# Maintaining Your Mental Health and Managing Stress

## Physical Health Basics

Questions to Consider:
1. What is healthy eating?
2. Why is it important to stay hydrated?
3. How important is exercise to a healthy body?
4. Are you getting enough sleep to be healthy?
5. What are toxins, and how can they affect your health?
You have one body. Treat it well so as to maximize its ability to serve you throughout your life. Often physical health gets moved to the bottom of the priority list when we are busy. Taking care of your physical health doesn’t mean six-pack abs or training for a marathon. It means honoring your physical needs so your body can function properly, feeding your cells the nutrients that will keep your body working well your entire life, and minimizing exposure to toxins to reduce your risk of disease.

### Healthy Eating

While it’s not the only thing that contributes to great health, what you eat makes a huge difference. We have 37 trillion cells in our body. The only way they function optimally is with good nutrition. As a college student, you will be surrounded by temptations to eat poorly. Although it is okay to choose unhealthy food options in moderation, your goal will be to focus on making healthier choices to fuel your mind and body daily.
One way to ensure you are making healthy meal choices is by using the United States Department of Agriculture (USDA) Healthy Plate Guidelines. MyPlate illustrates five different food groups considered the building blocks for a healthy plate for each meal—vegetables, fruits, protein, grains, and dairy.

### Whole Foods vs. Processed Foods

Choose whole foods. Whole foods are any foods that have not been processed, packaged, or altered in any way. Whole foods are an essential part of a healthy diet because they contain the vitamins and minerals our bodies need.
Examples of whole foods include the following:
1. Vegetables: Carrots, broccoli, kale, avocados, cauliflower, spinach, peppers
2. Fruits: Apples, bananas, blueberries, strawberries, grapes, melons, peaches
3. Grains: Brown rice, oatmeal, barley, buckwheat, quinoa, millet
4. Beans: Black, pinto, kidney, black-eyed peas, chickpeas
Minimize non-whole foods, often called processed foods. These are foods that have been processed, such as cookies, hot dogs, chips, pasta, deli meat, and ice cream. Even seemingly healthy foods like yogurt, granola, and other cereals are processed and should be checked for added sugar and other unhealthy ingredients. Review the label on these items and look for products that have less than 5 grams of fat and 10 grams of added sugars per serving. Also, review the dietary fiber and select products that have at least 3 grams per serving. Dietary fiber is a good thing; the higher the number the better. Fiber makes you feel full, and helps with digestion. Following these simple guidelines will help you select the best foods.
The average American eats 62 percent of their daily calories from processed foods.Dr. Joel Furhman https://www.mensjournal.com/features/joel-fuhrman-the-doctor-is-out-there-20121107/ In order for your body to be as healthy as possible, it’s extremely important to include lots of whole foods in your diet.

### How to Read a Food Label

The U.S. government requires food manufacturers to put a label on every processed food product. This is so we, as consumers, know what we are putting into our bodies and can make good dietary choices. A quick review of the label will provide a lot of important information about what you are eating, yet most people don’t take the time to read the label. This is a big mistake.
Think of the front of the package as a marketing billboard. Don’t be fooled by the marketing. Every day millions of dollars are spent to persuade us to eat foods that are not healthy for us. Through visuals and words (like natural, healthy, or gluten free), the food industry wants us to make assumptions about the nature of a food product without looking at the facts. For example, many people eat protein bars thinking they are a healthy choice, but protein bars can have up to 30 grams of sugar! Understanding the nutrition information and ingredients will help you make healthier choices. When you take the time to read the labeled ingredients, you are no longer being marketed to—you are staring at the facts.
This video on how to read a food label is a helpful overview on what else to look for.

### What You Drink

What is your go-to drink when you are thirsty? Soda? Juice? Coffee? How about water? Most of your blood and every cell in your body is composed of water. In fact, water makes up 60 to 80 percent of our entire body mass, so when we don’t consume enough water, all kinds of complications can occur. To function properly, all the cells and organs in our body need water. Proper hydration is key to overall health and well-being. By the time you feel thirsty, you are already dehydrated. Dehydration is when your body does not have as much water and fluids as it needs.
Researchers at Virginia Polytechnic discovered that mild dehydration (as little as losing 1 to 2 percent of body water) can impair cognitive performance.University of Virginia https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4207053/ Water increases energy and relieves fatigue, helps maintain weight, flushes toxins, improves skin complexion, improves digestion, and is a natural headache remedy (your brain is 76 percent water). Headaches, migraines, and back pains are commonly caused by dehydration. Your body will also let you know it needs water by messaging through muscle cramps, achy joints, constipation, dry skin, and of course a dry mouth.
Aside from feeling thirsty, the easiest way to tell if you are dehydrated is to check your urine. If it is a dark shade of yellow, your urine is over-concentrated with waste. Water helps to flush out waste, so when you’re hydrated there’s a higher ratio of water to waste, turning your urine a lighter color.
One of the best habits you can develop is to drink a large glass of water first thing in the morning. Your body becomes a little dehydrated as you sleep. Drinking water first thing in the morning allows your body to rehydrate, which helps with digestion and helps move the bowels for regularity in the morning. It also helps to eliminate the toxins your liver processed while you slept.
Check out this video for more benefits of drinking water.
“But I don’t like the taste of water!” No problem. Select any non-caloric beverage. Flavored waters are a perfect choice and there are many options with and without bubbles or caffeine. Limit your intake of caloric beverages such as juice, soda, and high calorie beverages at your favorite coffee shop.

### Exercise

Many people exercise to maintain or lose weight, or increase cardiovascular health, but physical outcomes are only one potential benefit of exercise. Regular exercise can improve the quality of your sleep, strengthen your bones, increase your energy levels, and reduce your risk of high blood pressure, diabetes, and even some forms of cancer.Harvard Medical School https://www.health.harvard.edu/newsletter_article/Exercise_as_medicine Regular exercise is key to living a long, healthy life.
There are three basic types of exercise—flexibility, strength training, and cardiovascular.
1. Flexibility is the range in motion of the joints in your body, or the ability for your muscles to move freely. Without adequate flexibility, daily activities can become difficult to do. Stretching increases your body’s flexibility, improves circulation, and sends more blood to your muscles. Just a few minutes a day of deep stretching can have a powerfully positive impact on your health. Yoga and Tai Chi are other wonderful ways to improve your flexibility.
2. Strength is the body’s ability to produce force. Strength training helps improve muscle strength and muscle mass, which will become increasingly important as you age. Increased muscle helps your body burn calories more efficiently. Strength training also helps maintain bone strength. In addition to lifting weights, other ways to build strength include push-ups, pull-ups, squats, lunges, and yoga.
3. Cardiovascular is the body’s ability to use oxygen efficiently during exercise. As one’s ability to use oxygen improves, daily activities can be performed with less fatigue. Great cardiovascular modes of exercise include jogging, swimming, biking, and HIIT (high intensity interval training). HIIT is short bursts of intense activity followed by a rest period. With HIIT, you can squeeze a lot of benefit into a short period of time. Click here for an example of HITT workouts.

Research indicates that regular aerobic exercise can support memory and cognition. In these studies, aerobic exercise generally increases the number of new neurons created in the brain’s memory center and also reduces inflammation.Kelty, Journal of Applied Physiology Inflammation in the brain may contribute to the development of dementia and other neurodegenerative conditions. It might be good timing to take a jog before you sit down to study for a test!
It’s important to move throughout the day, and every day. Aim to exercise for 150 minutes a week. You don’t have to be the king or queen of CrossFit; it’s the daily movement that is most important. Research has found that three brisk walks for 10 minutes a day is a great start. While it is best to integrate all three types of exercise, the best exercise is the one you will actually do. Find and commit to a form of exercise you will enjoy.

### Sleep

How often do you wake up filled with energy, eager to embrace the day? How often do you wake up still tired, with heavy eyes that just don’t want to open? Your answer to these questions has a direct bearing on the quality of your decisions, your ability to use good judgment, the extent to which you can focus in the classroom, and ultimately your long-term health.
A great night’s sleep begins the minute you wake up. The choices you make throughout the day impact how quickly you fall asleep, whether you sleep soundly, and whether your body is able to successfully complete the cycle of critical functions that only happen while you sleep.
Sleep is the foundation of health, yet almost 40 percent of adults struggle to get enough sleep.Cleveland Clinic, https://health.clevelandclinic.org/lack-sleep-make-crave-junk-food/ Lack of sleep affects mental and physical performance and can make you more irritable. The diminished energy that results from too little sleep often leads us to make poor decisions about most things, including food. Think about the last time you were really tired. Did you crave pizza, donuts, and fries—or a healthy salad? Studies have shown that people who sleep less are more likely to eat fewer vegetables and eat more fats and refined carbohydrates, like donuts.Cleveland Clinic, https://health.clevelandclinic.org/lack-sleep-make-crave-junk-food/
With sufficient sleep it is easier to learn, to remember what you learned, and to have the necessary energy to make the most of your educational experience. Without sufficient sleep it is harder to learn, to remember what you learned, and to have the energy to make the most of your educational experience. It’s that simple.

