Originally these tips were geared towards college students and labeled Finance 101. However, I feel like these simple tips are more appropriate to the general populace rather than financially uneducated students because they’re a bit vague. They don’t really offer any how-to advice to go along with these suggestions, so I thought I’d add my two cents worth with each tip. Really, though, I expected better of a credit bureau.

Tip # 1 – Understand Finances

I’m not kidding! TransUnion really wrote “understand finances.” Well hell, if it were that easy, we wouldn’t have people in debt and confused about it. Telling a college kid who hasn’t had any formal financial education that they need to understand finances is like telling an English major they need to take a Quantum Physics class. It doesn’t really make a lot of sense.

So, where do we start with this tip? Well, first I think it’s important for everyone – college students and the general populace alike – to know what a credit report is and how it affects your quality of life. There are several sources that can give you that information and more, including parents (hopefully), your bank, or the credit bureaus.

For general purposes, a credit report is a collection of your credit activities, and by credit I mean things like credit cards and loans – anything you have financed could be listed on this report. It will show potential lenders what kind of accounts you have, how long you’ve had them, the balances you currently carry, and if there’s been any action against you for late or slow pays.

This information is important to become familiar with because it has a tremendous impact on your quality of life. Everything down to you car insurance uses your credit report and subsequent score as a measure of your ability to repay. If you want to be able to get decent rates and save yourself a ton of money on interest when it comes time to buy a house or a car, then the best thing you can do for yourself is to keep an eye on your credit. Regularly check your report to ensure there isn’t any negative activity that will affect your score. The best thing you can do to ensure that your actions are not the cause of a score drop is to pay your bills on time.

Tip # 2 – Watch For Danger Signs

In this case, TransUnion was referring to the fact that collections can have a huge impact on your credit score. Any negative activity that shows up can stay there for 7 years, and even then you’re not in the clear. If you have outstanding debt and your 7 year sentence is nearing an end, don’t get too happy. Collection agencies and other companies reporting the collection have the right to put it back on your record for another 7 years if you haven’t paid.

Even things like cell phones and utility bills that don’t show up on credit reports can end up causing you a heap of trouble. Any outstanding debt that is passed on to a collection agency can be reported to your credit report, so if you thought you could skip out on that cell phone bill, think again. The best thing to do is to pay off any outstanding debt, preferably before the 7 year mark, and keep accurate records of when and how you paid it off.

Tip # 3 – Create a Spending Plan

We all know what this is…a budget! Yay, it’s your favorite ‘B’ word!

Hopefully everyone here knows how to make a budget…I know Jonathan and I have talked a lot about it. In case you don’t, here’s a refresher.

As a quick overview, a budget is something you set up to help control your spending and your savings. The goal is to spend less than you earn, but sometimes that takes a little work. Start by adding up all of your expenditures – every last thing, right down to that cup of coffee you buy every morning before work. You need to know how much money you’re spending and where it’s going to. If you need to keep a money journal for a month, then do so. But, in order to find the areas where you can trim the fat, you have to know where the money goes.

Once you’ve got the numbers in front of you, realistically, consider where you can make some changes so that you spend less. If that means you start by cutting your five cups of coffee a week down to three, then start there. Whatever it is…however, I advise that you not cut your entertainment completely out of the budget. You need to have some fun!

Tip # 4 – Prepare For Emergencies

It’s important to prepare for the worst-case scenario. I know a lot of people have a hard time with this because to them, the money is just sitting there doing nothing for them. But, the point of emergency money is to keep it liquid just in case something happens and you need immediate access to it. If the funds are tied up, you may have to pay penalties in order to access them, and that’s usually the interest you’ve accrued anyway. So, it doesn’t really matter in that case.

Ideally, you should have 3-6 months worth of expenses saved. That means, if you lost your job or became injured, you would have money to cover your bills for 3-6 months. However, at a minimum, people really should have 2-3 months saved up. I know Ramsey talks a lot about $1000 to get you started, and that’s fine, so long as you come back and build it to at least 3 months. But, in this economy where everything is on shaky grounds, it’s better to be safe than sorry.

Tip # 5 – Consider Consolidating

This tip actually applies more to students in the frame that TransUnion set up here. What they’re talking about is student loans. Graduates who consolidate within six months of graduating college can save even more money. However, this tip still applies to the general population, as well.

If you’re in debt, consolidating can save you money and aggravation. Combine all of your higher interest debts and payments into one lower interest payment and you’ll be making your life a lot easier. Of course, with that comes the responsibility not to run up your other credit cards again, but so long as you can handle that, then you’ll do well.

Ok, minus my commentary, how helpful do you think those five tips would have been to college students?

Related posts:

1. 7 Ways Students Ruin Their Credit
2. Why Pre-Approved Credit Offers Are a Myth
3. 8 Tips: Handling Credit Card Debt During a Divorce
4. TrueCredit – Free TransUnion Credit Monitoring
5. Should You Pay Off Old Debts?