Tuesday, Nov. 10, 2009
SIDEBAR: K-STATE EXPERT SAYS COLLEGE STUDENTS SHOULD ASK THEMSELVES THREE KEY QUESTIONS BEFORE INCURRING MORE DEBT
MANHATTAN -- Jodi Kaus, director of Kansas State University's Powercat Financial Counseling, said that college students should ask themselves the following three questions when considering whether to take on more debt:
* Is the item I'm taking on debt for a need or want? "If you go into debt to afford a vacation, that's bad debt," Kaus said. Things like a house or college education are good investments because they gain value over time, she said.
* Am I going to pay interest on the purchase and at what rate? Paying for educational expenses with a high-interest credit card is not wise when lower interest options -- such as student loans -- are available. As a general rule, the lower the rate the better. Also, remember to pay off your credit card balance in full each month so you pay no interest, Kaus said.
* Relative to my current income and other debts, can I afford this purchase? A quick and honest assessment should tell you whether you are overextending yourself or not. Everyone should know what money they have coming in, what their recurring bills are and what kind of cushion they should have in case of an emergency, Kaus said.
"A budget will help you focus your spending on what is important and help you set financial goals. It also can help safeguard you from debt, by helping you know your limits before you exceed them," Kaus said. "Creating a budget can help you be prepared for unexpected expenses and emergencies, reduce your debt, and focus on long-term financial goals."
She recommends the financial tools on K-State's CashCourse Web site at http://www.cashcourse.org/ksu for budgeting and general personal finance information.