### What Happens When We Sleep?

Sleep is a time when our bodies are quite busy repairing and detoxifying. While we sleep we fix damaged tissue, toxins are processed and eliminated, hormones essential for growth and appetite control are released and restocked, and energy is restored.
A review of hundreds of sleep studies concluded that most adults need around eight hours of sleep to maintain good health. Some people may be able to function quite well on seven and others may need closer to nine, but as a general rule, most people need a solid eight hours of sleep each night. And when it comes to sleep, both quantity and quality are important.
When sleep is cut short, the body doesn’t have time to complete the phases for the repair and detoxification.
A tiny lobe called the pineal gland helps us fall asleep. The pineal gland secretes melatonin to calm the brain. The pineal gland responds to darkness. If you are watching TV until the minute you go to bed and then sleep with the artificial light from smartphones and other devices, your brain is tricked into thinking it is still daylight; this makes it difficult for the pineal gland to do its job. In addition, if the TV shows you watch before bed are violent or action-packed, your body will release cortisol (the stress hormone). Anything that creates stress close to bedtime will make it more difficult to fall asleep. A bedtime practice of quiet activities like reading, journaling, listening to music, or meditation will make it much easier to fall asleep.

### What Happens If You Don’t Get Enough Sleep?

Lack of sleep has a big impact on your overall state of health and well-being. Studies have linked poor sleep to a variety of health problems. The U.S. Centers for Disease Control and Prevention have identified sleep deprivation as a public health epidemic.
Some of the health risks of insufficient sleep include the following:
Increased risk of heart attack and stroke: In his book Why We Sleep, Matthew Walker, PhD, shares Japanese research showing that male workers who average six hours of sleep or less are 400 to 500 percent more likely to suffer one or more cardiac arrests than those getting more than six hours of sleep each night. Another study of women between the ages of 20 and 79 found that those who had mild sleep disturbance such as taking longer to fall asleep or waking up one or more times during the night were significantly more likely to have high blood pressure than those who fell asleep quickly and slept soundly.Matthew Walker, PhD
Impaired cognitive function: Even one night of sleeping less than six hours can impact your ability to think clearly the next day.
Increased risk of accidents: Sleep deprivation slows your reaction time, which increases your risk of accidents. You are three times more likely to be in a car crash if you are tired.
According to the American Sleep Foundation, 40 percent of people admitted to falling asleep behind the wheel at least once. A Governor’s Highway Safety Association report estimates there are 6,400 fatal drowsy-driving crashes each year. Fifty percent of these crashes involve drivers under the age of 25.Governors Highway Safety Association
Driving after 20 hours without sleep is the equivalent of driving with a blood-alcohol concentration of 0.08 percent—the U.S. legal limit for drunk driving.
Weight gain/increased risk for obesity: Sleep helps balance your appetite by regulating hormones that play a role in helping you feel full after a meal. Also, cortisol is released during times of anxiety, and exhaustion causes your body to produce more cortisol. This can stimulate your appetite.
Increased risk of cancer: Tumors grow up to three times faster in laboratory animals with severe sleep dysfunctions. Researchers believe this is because of disrupted melatonin production, as melatonin has both antioxidant and anticancer activity.
Increased emotional intensity: The part of the brain responsible for emotional reactions, your amygdala, can be 60 percent more reactive when you've slept poorly, resulting in increased emotional intensity.
For more information on the advantages and health risks of sleep watch this TED Talk by Matt Walker, PhD, Director of the Sleep Center at U California Berkeley.

### Tips to Improve the Quality of Your Sleep

Now that you are more aware of the ways insufficient sleep harms your body, let’s review some of the things you can do to enhance your sleep.
Make sleep a priority.
It can be challenging once in college, but try to get on a schedule where you sleep and wake at the same time every day to get your body accustomed to a routine. This will help your body get into a sleep rhythm and make it easier to fall asleep and get up in the morning.
Sleep in a cool, quiet, dark room.
Create a sleeping environment that is comfortable and conducive to sleep. If you can control the temperature in your room, keep it cool in the evening. Scientists believe a cool bedroom (around 65 degrees) may be best for sleep, since it mimics our body's natural temperature drop. Exposure to bright light suppresses our body’s ability to make melatonin, so keep the room as dark as possible. A 2010 study in The Journal of Clinical Endocrinology & Metabolism found that individuals exposed to room light “during the usual hours of sleep suppressed melatonin by greater than 50%.”JCEM, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3047226/ Even the tiniest bit of light in the room (like from a clock radio LCD screen) can disrupt your internal clock and your production of melatonin, which will interfere with your sleep. A sleep mask may help eliminate light, and earplugs can help reduce noise.
Avoid eating late or drinking alcohol or caffeine close to bedtime.
It is best to finish eating at least two hours before bedtime and avoid caffeine after lunch. While not everyone is affected in the same way, caffeine hangs around a long time in most bodies. Although alcohol will make you drowsy, the effect is short-lived and you will often wake up several hours later, unable to fall back to sleep. Alcohol can also keep you from entering the deeper stages of sleep, where your body does most of the repair and healing. A 2013 Scientific Research study concluded that “energy drinks, other caffeinated beverages and alcoholic beverages are risk factors of poor sleep quality.” It’s important to finish eating hours before bedtime so your body is able to heal and detoxify and it is not spending the first few hours of sleep digesting a heavy meal.
Start to wind down an hour before bed.
Making mindfulness and/or a gratitude practice (as discussed previously) a part of your bedtime routine are well documented as improving an individual's ability to fall asleep and have better quality of sleep. There are also great apps to help with relaxation, stress release, and falling asleep which include mediations, gratitude practice, and mindfulness. Consider the Insight Timer app, or any of the free apps listed by the American Sleep Association.
Exercise for 30 minutes a day.
One of the biggest benefits of exercise is its effect on sleep. A study from Stanford University found that 16 weeks in a moderate-intensity exercise program allowed people to fall asleep about 15 minutes faster and sleep about 45 minutes longer. Walking, yoga, swimming, strength training, jumping rope—whatever it is, find an exercise you like and make sure to move your body every day.
Improve your diet.
Low fiber and high saturated fat and sugar intake is associated with lighter, less restorative sleep with more wake time during the night. Processed food full of chemicals will make your body work extra hard during the night to remove the toxins and leave less time for healing and repair.
Sleep affects how we look, feel, and function on a daily basis and is vital to our health and quality of life. When you get the sleep your body needs, you look more vibrant, you feel more vibrant, and you have the energy to live your best life.
Now, with a better understanding of the benefits of getting the recommended hours of nightly sleep and the health risks of not getting enough sleep, what changes can you make to improve the quality and quantity of your sleep?
Difficulty sleeping may be a sign of something else happening in your mind or body (i.e., anxiety, insomnia, sleep apnea). If you are doing all the right things and still have trouble falling or staying asleep, talk to your doctor or go to your student health services.
Here are some resources to learn more:
1. Healthy Sleep, Harvard Medical School Division of Sleep Medicine
2. Insomnia Treatment, American Association of Sleep Medicine
3. Sleep Medicine, Society of Behavioral Sleep Medicine

### Friends & Family Matter

JT has always been a hard worker, even when balancing college and work has been stressful. However, shortly after the end of the year, JT’s family experiences the sudden death of his father. While he had had health issues, the family is not prepared for the loss, especially right after JT's grandparents, aunts, uncles, and cousins celebrated the holidays together. JT is very close to his family, and the thought of returning to his classes and continuing to work seems too much to bear.
Nonetheless, JT begins the new semester, but soon finds it difficult to get out of bed and go to class. Working is the only thing that he has motivation to do, perhaps because he needs to work to pay the bills. When JT feels well enough to go to class, he comes in late, loses focus during class, and forgets to submit assignments.
JT’s boss has seen no difference in his work ethic or behavior, but JT’s professors have noticed he is not performing well, and a few of them have reached out to find out what is going on. JT has ignored the professors’ emails and skipped appointments with his advisor to talk about his academic risk. Despite being encouraged to seek on-campus counseling, JT is convinced that he can get better on his own and doesn’t have the motivation to talk to anyone other than his family members who understand best what he is going through.

### Let’s Think About It

JT has several options. Think through the consequences of each one, and choose the best option or create your own option.
1. JT continues to deal with his depression and anxiety by missing classes and avoiding work with the hope that with time it will get better.
2. JT talks to their professor about what he is going through to see if there is a way to get extensions on assignments.
3. JT meets with a counselor to talk through options for improving his mental health that would involve additional costs including regular therapy and medication.

