College is a financially stressful time for many college students. Not only is it the first time that many students have had to deal with the bulk of their financial burden and responsibilities, but most college students do not have the benefit of a sufficient stable income. Despite financial aid and scholarships, many college students are forced to work long hours just to pay for tuition. Add on the cost of books, groceries, insurance payments, cell phone bills and other essentials, its not surprising that most people graduate college already knee-deep in debt.
Most would agree that academic performance should be the most important goal for any college student. For some, this means working less in order to study more. However, no matter what their income, there are certain steps that any college student can take to help insure that they leave college with as little debt as possible. After all, we all know that a college education is much more than what is learned in the classroom. Learning to manage money is one of the most important lessons that college can provide.
Once you get the hang of it, managing your finances doesn’t have to take a lot of time or effort and you will be forming healthy habits that will continue to benefit you throughout your life.
Here are a few guidelines to help get you started:
Make a budget. Yes, I know its not how you’d prefer to spend your Friday evening, but in the end you will be glad you did. Many of us don’t realize where our money is really going until we actually take the time to write down our expenses. It’s much easier to overspend when we don’t keep track of our purchases.
Start by writing down all of your essential expenses, such as tuition, rent, car insurance, groceries, cell phone, gas money, etc. Then write down any sources of income, such as weekly paycheck, financial aid and money from student loans or scholarships. Now take the two totals and compare them. Hopefully, your income exceeds your expenses, otherwise it is time to look for ways to cut back on spending or start filling out job applications. If your budget shows a positive balance, you should decide ahead of time where you want this money to go. Ideally, a percentage should go into savings or low-risk investments every month.
Don’t worry, having a budget doesn’t mean that you can’t buy a new pair of jeans or indulge your occasional late night pizza craving once in awhile – it just means that you have to include entertainment and other non-essential expenses
into your monthly calculations. Once you’ve created your budget, the important thing is to stick to it. If your budget only allows for $40 per month for entertainment, keep track of what you spend eating out with friends, going to the movies or at the bar.
2. Avoid credit cards. Credit cards may seem like a college student’s best friend, but in reality they are typically your worst enemy. They may be convenient, but it is just too easy for even the most financially responsible student to get carried away. Relying on credit cards can lead to a dangerous pattern of impulse buying and before long balances are adding up and the amount of cards in your wallet keeps increasing. High interest rates and other fees can add hundreds or even thousands of dollars to your credit card debt.
If you must keep a credit card around for emergency situations, keep only one and remember that a new pair of shoes does not constitute an emergency. Don’t just sign up for the first credit card offer that you receive. Shop around and find the best interest rate. Credit card companies love to suck you in by offering low introductory rates, but then jack up rates when the introductory period ends. If you do need to make charges when unexpected expenses arise, such as car repairs or medical bills, try to pay off your balance in full at the end of the month.
3. Don’t rely too heavily on student loans. While it’s typically better to take out student loans than it is to rely on credit cards, many students look at loans as “free money”. As a freshman or sophomore, graduation can seem so far away, but time flies and soon your student loans will begin accruing interest and you will be required to make hefty monthly payments. Even with a low interest rate, the more loans you have taken out the more interest that you will accrue. While its okay to use student loans for essential expenses like rent or food, don’t think of it as an excuse to go on a shopping spree or a means of funding your spring break.
4. Stick to it. Like anything else, a financial management plan only works when you stick to it. Expect there to be a few hiccups along the way; nobody’s perfect after all and it will be hard at first if you are used to being financially irresponsible. In time it will become less difficult, especially as your bank balance grows and you can see the rewards of properly managing your money. Unless you started out with a significant amount of savings, you’re most likely not going to graduate college without at least a little debt under your belt. However, if you spend wisely and budget properly, you can keep this debt to a very manageable amount that will be fairly easy to pay off once you enter the work world.