College is that time of the life when you look forward to be on your own. No more curfews to worry about or being forced to finish the greens before dessert. At the same time, greater freedom means you have more responsibilities. And that is why though the prospect of taking your own spending decisions seems so attractive, it has to be tempered with good financial habits too. Here are 5 financial concepts that will come in handy as you gear up for college.
Net Present Value
To put it succinctly, net present value is the value of all future cash flows – both positive and negative – over the entire life of an investment discounted to the present. It is calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time. Though this concept is mostly used in corporate accounting, it can have its uses for college students too. Since NPV analysis is used to gauge how much a project or an investment is worth, it can be applied to any series of cash flows like college education too. In this context, try to understand how much you are spending on college tuition and associated costs and then calculate the future worth of your college degree in terms of professional salaries or business returns. By including the time factor, you can arrive at an idea of the present worth of your investment which in this case is your college education.
Even if you are lucky enough to not need to worry about financing your college education, bear in mind that knowing such finance basics will definitely help in your future career and especially business prospects. It is quite possible that you may not be able to your head around the complexities of NPV, in which case get the professionals from ThanksForTheHelp to break it down for you.
Compounding
Every time you tune it to Finance News, you are probably told about the power of compounding. To put it simply, this is a process by which any earnings – whether from capital gains or interest – is put back in the same investment to reap additional growth over time. If you are already investing in the market, perhaps you already know about this process and how useful it could be to reap higher returns in the long run. But in college, in case you are simply keeping aside money from your student’s budget and then investing it, you can make it work much harder by compounding.
To understand the nitty-gritty of all this, why not get the finance whiz-kids from BestOnlineAssignmentHelp to help you out? Conversely don’t forget that if you are living beyond your means and taking loans to do so, the principle of compounding will require you to repay much more than you had borrowed.
Inflation
This is a finance concept every individual, no matter in what field, should understand to maximize their material well-being – now and in future. Inflation is the rate at which the general cost of goods and services is rising over a period of time. Rising inflation means the lower purchasing power of a nation’s currency – including yours. So if in 1975 you could have bought 20 gallons of gasoline with a $10 bill since then cost of gasoline was around $0.5 per gallon, in 2000, you would have got only 6.25 gallons with the same ten dollar bill since the cost of gasoline would have risen to $1.6 per gallon.
So though you use the ten dollar bill remains the same, it loses its purchasing power by around 69 percent over the 25 year period. To know more about how inflation affects students as you get in touch with finance gurus from TopAssignmentExperts so that you can optimize your student’s budget now and invest wisely to beat inflationary trends over time.
Credit
One of the biggest attractions of college life is the freedom to take your own spending decisions. but though you now have a couple of credit cards in your wallet – especially since the promotional items they come with seem so cool – , learn all about them before you max out your limit. In the simplest terms, credit means to borrow. So spend only that much what you will be able to put back in full. The most effective way to do this is to go for an automatic transfer from your checking or savings account when the credit card bill is due. And no, paying the minimum balance on your credit card is not enough since the balance will keep attracting interest – remember the impact of compounding?! So, ensure that your credit card bills are paid in time but more than that use discretion on when and for what to use it.
Not all credit is dangerous though. For example, the earlier to start transacting, the longer credit history you will have at your disposal and hence more time to improve your credit score, especially when the major costs like buying a mortgage, a car and starting a family confronts you. Get in touch with professionals from PaperDoers who would give you many more smart and useful tips to establish credit at this time of your life.
Budgeting
Finally, all good financial concepts come down to that one fundamental habit – budgeting. This essentially means making a tally of all the sources of your income on one side and expenses on the other so that the quantum of the latter does not exceed the former. As a student, your primary expenses are college tuition as well as supplies like books, stationery, computer peripherals, printer, ink and so on. Then there are boarding and lodging costs, whether you are staying in the campus hostel or as a paying guest.
How far you are located from your college will also determine gas or transport costs. And of course, you need to set aside some money to meet emergencies besides also paying your medical insurance.. In the end, you need to include recreational and entertainment outlay since what is the point of studying in a college if you can’t have some fun right. All this can get a bit overwhelming in which case you can get someone from OnlineAssignmentWriting to help you do the number-crunching associated with budgeting.