### Let’s Talk About It

JT may feel uncomfortable expressing his mental and emotional needs—and he need not share personal health information with others if he does not want to—but he could communicate with those who are affected by his behaviors. Here are some suggestions for communicating with others about the dilemma that JT is facing:
1. “I am going through some tough things right now and have not been myself. While I am very committed to my education, my actions are not in line with that commitment. I am struggling with how to get back on track.”
2. “I have had some personal issues that have kept me from focusing on my course work. I am planning to seek some counseling and would like to talk about what steps I can take now, if any, to help me make up for lost time in the course.”
3. “I want to share an explanation—and not an excuse—about my behavior in and out of class. I have been struggling with some family issues that have made it difficult to feel good enough to come to class and do the work. Do you have any advice for me or would you be able to talk to me about it at length?”
Whatever choice you would make in this situation, it is always best to communicate clearly your needs, your concerns, and even your uncertainties.

### Summary and Next Steps for College Success

As you learned in this chapter, your college experience will be impacted by your own health and well-being. During these years, you will start the process of learning who you are and who you want to be. Your values will be questioned and your strengths will become more apparent not only to you but also to your support system. The goal of this chapter was to introduce you to the complex relationship between your mind and body; to help you identify the differences between feeling stressed versus being anxious; and to know when feeling sad may be symptoms of depression.
This foundational knowledge will help to empower you to not only improve your self-efficacy, but also help you become more resilient during difficult situations. With the hope you can continue to grow in this area and improve your health and well-being, consider one of the items below and commit to setting it as your new top priority:
1. Reach out to your support system and start the conversation with a person you have identified as an important support for your health. Tell them why you included them and let them know that you value them as a key person in your life.
2. Identify other strategies that you can turn to during difficult times. Talk to your friends to learn how they handle difficult situations and if they have specific strategies that help them through such times.
3. Consider the resources available to you on campus. Are there classes that can help you learn to meditate or how to handle stress? Where is the student health service and what treatment and prevention opportunities are provided for students?
4. Think back to situations that did not go smoothly in the past. What knowledge and skills can you take from this chapter and apply to that situation which would have a different, more positive outcome. If a similar situation happens again, what would you do differently?


# Understanding Financial Literacy

## Introduction

### Student Survey

How financially literate are you? This survey will help you determine how the chapter concepts relate to you right now. As we are introduced to new concepts and practices, it can be informative to reflect on how your understanding changes over time. Take this quick survey to figure it out, ranking the statements on a scale of 1—4, 1 meaning “least like me” and 4 meaning “most like me.”
1. I actively and regularly plan and/or monitor my finances.
2. I understand the benefits and risks of credit.
3. I have a plan to repay my student loans.
4. I regularly take steps to protect my identity and assets.
You can also take the Chapter 8 survey anonymously online.

### About This Chapter

In this chapter, you will learn to reach your personal life goals by implementing financial planning and strategies to protect yourself, manage your money today, and put yourself in a better position for tomorrow. How you act today impacts your tomorrow.
By the end of this chapter, you should be able to do the following:
1. Align your personal and financial goals through smart financial planning.
2. Create a saving and spending plan and track your performance.
3. Identify best practices and risks associated with credit cards and other debt.
4. Determine the best opportunities for you to finance your college education.

### What Would You Do?

Think about this scenario: Everything was working out for Elan. They got into the college they wanted to, and some friends were planning to attend as well. They felt like an adult and were looking forward to new freedoms and opportunities. Elan’s parents let them get a credit card after high school graduation. Elan shared an apartment with their friends just off campus, and was able to get where they needed to go because they had a car. Elan had also saved over $1,000 from gifts and a summer job. They needed a new laptop.
Elan planned to stay within set limits. They went to the store and found a very knowledgeable salesperson, Jermain, who said he knew exactly what Elan needed. Jermain pointed out that the laptop in Elan’s budget would do schoolwork just fine, but it was not as powerful as the best unit with advanced gaming features. Plus, the better computer came with new headphones! Jermain suggested that Elan could later sell the computer to incoming students. (Most first-year students bought used computers if they did not have one when they came to school.) The high-powered computer was $2,000, though, and Elan didn’t have that much money. Maybe they should use the credit card? Maybe their new part-time job would pay for it? But Jermain arranged for a small down payment and monthly payments of only $100. That did not seem too bad to Elan. The future looked bright.
At least, that’s what Elan thought. They soon realized that working more hours meant fewer hours to study. Meanwhile, Elan’s rent and gas usage went up, and, as a young car owner, their insurance was through the roof. Only three months into the first semester, Elan missed a payment on the laptop and accrued a late fee. They put the next laptop payment on the credit card. Soon, Elan was alternating payments between the credit card, laptop, and car, building up interest and late charges. Now Elan was having trouble paying their rent and started getting calls from creditors. Everything had seemed so promising. Elan didn’t know where they had gone wrong.
Elan comes to you and shares the situation. They ask, “What could I have done differently?”
This chapter offers you insight into your finances so that you can make good decisions and avoid costly mistakes. We all face chances to spend money to try to get what we want. Many think only about now and not next month, next year, or ten years from now, but our behavior now has consequences later. Not everyone can own all the latest technology, drive their dream car, continually invest for their retirement, or live in the perfect home at this moment. But by understanding the different components of earning money, banking, credit, and budgeting, you can begin working toward your personal and financial goals. We’ll also discuss a related topic, safeguarding your accounts and personal information, which is critical to protecting everything you’ve worked for. By the end of this chapter, you will have good insights for Elan . . . and yourself!


# Understanding Financial Literacy

## Personal Financial Planning

Questions to Consider:
1. What simple steps do I take to create a financial plan?
2. How do I use financial planning in everyday life?
3. How is the financial planning process implemented for every purchase?
Honestly, practicing money management isn’t that hard to figure out. In many ways it’s similar to playing a video game. The first time you play a game, you may feel awkward or have the lowest score. Playing for a while can make you okay at the game. But if you learn the rules of the game, figure out how to best use each tool in the game, read strategy guides from experts, and practice, you can get really good at it.
Money management is the same. It’s not enough to “figure it out as you go.” If you want to get good at managing your money, you must treat money like you treat your favorite game. You have to come at it with a well-researched plan. Research has shown that people with stronger finances are healthierhttps://www.sciencedirect.com/science/article/pii/S0277953613002839 and happier,https://academic.oup.com/geronj/article-abstract/38/5/626/578092 have better marriages,https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1741-3729.2012.00715.x and http://onlinelibrary.wiley.com/doi/10.1111/j.1741-3729.2012.00715.x/abstract and even have better cognitive functioning.https://science.sciencemag.org/content/341/6149/976%20

### The Financial Planning Process

Personal goals and behaviors have a financial component or consequence. To make the most of your financial resources, you need to do some financial planning. The financial planning process consists of five distinct steps: goal setting, evaluating, planning, implementing, and monitoring.

### Financial Planning in Five Steps

1. Develop Personal Goals

2. Identify and Evaluate Alternatives for Achieving Goals for My Situation

3. Write My Financial Plan

4. Implement the Plan

5. Monitor and Adjust the Plan

### How to Use Financial Planning in Everyday Life

The financial planning process isn’t only about creating one big financial plan. You can also use it to get a better deal when you buy a car or computer or rent an apartment. In fact, any time you are thinking about spending a lot of money, you can use the financial planning process to pay less and get more.
To explore financial planning in depth, we’ll use the example of buying a car.

### 1. Develop Goals

First, what do you really need? If you’re looking for a car, you probably need transportation. Before you decide to buy a car, consider alternatives to buying a car. Could you take a bus, walk, or bike instead? Often one goal can impact another goal. Cars are typically not good financial investments. We have cars for convenience and necessity, to earn an income and to enjoy life. Financially, they are an expense. They lose value, or depreciate, rather than increasing in value, like savings. So buying a car may slow your savings or retirement plan goals. Cars continually use up cash for gas, repairs, taxes, parking, and so on. Keep this in mind throughout the planning process.

### 2. Identify and Evaluate Alternatives for Achieving Goals in Your Current Situation.

For this example, let’s assume that you have determined the best alternative is to buy a car. Do you need a new car? Will your current car last with some upkeep? Consider a used car over a new one. On average, a new car will lose one-fifth of its value during its first year.Krome, Charles. “Car Depreciation.” 2018, Carfax. https://www.carfax.com/blog/car-depreciation Buying a one-year-old car is like getting a practically new car for a 20 percent discount. So in many cases, the best deal may be to buy a five- or six-year-old car. Sites such as the Kelley Blue Book website (KBB.com) and Edmunds.com can show you depreciation tables for the cars you are considering. Perhaps someone in your family has a car they will sell you at a discount.
Do you know how much it will cost in total to own the car? It will help to check out the total cost of ownership tools (also on KBB.com and Edmunds.com) to estimate how much each car will cost you in maintenance, repairs, gas, and insurance. A cheap car that gets poor gas mileage and breaks down all the time will actually cost you more in the long run.

