Managing your money the right way

I hate math. I loathe it so much that I would rather go without coffee (I love coffee) for a year than solve a differential equation (whatever that is). Due to this hatred of math I've realized that I am just absolutely terrible at budgeting my money.

It's a good thing I married an accountant. Through him I've learned to stop managing my money day to day and start budgeting for the long term.

It is essential that every college student learns how to budget their money because it is what will determine whether you have a ramen noodle diet or if you can spring for that new iPod Touch.

From my experience of starting out as a poor college student years ago to being financially stable today, I have found that there are three things college students need to understand in order to keep out of the red.

Learn how to balance a checkbook, and manage your online banking.

It sounds simple and unnecessary, but its really the basis of budgeting money. Way before online banking was invented, people used registers to keep track of their money. Writing down how much money coming in and out of all of your accounts gives you a better understanding of just how much money you are spending.

Once you see in writing how much money you spend at Starbucks (or wherever you get your fix), you'll be quick to change your habits.

Essentially, keeping track of your accounts in a register is the same thing as using online banking. It's a great tool to help you keep track of your finances, monitor accounts for fraud and add money to your accounts. However, be aware that some transactions take two-three days or more to post to your account which may lead you to believe you have money when you actually don't.

Understand how much money you have incoming and outgoing

Since balancing a checkbook and using online banking are not foolproof, students really need to learn how to keep track of how much money they have incoming and outgoing.

It's really easy to know how much money you are bringing in through paychecks and other sources of income, but knowing how much money you need to pay out is much harder to keep track of.

For example, if you make one thousand dollars a month, but pay $400 in rent, $100 in electricity and $200 in car payments and insurance, you will have $300 leftover each month to spend on food and luxuries like cable and Internet.

Its important you understand how that works because if you spend more than you bring in per month it doesn't take a mathematician to figure out that you will end up in debt.

Start building your credit early.

Credit is everything if you want to be financially successful in life. You will find that buying a house or a car on your own is much easier if you have an established and healthy credit score.

Students can start building credit in several ways. Lenders want to see if you are able to hold a job. They don't like long periods of unemployment. Your ability to hold a steady job can improve the likelihood of getting approved. Another way is by paying your bills on time and refraining from overdrafting on accounts. Lenders will look at these things to determine your risk factor and will use this as the basis for approving or denying you a loan.

If you take away anything from this column let it be this: Don't pretend that your accounts and bills are not there and ignore them. Check them at least once or twice a week. Neglecting your accounts will have negative results.

Karissa explains it all is a recurring column that focuses on providing students with advice on general topics that affect them. Next issue I will discuss time management.