Financial Tips for College Students
If you’re about to head to college for the first time, then you’re likely excited about the idea of being on your own. You have so much to look forward to, but your new adventure comes with greater responsibilities, especially where money is concerned. College students graduate with an average of $4,000 in unsecured credit card debt. Entering freshman year is not the time to run up unnecessary expenses. Creating a budget before you leave for college can help keep you from racking up unnecessary debt as well as save for future goals. Knowing how to budget appropriately can help you manage your money more effectively and meet your financial obligations.
Your dorm room
Before you determine your budget for the school year, it’s important to create a separate budget for setting up your dorm room. Start with a realistic budget for your dorm room and make a list of exactly what you think you’ll need, then divide that list into ‘needs’ and ‘wants.’ Focus on the ‘needs’ list first before you tackle the extra comforts and décor. However you decide to decorate your dorm room, start with a clear budget, and fit your décor in to the budget and not the budget to the décor. You can learn more about budgeting for your dorm room here.
First, let’s set up a monthly budget.
The most important thing you should do for your finances is set up a budget. When creating your college budget, you’ll first want to look at your fixed expenses. These are the ones that will stay the same, or nearly the same, each month. In this category, you’ll include things like housing and related living expenses, transportation, cell phone, and insurance. After you’ve sorted out your fixed expenses, you can determine your variable expenses. These expenses are most likely to change from month to month. If you’re not participating in a college meal plan, you’ll also want to include food in your variable expenses. You’ll also want to plan for things like toiletries, personal services, school-related expenses, clothing, and entertainment costs.
Read More: How to Create a Budget
Getting an app for budgeting is an easy way to stay organized and committed. There are a lot of different budget apps out there that have different financial goals. An app like Mint is simply designed to help you categorize and track expenses. Other apps like Personal Capital help you build savings and work on investments. Some apps track your expenses automatically while others require you to manually enter everything. Do your research to find which app works best for your college lifestyle.
Build on your credit, the right way
Now that you’ve established your budget, it’s time to start building your credit. Credit card issuers know how important it is for students to have access to credit. Credit cards can help you build credit as a college student. Many card issuers have special student credit cards tailored to student needs. Student credit cards don’t require a previous credit history to apply for and often offer school- related perks, like cash back for good grades. When used responsibly, using a student credit card can help you grow your credit score. However, using a student credit card irresponsibly can destroy your credit score.
Credit cards are not to be treated as an infinite source of cash. High credit balances and missed payments can prolong the time it takes for students to get on their feet after graduation. Poor credit can jeopardize job searches, apartment rentals, and home purchases. Establishing a solid record of credit card payments can help students build credit, which will, in turn, make future loans and purchases or a car or apartment much easier to secure.
Only spend what you know you can afford to pay back, and pay your card off in full each month. This will keep credit card fees away and help you build an excellent credit score. Getting an early start on building credit can help you achieve your financial goals before and after graduation, as well as help you obtain financial products and lower interest rates in the future.
Start saving now
As you go through college, saving becomes more important. Start putting money away now for emergencies and bigger-ticket purchases, such as a spring break trip or a new car. Contributing even a few dollars a month to a savings account can pay off down the road and help develop good financial habits. Try to save a little each month to build up an emergency fund. If you’re only working during the summer, designate a good amount of your summer earnings to your emergency fund. If you’re working throughout the school year as well as in the summer, select an amount of your earnings to go towards your emergency fund throughout the year. Many college-aged students believe that emergencies won’t happen to them, but they’re just as susceptible to financial emergencies as everyone else.
Read More: Why Everyone Needs And Emergency Fund
If you start saving in college while your paycheck is small, it helps you establish a savings habit. You’ll continue to save more and more money as you get your hands on a real paycheck after you’ve graduated. If you struggle to save a portion of your earnings on payday, make the decision once and for all and automate your savings. Most banks have a link on their website to help you set this up. If you automate your savings, you won’t think twice about saving money, which makes saving much easier.
Be smart about your spending
Once you have all of your school supplies, your budget set, your student credit card ready, and your savings started, you need to be smart about how you’re spending your money. If you have a proper budget, you should stick to it. However, there are a lot of temptations in college, and it can be easy to stray away from your budget. Even if a purchase is not likely to upset your budget, if you don’t need it, try to not buy it. Instead, it may be a better idea to put that money towards your savings. If you must choose between two ‘needs,’ prioritize the most urgent item and buy the second item later. Try as much as possible not to borrow money unless necessary.
Taking advantage of student discounts will also help you be smart about your spending. You’re investing significant funds to attend school, so it only makes sense that you take advantage of student discounts whenever possible. You may get discounts on food, movies, and transportation for example. If you’re not sure if there’s a discount offered, just ask. Keep your student ID on hand when making purchases just in case there’s a student discount offered. You might only be saving a small amount, but that small amount will add up over time.
As a college student, you may not have a ton of extra money now, but making smart decisions about how to manage your money in college could help you make the most of your income after you graduate. Learning to manage money while still in school can help students live within their means, avoid consumer debt, and line up for future financial success. By keeping an eye on day-to-day expenses, students can prepare for life after graduation, when their earnings will need to meet competing priorities.
Katherine Fatta is the Social Media and Content Specialist at Navicore Solutions. She creates fun and informative social media posts that engage the public. She’s also the host of Navicore’s podcast, ‘Millennial Debt Domination.’ You can listen to our podcast here.