### 3. Write Down Your Financial Plan

### 4. Implement Your Plan

Once you’ve narrowed down which car you are looking for, do more online research with resources such as Kelley Blue Book to see what is for sale in your area. You can also begin contacting dealerships and asking them if they have the car you are looking for with the features you want. Ask the dealerships with the car you want to give you their best offer, then compare their price to your researched price. You may have to spend more time looking at other dealerships to compare offers, but one goal of online research is to save time and avoid going from place to place if possible.
When you do go to buy the car, bring a copy of your written plan into the dealership and stick to it. If a dealership tries to switch you to a more expensive option, just say no, or you can leave to go to another dealership. Remember Elan in our opening scenario? They went shopping alone and caved to the pressure and persuasion of the salesperson. If you feel it is helpful, take a responsible friend or family member with you for support.

### 5. Monitor and Adjust the Plan to Changing Circumstances and New Life Goals

Life changes, and things wear out. Keep up the recommended maintenance on the car (or any other purchase). Keep saving money for your emergency fund, then for your next big purchase. The worst time to buy something is when you need to replace an important item that stops working or is damaged, because you are easier to take advantage of when you are desperate. You will be glad that you have an emergency fund.
A good practice is to keep making car payments once the car loan is paid off. If you are paying $300 per month for a car loan, when the loan is paid off, put $300 per month into a savings account for a new car instead. Do it long enough and you can buy your next car using your own money!

### Use the Financial Planning Process for Everything

The same process can be used to make every major purchase in your life. When you rent an apartment, begin with the same assessment of your current financial situation, what you need in an apartment, and what goals it will impact or fulfill. Then look for an apartment using a written plan to avoid being sold on a more expensive place than you want.
You can even use the process of assessing and planning for small things such as buying textbooks or weekly groceries. While saving a few bucks each week may seem like a small deal, you will gain practice using the financial planning process, so it will become automatic for when you make the big decisions in life. Stick to your plan.


# Understanding Financial Literacy

## Savings, Expenses, and Budgeting

Questions to Consider:
1. How is the flow of money best measured?
2. How do I keep things balanced?
What is the best way to get to the Mississippi River from here? Do you know? To answer the question, even with a map app, you would need to know where you are starting from and exactly where on the river you want to arrive before you can map the best route. Our financial lives need maps, too. You need to know where you are now and where you want to end up in order to map a course to meet the goal.
You map your financial path using a spending and savings plan, or budget, which tracks your income, savings, and spending. You check on your progress using a balance sheet that lists your assets, or what you own, and your liabilities, or what you owe. A balance sheet is like a snapshot, a moment in time, that we use to check our progress.

### Budgets

The term budget is unpleasant to some people because it just looks like work. But who will care more about your money than you? We all want to know if we have enough money to pay our bills, travel, get an education, buy a car, etc. Technically, a budget is a specific financial plan for a specified time. Budgets have three elements: income, saving and investing, and expenses.

### Income

Income most often comes from our jobs in the form of a paper or electronic paycheck. During school, you may receive support from family that could be considered income. You may also receive scholarships, grants, or student loan money. When listing your income for your monthly budget, you should use your net pay, also called your disposable income. It is the only money you can use to pay bills. If you currently have a job, look at the pay stub or statement. You will find gross pay, then some money deducted for a variety of taxes, leaving a smaller amount—your net pay.
Sometimes you have the opportunity to have some other, optional deductions taken from your paycheck before you get your net pay. Examples of optional deductions include 401(k) or health insurance payments. You can change these amounts, but you should still use your net pay when considering your budget.
Some individuals receive disability income, social security income, investment income, alimony, child support, and other forms of payment on a regular basis. All of these go under income.

### Saving and Investing

The first bill you should pay is to yourself. You owe yourself today and tomorrow. The quote at the start of this section was said by Warren Buffet who is one of the most successful investors of the 20th century, with a personal fortune of more than $60 billion. Setting aside a certain amount of money for savings and investments, before paying bills and making discretionary, or optional, purchases, will put you on a path to building your own reserve. Savings can be for an emergency fund or for short-term goals such as education, a wedding, travel, or a car. Investing, such as putting your money into stocks, bonds, or real estate, offers higher returns at a higher risk than money saved in a bank. Investments include retirement accounts that can be automatically funded with money deducted from your paycheck. Automatic payroll deductions are an effective way to save money before you can get your hands on it. Make saving money a priority to assure that you will work as hard to make the payment to yourself as you work to make your car or housing payment. The money you “pay” toward saving or investing will earn you back your money, plus some money earned on your money. Compare this to the cost of buying an item on credit and paying your money plus interest to a creditor. Paying yourself first is a habit that pays off!

### Expenses

Expenses are categorized in two ways. One method separates them into fixed expenses and variable expenses. Rent, insurance costs, and utilities (power, water) are fixed: they cost about the same every month and are predictable based on your arrangement with the provider. Variable expenses, on the other hand, change based on your priorities and available funds; they include groceries, restaurants, cell phone plans, gas, clothing, and so on. You have a good degree of control over your variable expenses. You can begin organizing your expenses by categorizing each one as either fixed or variable.
A second way to categorize expenses is to identify them as either needs or wants. Your needs come first: food, basic clothing, safe housing, medical care, and water. Your wants come afterward, if you can afford them while sticking to a savings plan. Wants may include meals at a restaurant, designer clothes, video games, other forms of entertainment, or a new car. After you identify an item as a need or want, you must exercise self- control to avoid caving to your desire for too many wants.
How do your total “need” expenses compare to your total “want” expenses? Should either of them change?
Budgets are done in a chart or spreadsheet format and often look like the ones below. Pay attention to how the first budget differs from the second.

### Balancing Your Budget

Would you take all your cash outside and throw it up in the air on a windy day? Probably not. We want to hold on to every cent and decide where we want it to go. Our budget allows us to find a place for each dollar. We should not regularly have money left over. If we do, we should consider increasing our saving and investing. We also should not have a negative balance, meaning we don’t have enough to pay our bills. If we are short of money, we can look at all three categories of our budget: income, savings, and expenses.
We could increase our income by taking a second job or working overtime, although this is rarely advisable alongside college coursework. The time commitment quickly becomes overwhelming. Another option is to cut savings, or there’s always the possibility of reducing expenses. Any of these options in combination can work.
Another, even less desirable option is to take on debt to make up the shortfall. This is usually only a short-term solution that makes future months and cash shortages worse as we pay off the debt. When we budget for each successive month, we can look at what we actually spent the month before and make adjustments.

### Tracking the Big Picture

When you think about becoming more financially secure, you’re usually considering your net worth, or the total measure of your wealth. Earnings, savings, and investments build up your assets—that is, the valuable things you own. Borrowed money, or debt, increases your liabilities, or what you owe. If you subtract what you owe from what you own, the result is your net worth. Your goal is to own more than you owe.
When people first get out of college and have student debt, they often owe more than they own. But over time and with good financial strategies, they can reverse that situation. You can track information about your assets, liabilities, and net worth on a balance sheet or part of a personal financial statement. This information will be required to get a home loan or other types of loans. For your net worth to grow in a positive direction, you must increase your assets and decrease your liabilities over time.


# Understanding Financial Literacy

## Credit Cards

Questions to Consider:
1. How dangerous is debt?
2. What should I think about when getting and using a credit card?
3. What is the purpose of a credit score?
Yes, taking on too much debt can (and does) have disastrous effects on people’s personal finances, but if used appropriately, debt can be a tool to help you build wealth. Debt is like fire. You can use it to keep yourself warm, cook food, and ward off animals—but if you don’t know how to control it, it’ll burn your house down.

### The Danger of Debt

When you take out a loan, you take on an obligation to pay the money back, with interest, through a monthly payment. You will take this debt with you when you apply for auto loans or home loans, when you enter into a marriage, and so on. Effectively, you have committed your future income to the loan. While this can be a good idea with student loans, take on too many loans and your future self will be poor, no matter how much money you make. Worse, you’ll be transferring more and more of your money to the bank through interest payments.

### Compounding Interest

While compounding works to make you money when you are earning interest on savings or investments, it works against you when you are paying the interest on loans. To avoid compounding interest on loans, make sure your payments are at least enough to cover the interest charged each month. The good news is that the interest you are charged will be listed each month on the loan account statements you are sent by the bank or credit union, and fully amortized loans will always cover the interest costs plus enough principal to pay off what you owe by the end of the loan term.
The two most common loans on which people get stuck paying compounding interest are credit cards and student loans. Paying the minimum payment each month on a credit card will just barely cover the interest charged that month, while anything you buy with the credit card will begin to accrue interest on the day you make the purchase. Since credit cards charge interest daily, you’ll begin paying interest on the interest immediately, starting the compound interest snowball working against you. When you get a credit card, always pay the credit card balance down to $0 each month to avoid the compound interest trap.

