the standard plan. So try and stick with the 10-year plan, as it’s the fastest and cheapest repayment option. You also may be eligible for several income-based repayment plans that limit your monthly payments based on your income. Contact your loan servicer to inquire about switching plans.

With private student loans, there are fewer options and it will ultimately be up to the bank and the terms of the loan as to how your repayment plan will be structured.

5. Make it Automatic

Streamline your finances by automating everything: your savings, bill payments and retirement savings. Have a certain amount of money (10% of your income) automatically transferred from your checking account to your savings account – this will force you to make do with less. Head over to your bank’s website to set this up – it takes a few minutes.

Scott Gamm is author of MORE MONEY, PLEASE and founder of HelpSaveMyDollars. Follow him on Facebook and  Twitter. He studies finance at NYU Stern.

This article has been posted for your edification.  The views expresses in this article are solely those of the author and do not necessarily represent the views of Higher One, Inc. In addition, the posting of this article by no means represents an endorsement by Higher One, Inc. of any of the products or services that may be included therein.

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