### Getting and Using a Credit Card

One of the most controversial aspects of personal finance is the use of credit cards. While credit cards can be an incredibly useful tool, their high interest rates, combined with how easily credit cards can bury you in debt, make them extremely dangerous if not managed correctly.
Reflect on Elan from the chapter introduction and how they felt. How would you (or did you) feel to hold a new credit card with a $2,000 spending limit?

### Benefits of a Credit Card

There are three main benefits of getting a credit card. The first is that credit cards offer a secure and convenient method of making purchases, similar to using a debit card. When you carry cash, you have the potential of having the money lost or stolen. A credit card or debit card, on the other hand, can be canceled and replaced at no cost to you.
Additionally, credit cards offer greater consumer protections than debit cards do when lost or stolen. These consumer protections are written into law, and with credit cards you have a maximum liability of $50. With a debit card, you are responsible for all charges made up until the point you report the card stolen. In order to have the same protections as with credit cards, you need to report the debit card lost or stolen within 48 hours. The longer you wait to report the loss of the card, or the longer it takes you to realize you lost your card, the more money in stolen charges you may be responsible for, up to an unlimited amount.Federal Trade Commission. “Lost Or Stolen Credit, ATM, and Debit Cards.” 2012.
The final benefit is that a credit card will allow you to build your credit score, which is helpful in many aspects of life. While most people associate a credit score with getting better rates on loans, credit scores are also important to getting a job, lowering car insurance rates, and finding an apartment.Purposeful Finance. “Four Surprising Ways Your Credit Score Will Affect Your Life.” https://www.purposefulfinance.org/home/Articles/2016/four-surprising-ways-your-credit-score-will-affect-your-life

### How to Use a Credit Card

All the benefits of credit cards are destroyed if you carry credit card debt. Credit cards should be used as a method of paying for things you can afford, meaning you should only use a credit card if the money is already sitting in your bank account and is budgeted for the item you are buying. If you use credit cards as a loan, you are losing the game.
Every month, you should pay off your credit card in full, meaning you will bring the loan amount down to $0. If your statement says you charged $432.56 that month, make sure you can pay off all $432.56. If you do this, you won’t pay any interest on the credit card.
But what happens if you don’t pay it off in full? If you are even one cent short on the payment, meaning you pay $432.55 instead, you must pay daily interest on the entire amount from the date you made the purchases. Your credit card company, of course, will be perfectly happy for you to make smaller payments—that’s how they make money. It is not uncommon for people to pay twice as much as the amount purchased and take years to pay off a credit card when they only pay the minimum payment each month.
What to Look for in Your Initial Credit Card
1. Find a Low-Rate Credit Card
    Even though you plan to never pay interest, mistakes will happen, and you don’t want to be paying high interest while you fix a misstep. Start by narrowing the hundreds of card options to the few with the lowest APR (annual percentage rate).

2. Avoid Cards with Annual Fees or Minimum Usage Requirements
    Your first credit card should ideally be one you can keep forever, but that’s expensive to do if they charge you an annual fee or have other requirements just for having the card. There are many options that won’t require you to spend a minimum amount each month and won’t charge you an annual fee.

3. Keep the Credit Limit Equal to Two Weeks’ Take-Home Pay
    Even though you want to pay your credit card off in full, most people will max out their credit cards once or twice while they are building their good financial habits. If this happens to you, having a small credit limit makes that mistake a small mistake instead of a $5,000 mistake.

4. Avoid Rewards Cards
    Everyone loves to talk about rewards cards, but credit card companies wouldn’t offer rewards if they didn’t earn them a profit. Rewards systems with credit cards are designed by experts to get you to spend more money and pay more interest than you otherwise would. Until you build a strong habit of paying off your card in full each month, don’t step into their trap.

### What Is a Good Credit Score?

Most credit scores have a 300–850 score range. The higher the score, the lower the risk to lenders. A “good” credit score is considered to be in the 670–739 score range.

### Components of a Credit Score and How to Improve Your Credit

Credit scores contain a total of five components. These components are credit payment history (35 percent), credit utilization (30 percent), length of credit history (15 percent), new credit (10 percent), and credit mix (10 percent). The main action you can take to improve your credit score is to stop charging and pay all bills on time. Even if you cannot pay the full amount of the credit card balance, which is the best practice, pay the minimum on time. Paying more is better for your debt load but does not improve your score. Carrying a balance on a credit card does not improve your score. Your score will go down if you pay bills late and owe more than 30 percent of your credit available. Your credit score is a reflection of your willingness and ability to do what you say you will do—pay your debts on time.


# Understanding Financial Literacy

## Paying for College

Questions to Consider:
1. What choices should you consider when taking on student debt?
2. How do you match debt to postgraduate income?
3. What types of financial aid are available?
4. How do you apply for financial aid?
5. What are the best repayment strategies?
As you progress through your college experience, the cost of college can add up rapidly. Worse, your anxiety about the cost of college may rise faster as you hear about the rising costs of college and the horror stories regarding the “student loan crisis.” It is important to remember that you are in control of your choices and the cost of your college experience, and you do not have to be a sad statistic.

### Education Choices

Education is vital to living. Education starts at the beginning of our life, and as we grow, we learn language, sharing, and to look both ways before crossing the street. We also generally pursue a secular or public education that often ends at high school graduation. After that, we have many choices, including getting a job and stopping our education, working at a trade or business started by our parents and bypassing additional schooling, earning a certificate from a community college or four-year college or university, earning a two-year or associate degree from one of the same schools, and completing a bachelor’s or advanced degree at a college or university. We can choose to attend a public or private school. We can live at home or on a campus.
Each of these choices impacts our debt, happiness, and earning power. The average income goes up with an increase in education, but that is not an absolute rule. The New York Federal Reserve Bank reported in 2017 that approximately 34 percent of college graduates worked in a job that did not require a college degreeCooper. P. (2017). “New York Fed highlights underemployment among college graduates.” https://www.forbes.com/sites/prestoncooper2/2017/07/13/new-york-fed-highlights-underemployment-among-college-graduates/#55be172f40d8. Of course, many well-paying occupations do require a bachelor’s or master’s degree. You have started on a path that may be perfect for you, but you may also choose to make adjustments.
College success from a financial perspective means that you must:
1. Know the total cost of the education
2. Consider job market trends
3. Work hard at school during the education
4. Pursue ways to reduce costs
Most importantly: Buy only the amount of education that returns more than you invest.
According to US News & World Report, the average cost of college (including university) tuition and fees varies widely. In-state colleges average $10,338 while out-of-state students pay $22,698 for the same state college. Private colleges average $38,185 . The local community college averages approximately $3,726. On-campus housing and meals, if available, can add approximately $10,000 per year.Kerr, E. and Wood, S. (2019). “The cost of private versus public colleges.” US News and World Reports. https://www.usnews.com/education/best-colleges/paying-for-college/articles/2019-06-25/the-cost-of-private-vs-public-colleges See the table below, and create your own chart after you research.
You may need to adjust your college plan as circumstances change for you and in the job market. You can modify plans based on funding opportunities available to you (see next sections) and your location. You may prefer a community-college-only education, or you may complete two years at a community college and then transfer to a university to complete a bachelor’s degree. Living at home for the first two years or all of your college education will save a lot of money if your circumstances allow. Be creative!

### Key to Success: Matching Student Debt to Post-Graduation Income

Students and parents often ask, “How much debt should I have?” The problem is that the correct answer depends on your personal situation. A big-firm attorney in a major city might make $120,000 in their first year as a lawyer. Having $100,000 or even $200,000 in student debt in this situation may be reasonable. But a high school teacher making $40,000 in their first year would never be able to pay off the debt.
The amount of student debt you take on should be tied to the income you expect.

### Research Your Starting Salary

Begin by researching your expected starting salary when you graduate. Most students expect to make significantly more than they will actually make.Hess, Abigail. “College Grades expect to earn $60,000.” 2019. CNBC. https://www.cnbc.com/2019/02/15/college-grads-expect-to-earn-60000-in-their-first-jobfew-do.html As a result, your salary expectations are likely much higher than reality. Ask professors at your college what is typical for a recent graduate in your field, or do informational interviews with human resource managers at local companies. Explore the US Bureau of Labor Statistics' Occupational Outlook Handbook. Another handy tool that gives general information based on your personal experience and location is the PayScale. Search websites and talk to employees of companies that interest you for future employment to identify real starting salaries.

### Undergraduate Degree: 1 x Annual Salary

For students working toward a bachelor’s or associate degree, or both forms of undergraduate degrees, you should try to keep your student loans equal to or less than your expected first year’s salary. So if, based on research, you expect to make $40,000 in your first year out of college, then $33,000 in student loans would be a reasonable amount for you to pay out of a monthly budget with some sacrifice.

### Advanced Degrees: 1–2 x Annual Salary

Once you’ve graduated with your bachelor’s degree, you may want to get an advanced degree such as a master’s degree, a law degree, a medical degree, or a doctorate. While these degrees can greatly increase your income, you still need to match your student debt to your expected income. Advanced degrees can often double your expected annual salary, meaning your total debt for all your degrees should be equal to or less than twice your expected first job income. A lower number for the debt portion of your education would be more manageable.
Your goal should be to pay for college using multiple methods so your student loan debt can be as small as possible, rather than just making low monthly payments on a large loan that will lead to a higher overall cost.

### Types of Financial Aid: How to Pay for College

The true cost of college may be more than you expected, but you can make an effort to make the cost less than many might think. While the price tag for a school might say $40,000, the net cost of college may be significantly less. The net price for a college is the true cost a family will pay when grants, scholarships, and education tax benefits are factored in. The net cost for the average family at a public in-state school is only $3,980. And for a private school, free financial aid money reduces the cost to the average family from $32,410 per year to just $14,890.
If you haven’t visited your college’s financial aid office recently, it’s probably worth it to talk with them. You must seek out opportunities, complete paperwork, and learn about then meet the specific criteria, but it can save you thousands of dollars.

### Grants and Scholarships

Grants and scholarships are free money you can use to pay for college. Unlike loans, you never have to pay back a grant or a scholarship. All you have to do is go to school. And you don’t have to be a straight-A student to get grants and scholarships. There is so much free money, in fact, that billions of dollars go unclaimed every year.https://www.usatoday.com/story/college/2015/01/20/29-billion-unused-federal-grant-awards-in-last-academic-year/37399897/
While some grants and scholarships are based on a student’s academic record, many are given to average students based on their major, ethnic background, gender, religion, or other factors. There are likely dozens or hundreds of scholarships and grants available to you personally if you look for them.

### Federal Grants

Federal Pell Grants are awarded to students based on financial need, although there is no income or wealth limit on the grant program. The Pell Grant can give you more than $6,000 per year in free money toward tuition, fees, and living expenses.https://studentaid.ed.gov/sa/types/grants-scholarships/pell If you qualify for a Pell Grant based on your financial need, you will automatically get the money.
Federal Supplemental Educational Opportunity Grants (FSEOGs) are additional free money available to students with financial need. Through the FSEOG program, you can receive up to an additional $4,000 in free money. These grants are distributed through your school’s financial aid department on a first-come, first- served basis, so pay close attention to deadlines.
Teacher Education Assistance for College and Higher Education (TEACH) Grants are designed to help students who plan to go into the teaching profession. You can receive up to $4,000 per year through the TEACH Grant. To be eligible for a TEACH Grant, you must take specific classes and majors and must hold a qualifying teaching job for at least four years after graduation. If you do not fulfill these obligations, your TEACH Grant will be converted to a loan, which you will have to pay back with both interest and back interest.
There are numerous other grants available through individual states, employers, colleges, and private organizations.

### State Grants

Most states also have grant programs for their residents, often based on financial need. Eleven states have even implemented free college tuition programs for residents who plan to continue to live in the state. Even some medical schools are beginning to be tuition free. Check your school’s financial aid office and your state’s department of education for details.

### College/University Grants and Scholarships

Most colleges and universities have their own scholarships and grants. These are distributed through a wide variety of sources, including the school’s financial aid office, the school’s endowment fund, individual departments, and clubs on campus.

### Private Organization Grants and Scholarships

A wide variety of grants and scholarships are awarded by foundations, civic groups, companies, religious groups, professional organizations, and charities. Most are small awards under $4,000, but multiple awards can add up to large amounts of money each year. Your financial aid office can help you find these opportunities.

### Employer Grants and Scholarships

Many employers also offer free money to help employees go to school. A common work benefit is a tuition reimbursement program, where employers will pay students extra money to cover the cost of tuition once they’ve earned a passing grade in a college class. And some companies are going even further, offering to pay 100 percent of college costs for employees. Check to see whether your employer offers any kind of educational support.

### Additional Federal Support

The federal government offers a handful of additional options for college students to find financial support.

### Education Tax Credits

The IRS gives out free money to students and their parents through two tax credits, although you will have to choose between them. The American opportunity tax credit (AOTC) will refund up to $2,500 of qualifying education expenses per eligible student, while the lifetime learning credit (LLC) refunds up to $2,000 per year regardless of the number of qualifying students.
While the AOTC may be a better tax credit to choose for some, it can only be claimed for four years for each student, and it has other limitations. The LLC has fewer limitations, and there is no limit on the number of years you can claim it. Lifetime learners and nontraditional students may consider the LLC a better choice. Calculate the benefits for your situation.
The IRS warns taxpayers to be careful when claiming the credits. There are potential penalties for incorrectly claiming the credits, and you or your family should consult a tax professional or financial adviser when claiming these credits.

### Federal Work-Study Program

The Federal Work-Study Program provides part-time jobs through colleges and universities to students who are enrolled in the school. The program offers students the opportunity to work in their field, for their school, or for a nonprofit or civic organization to help pay for the cost of college. If your school participates in the program, it will be offered through your school’s financial aid office.

### Student Loans

Federal student loans are offered through the US Department of Education and are designed to give easy and inexpensive access to loans for school. You don’t have to make payments on the loans while you are in school, and the interest on the loans is tax deductible for most people. Direct Loans, also called Federal Stafford Loans, have a competitive fixed interest rate and don’t require a credit check or cosigner.

### Direct Subsidized Loans

Direct Subsidized Loans are federal student loans on which the government pays the interest while you are in school. Direct Subsidized Loans are made based on financial need as calculated from the information you provide in your application. Qualifying students can get up to $3,500 in subsidized loans in their first year, $4,500 in their second year, and $5,500 in later years of their college education.

### Direct Unsubsidized Loans

Direct Unsubsidized Loans are federal loans on which you are charged interest while you are in school. If you don’t make interest payments while in school, the interest will be added to the loan amount each year and will result in a larger student loan balance when you graduate. The amount you can borrow each year depends on numerous factors, with a maximum of $12,500 annually for undergraduates and $20,500 annually for professional or graduate students.
There are also total loan limits that apply to put a maximum cap on the total amount you can borrow for student loans.

### Direct PLUS Loans

Direct PLUS Loans are additional loans a parent, grandparent, or graduate student can take out to help pay for additional costs of college. PLUS loans require a credit check and have higher interest rates, but the interest is still tax deductible. The maximum PLUS loan you can receive is the remaining cost of attending the school.
Parents and other family members should be careful when taking out PLUS loans on behalf of a child. Whoever is on the loan is responsible for the loan forever, and the loan generally cannot be forgiven in bankruptcy. The government can also take Social Security benefits should the loan not be repaid.

### Private Loans

Private loans are also available for students who need them from banks, credit unions, private investors, and even predatory lenders. But with all the other resources for paying for college, a private loan is generally unnecessary and unwise. Private loans will require a credit check and potentially a cosigner, they will likely have higher interest rates, and the interest is not tax deductible. As a general rule, you should be wary of private student loans or avoid them altogether.

### Repayment Strategies

Payments on student loans will begin shortly after you graduate. While many websites, financial “gurus,” and talking heads in the media will encourage you to pay off your student loans as quickly as possible, you should give careful consideration to your repayment options and how they may impact your financial plans. Quickly paying off your student loans or refinancing your student loans into a private loan may be the worst option available to you.

### Payment Plans

The federal government has eight separate loan repayment programs, each with their own way of calculating the payment you owe. Five of the programs tie loan payments to your income, which can make it easier to afford your student loans when you are just starting off in your career. The programs are described briefly below, but you should seek the help of a licensed fiduciary financial adviser familiar with student loans when making decisions related to student loan payment plans.
The standard repayment plan sets a consistent monthly payment to pay off your loan within 10 years (or up to 30 years for consolidated loans). You can also choose a graduated repayment plan, which will begin with lower payments and then increase the payment every two years. The graduated plan is also designed to pay off your student loans in 10 years (or up to 30 years for consolidated loans). A third option is the extended repayment plan, which provides a fixed or graduated payment for up to 25 years. However, none of these programs are ideal for individuals planning to seek loan forgiveness options, which are discussed below.
Beyond the “normal” repayment options, the government offers five income-based repayment options: (1) the Pay As You Earn (PAYE) repayment plan, (2) the Revised Pay As You Earn (REPAYE) repayment plan, (3) the Income-Based Repayment (IBR) plan, (4) the Income-Contingent Repayment (ICR) plan, and (5) the Income- Sensitive Repayment (ISR) plan. Each program has its method of calculating payments, along with specific requirements for eligibility and rules for staying eligible in the program. Many income-based repayment plans are also eligible for loan forgiveness after a set period of time, assuming you follow all the rules and remain eligible.

### Loan Forgiveness Programs

Many income-based repayment options also have a loan forgiveness feature built into the repayment plan. If you make 100 percent of your payments on time and follow all of the other plan rules, any remaining loan balance at the end of the plan repayment term (typically 20 to 30 years) will be forgiven. This means you will not have to pay the remainder on your student loans.
This loan forgiveness, however, comes with a catch: taxes. Any forgiven balance will be counted and taxed as income during that year. So if you have a $100,000 loan forgiven, you could be looking at an additional $20,000 tax bill that year (assuming you were in the 20 percent marginal tax rate).
Another option is the Public Service Loan Forgiveness (PSLF) program for students who go on to work for a nonprofit or government organization. If eligible, you can have your loans forgiven after working for 10 years in a qualifying public service job and making 120 on-time payments on your loans. A major advantage of PSLF is that the loan forgiveness may not be taxed as income in the year the loan is forgiven.

### Consider Professional Advice

The complexity of the payment and forgiveness programs makes it difficult for non-experts to choose the best strategy to minimize costs. Additionally, the strict rules and potential tax implications create a minefield of potential financial problems. In 2017, the first year graduates were eligible for the PSLF program, 99 percent of applicants were denied due to misunderstanding the programs or having broken one of the many requirements for eligibility.https://www.forbes.com/sites/zackfriedman/2019/05/01/99-of-borrowers-rejected-again-for-student-loan-forgiveness/

### Your Rights as a Loan Recipient

As a recipient of a federal student loan, you have the same rights and protections as you would for any other loan. This includes the right to know the terms and conditions for any loan before signing the paperwork. You also have the right to know information on your credit report and to dispute any loan or information on your credit file.
If you end up in collections, you also have several rights, even though you have missed loan payments. Debt collectors can only call you between 8 a.m. and 9 p.m. They also cannot harass you, threaten you, or call you at work once you’ve told them to stop. The United States doesn’t have debtors’ prisons, so anyone threatening you with arrest or jail time is automatically breaking the law.
Federal student loans also come with many other rights, including the right to put your loan in deferment or forbearance (pushing pause on making payments) under qualifying circumstances. Deferment or forbearance can be granted if you lose your job, go back to school, or have an economic hardship. If you have a life event that makes it difficult to make your payments, immediately contact the student loan servicing company on your loan statements to see if you can pause your student loan payments.
The Consumer Financial Protection Bureau (CFPB) has created a series of sample letters you can use to respond to a debt collector. You can also file a complaint with the CFPB if you believe your rights have been violated.

### Applying for Financial Aid, FAFSA, and Everything Else

The federal government offers a standard form called the Free Application for Federal Student Aid (FAFSA), which qualifies you for federal financial aid and also opens the door for nearly all other financial aid. Most grants and scholarships require you to fill out the FAFSA, and they base their decisions on the information in the application.
The FAFSA only requests financial aid for the specific year you file your application. This means you will need to file a FAFSA for each year you are in college. Since your financial needs will change over time, you may qualify for financial aid even if you did not qualify before.
You can apply for the FAFSA through your college’s financial aid office or at studentaid.gov if you don’t have access to a financial aid office. Once you file a FAFSA, any college can gain access to the information (with your approval), so you can shop around for financial aid offers from colleges.

### Maintaining Financial Aid

To maintain your financial aid throughout your college career, you need to make sure you meet the eligibility requirements for each year you are in school, not just the year of your initial application. The basic requirements include being a US citizen or eligible noncitizen, having a valid Social Security number, and registering for selective service if required. Undocumented residents may receive financial aid as well and should check with their school’s financial aid office.
You also must make satisfactory academic progress, including meeting a minimum grade-point average, taking and completing a minimum number of classes, and making progress toward graduation or a certificate. Your school will have a policy for satisfactory academic progress, which you can get from the financial aid office.

### What to Do with Extra Financial Aid Money

One expensive mistake that students make with financial aid money is spending the money on non-education expenses. Students often use financial aid, including student loans, to purchase clothing, take vacations, or dine out at restaurants. Nearly 3 percent spend student loan money on alcohol and drugs.https://studentloanhero.com/featured/smart-dumb-money-moves-students/ These non-education expenses are major contributors to student loan debt, which will make it harder for you to afford a home, take vacations, or save for your retirement after you graduate.
When you have extra student loan money, consider saving it for future education expenses. Just like you will need an emergency fund all your adult life, you will want an emergency fund for college when expensive books or travel abroad programs present unexpected costs. If you make it through your college years with extra money in your savings, you can use the money to help pay down debt.

### Friends & Family Matter

Ana has several ideas for what to major in and because she has had to take out student loans to cover the costs of college, she is worried about getting a job after graduation that pays enough for her to afford the monthly loan payments. Fortunately, she has met with her financial aid advisor who has provided her with a few options that could help her cover her costs for the remainder of her time in college.
One of her options is to major in education and become a middle school science teacher. She likes this option because she loves science and working with young people. She finds out that her state has a student grant program for teachers in STEM (science, technology, engineering, and mathematics) fields who agree to teach for five years in a rural part of the state, a place that is several hours from Ana’s hometown. The program provides grants to cover the remaining costs of a degree for the promise of the graduate’s teaching in the designated district for the entire 5 years. However, the program requires that Ana commit to the major now, complete the degree, and sign on for at least 5 years of teaching service. If she breaks any part of the requirements, the grants will turn into loans that she will owe the state.
While Ana is excited by the opportunity to earn grant money, she is concerned about being so far away from her family for that long and the commitment to the degree and length of service. Her family still relies on her and had planned for her to be close to them after graduation. While this is not the only option that Ana has for covering the costs of her education, it is the most promising one. The others are scholarships and internships that are highly competitive, and Ana is not confident that she has the grades or the experiences to compete with other more accomplished or needy students.

### Let’s Think About It

Ana has several options. Think through the consequences of each one, and choose the best option or create your own option.
1. Ana majors in education and applies for the grant program even if it means being away from her family for an extended time and carries the possibility the grants will become loans if she doesn’t fulfill the commitment.
2. Ana chooses to apply for the scholarships and internships only.
3. Ana applies for the grant program and will wait until after she graduates to decide if she wants to maintain the commitment.

### Let’s Talk About It

Ana’s situation sounds as if it can help her get the financial support she needs, but it comes with a long-term commitment that she and her family may not be ready for. She will need to think about the pros and cons of any of her next steps and communicate what she is thinking to her family. Here are some suggestions for communicating with others about the dilemma that Ana is facing:
1. “I have an opportunity to get grants to cover my educational costs, but it comes with a big commitment. Can we talk about how this decision may affect all of us now and in the future?”
2. “I have explored different options for paying for college, and this one seems to be the best one. Can you help me talk through the others to see if there is anything else I need to consider?”
3. “I have to admit I am nervous about locking myself into such a commitment even though I know the grant money is much needed for me to continue my degree with less stress. Can I share with you what I am feeling and why?”
Whatever choice you would make in this situation, it is always best to communicate clearly your needs, your concerns, and even your uncertainties.

### Summary and Next Steps for College Success

There are a lot of benefits to good financial management. Primarily, it generally allows you to do more of what you want with your life. When you have poor financial habits, too much of your money goes into other people’s pockets. But when you have good financial management habits, you can afford to do more because you have worked hard, separated needs from wants, saved and invested, and avoided credit card and debt pitfalls.
However, financial literacy is a topic that many college students struggle with, but good financial planning habits will benefit you long after your college days are behind you. To make the most of what you have learned about financial literacy, specifically student debt and strategies for managing your finances in college, consider what else you would like to work on. Choose one of the following to explore further this term:
1. Create a budget with your expenses and income. Look for ways to eliminate unnecessary spending and increase your ability to pay for your college expenses.
2. Research college grants, scholarships, and loans and create a list of potential opportunities that you can take now and in the future to help you cover your costs while in college. Rank your options.
3. Develop an emergency fund and guidelines for when to use it.
4. Research the best credit card options for you at this time.

### Checking In: Your College Readiness Checklist

### Summer


# Planning Your Future

## Introduction

### Student Survey

How do you feel about your readiness to create an academic and life plan? These questions will help you determine how the chapter concepts relate to you right now. As you are introduced to new concepts and practices, it can be informative to reflect on how your understanding changes over time. Take this quick survey to figure it out, ranking questions on a scale of 1—4, 1 meaning “least like me” and 4 meaning “most like me.”
1. I know why I want to go to college and what I want to accomplish.
2. I have set both short- and long-term academic goals.
3. I am familiar with the requirements I must complete and options I must select to obtain a college degree.
4. I am familiar with the resources, tools, and individuals who can assist me in developing an effective plan for success.
You can also take the Chapter 9 survey anonymously online.

### About This Chapter

Among the most celebrated differences between high school and college is the freedom that students look forward to when they complete their mandatory high school education and take up the voluntary pursuit of a college degree. Though not every college freshman comes fresh from high school, those who do might be looking forward to the freedom of moving away from home onto a campus or into an apartment. Others might be excited about the potential to sleep in on a Monday morning and take their classes in the afternoon. For others, balancing a class schedule with an already-busy life filled with work and other responsibilities may make college seem less like freedom and more like obligation. In any case, and however they might imagine their next experience to be, students can anticipate increased freedom of choice in college and the ability to begin to piece together how their values, interests, and developing knowledge and skills will unfold into a career that meets their goals and dreams.
By the time you complete this chapter, you should be able to do the following:
1. Learn to set short-term goals that build toward a long- term goal, and plan how you will track progress toward your goals.
2. List the types of college certificates, degrees, special programs, and majors you can pursue, as well as general details about their related opportunities and requirements.
3. Take advantage of resources to draft and track an academic plan.
4. Recognize decision-making and planning as continuous processes, especially in response to unexpected change.


# Planning Your Future

## Setting Goals and Staying Motivated

Questions to Consider:
1. How do I set motivational goals?
2. What are SMART goals?
3. What’s the importance of an action plan?
4. How do I keep to my plan?
Motivation often means the difference between success and failure. That applies to school, to specific tasks, and to life in general. One of the most effective ways to keep motivated is to set goals.
Goals can be big or small. A goal can range from I am going to write one extra page tonight, to I am going to work to get an A in this course, all the way to I am going to graduate in the top of my class so I can start my career with a really good position. The great thing about goals is that they can include and influence a number of other things that all work toward a much bigger picture. For example, if your goal is to get an A in a certain course, all the reading, studying, and every assignment you do for that course contributes to the larger goal. You have motivation to do each of those things and to do them well.
Setting goals is something that is frequently talked about, but it is often treated as something abstract. Like time management, goal setting is best done with careful thought and planning. This next section will explain how you can apply tested techniques to goal setting and what the benefits of each can be.

### Set Goals That Motivate You

The first thing to know about goal setting is that a goal is a specific end result you desire. If the goal is not something you are really interested in, there is little motivational drive to achieve it. Think back to when you were much younger and some well-meaning adult set a goal for you—something that didn’t really appeal to you at all. How motivated were you to achieve the goal? More than likely, if you were successful at all in meeting the goal, it was because you were motivated by earning the approval of someone or receiving a possible reward, or you were concerned with avoiding something adverse that might happen if you did not do what you were told. From an honest perspective in that situation, your real goal was based on something else, not the meeting of the goal set for you. To get the most from the goals you set, make sure they are things that you are interested in achieving.
That is not to say you shouldn’t set goals that are supported by other motivations (e.g., If I finish studying by Friday, I can go out on Saturday), but the idea is to be intellectually honest with your goals.

### Set SMART Goals

Goals should also be SMART. In this case, the word smart is not only a clever description of the type of goal, but it is also an acronym that stands for Specific, Measurable, Attainable, Relevant, and Time-bound. The reason these are all desirable traits for your goals is because they not only help you plan how to meet the goal, but they can also contribute to your decision-making processes during the planning stage.
What does it mean to create SMART goals?
1. Specific—For a goal to be specific, it must be defined enough to actually determine the goal. A goal of get a good job when I graduate is too general. It doesn’t define what a good job is. In fact, it doesn’t even necessarily include a job in your chosen profession. A more specific goal would be something like be hired as a nurse in a place of employment where it is enjoyable to work and that has room for promotion.
2. Measurable—The concept of measurable is one that is often overlooked when setting goals. What this means is that the goal should have clearly defined outcomes that are detailed enough to measure and can be used for planning of how you will achieve the goal. For example, setting a goal of doing well in school is a bit undefined, but making a goal of graduating with a GPA above 3.0 is measurable and something you can work with. If your goal is measurable, you can know ahead of time how many points you will have to earn on a specific assignment to stay in that range or how many points you will need to make up in the next assignment if you do not do as well as you planned.
3. Attainable—Attainable or achievable goals means they are reasonable and within your ability to accomplish. While a goal of make an extra one million dollars by the end of the week is something that would be nice to achieve, the odds that you could make that happen in a single week are not very realistic.
4. Relevant—For goal setting, relevant means it applies to the situation. In relation to college, a goal of getting a horse to ride is not very relevant, but getting dependable transportation is something that would contribute to your success in school.
5. Time-bound—Time-bound means you set a specific time frame to achieve the goal. I will get my paper written by Wednesday is time-bound. You know when you have to meet the goal. I will get my paper written sometime soon does not help you plan how and when you will accomplish the goal.
In the following table you can see some examples of goals that do and do not follow the SMART system. As you read each one, think about what elements make them SMART or how you might change those that are not.

### Long-Term Goals

Once you have learned how to set goals that are specific and measurable, consider developing both long-term and short-term goals. Long-term goals are future goals that often take years to complete. An example of a long-term goal might be to complete a Bachelor of Arts degree within four years. Another example might be purchasing a home or running a marathon. While this chapter focuses on academic and career planning, long-term goals are not exclusive to these areas of your life. You might set long-term goals related to fitness, wellness, spirituality, and relationships, among many others. When you set a long-term goal in any aspect of your life, you are demonstrating a commitment to dedicate time and effort toward making progress in that area. Because of this commitment, it is important that your long-term goals are aligned with your values.

### Short-Term Goals

Setting short-term goals helps you consider the necessary steps you’ll need to take, but it also helps to chunk a larger effort into smaller, more manageable tasks. Even when your long-term goals are SMART, it’s easier to stay focused and you’ll become less overwhelmed in the process of completing short-term goals.
You might assume that short-term and long-term goals are different goals that vary in the length of time they take to complete. Given this assumption, you might give the example of a long-term goal of learning how to create an app and a short-term goal of remembering to pay your cell phone bill this weekend. These are valid goals, but they don’t exactly demonstrate the intention of short- and long-term goals for the purposes of effective planning.
Instead of just being bound by the difference of time, short-term goals are the action steps that take less time to complete than a long-term goal, but that help you work toward your long-term goals. To determine your best degree option, it might make sense to do some research to determine what kind of career you’re most interested in pursuing. Or, if you recall that short-term goal of paying your cell phone bill this weekend, perhaps this short-term goal is related to a longer-term goal of learning how to better manage your budgeting and finances.

### Setting Long- and Short-Term Goals

Consider this scenario: While meeting with an academic advisor at his college to discuss his change of major, Sunil was tasked with setting long- and short-term goals aligned with that major. He selected a degree plan in business administration, sharing with his advisor his intention to work in business and hopefully human relations in particular. His advisor discussed with him how he could set short-term goals that would help his progress on that plan. Sunil wondered if he should be as specific as setting short-term goals week by week or for the successful completion of every homework assignment or exam. His advisor shared that he could certainly break his goals down into that level of specificity if it helped him to stay focused, but recommended that he start by outlining how many credits or courses he would hope to complete. Sunil drafted his goals and planned to meet again with his advisor in another week to discuss.
Sunil worried that his list of short-term goals looked more like a checklist of tasks than anything. His advisor reassured him, sharing that short-term goals can absolutely look like a checklist of tasks because their purpose is to break the long-term goal down into manageable chunks that are easier to focus on and complete. His advisor then recommended that Sunil add to his plan an additional note at the end of every other semester to “check in” with his advisor to make certain that he was on track.

### Planning for Adjustments

You will recall from the SMART goals goal-setting model that goals should be both measurable and attainable. Far too often, however, we set goals with the best of intentions but then fail to keep track of our progress or adjust our short-term goals if they’re not helping us to progress as quickly as we’d like. When setting goals, the most successful planners also consider when they will evaluate their progress. At that time, perhaps after each short-term goal should have been met, they may reflect on the following:
1. Am I meeting my short-term goals as planned?

2. Are my short-term goals still planned across time in a way that they will meet my long-term goals?

3. Are my long-term goals still relevant, or have my values changed since I set my goals?

While departing from your original goals may seem like a failure, taking the time to reflect on goals before you set them aside to develop new ones is a success. Pivoting from one goal to new, better-fitting goal involves increased self-awareness and increased knowledge about the processes surrounding your specific goal (such as the details of a college transfer, for example). With careful reflection and information seeking, your change in plans may even demonstrate learning and increased maturity!
Keep in mind that values and goals may change over time as you meet new people, your life circumstances change, and you gain more wisdom or self-awareness. In addition to setting goals and tracking your progress, you should also periodically reflect on your goals to ensure their consistency with your values.