With the new school year right around the corner, many young adults will be preparing to head off to college for the first time. While going to college is an amazing experience that can help you grow as an individual, for many freshmen, going away to college also means being in charge of your own finances for the first time.
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While this presents a great learning opportunity that can help prepare you for life after school, you also need to take steps to ensure that you do not spend more than is necessary during college, as frivolous spending now can cause a financial setback when you are out of college.
To help you avoid the many pitfalls that can come with managing your own money, we’ve provided a few tips to help get you started on this exciting new chapter of your life:
While you've likely heard this before, it is important not to underestimate the value of creating a budget to help you keep track of your finances. Without proper budgeting, it is hard to keep track of how much money you are earning, how much you are spending, and how you should be prioritizing your money, making it easy to overspend and potentially go into serious debt. First, identify all of your sources of income for the year including paychecks, grants, loans, and family contributions. This will help you figure out how much money you have to spend throughout the semester. Next, try to estimate your expenses for the semester such as books, housing, school materials, and food.
This will help you figure out how much you can afford to spend each month by giving you a better idea of what your cash flow will be. Budgeting isn’t just about saving money, it’s about knowing what you can spend on fun things like trips with friends, nights out, or that new car you’ve had your eyes on, without breaking the bank. While you may find it useful to use a spreadsheet to keep track of your finances and how much you can afford to spend each month on food, gas, and entertainment, there are also plenty of free tools and apps that provide a simple way to track your money.
Free Budget Apps To Keep You On Track:
Student loans are an essential tool that ensures students have the money to pay for tuition as well as room and board. However, if you plan on taking out loans to pay for school, it is important that you are smart about how much you borrow and how you use your student loan money.
When taking out a large student loan, students are often tempted to take out a larger loan than they need so that they will have extra money to spend on clothing and entertainment. However, if you use student loan money for anything other than the essentials, this could come to haunt you after graduation when your loan payments kick in. Not only will your large loan mean larger monthly payments, but it also accumulates serious interest on a large loan over time.
Being fiscally responsible in college often includes finding ways to make your limited budget go further. You will become an expert at finding ways to save money, such as by using campus fitness centers instead of paying for a costly gym membership. Perhaps the easiest way to save money in college is by being on the lookout for student discounts. It is common for businesses that cater to young adults such as movie theaters, restaurants near college campuses, and software companies to offer significant student discounts.
Any time you make a purchase, you should make sure to ask if they have a student discount, as you may be surprised by how many businesses offer some sort of incentive or discount to college students. Additionally, if you do most of your shopping online, it can be helpful to know in advance which retailers offer student discounts, as this can help stretch your budget for the semester.
During college, you will want to make a point of starting to build a credit history, as your credit score will play a key role after college by helping you qualify for things like auto loans and apartment rentals. A great way to start building credit in college is by taking out a credit card and making payments on time each month. However, it is important that you do not fall into the trap of spending more than you can afford to pay off each month, as you could quickly find yourself with mounting debt at a high interest rate, which could be hard to pay off.
Exiting college with significant credit card debt can hold you back for years, so it is important that you are cautious if you choose to take out any credit. Start by taking out a credit card with a low spending limit, and make a point of paying it off after each purchase you make with it. This will help you build credit while also teaching you healthy spending habits that will help you avoid falling into significant credit card debt.
One of your largest expenses in college will be your textbooks, with each class potentially requiring several hundred dollars worth of books. One of the biggest mistakes you can make is going to the campus bookstore and buying your books off the shelf, new. In fact, you should try to avoid the campus bookstore altogether if possible, as books sold there tend to have inflated prices.
An easy way to save money would be to buy your school books from retailers like Amazon or eBay, as you will likely pay a fraction of the price that you would have spent for the same book on campus.
Important Note: Just make sure that you purchase the right edition of each book, as some professors expect students to have a particular version of the book specified in the syllabus.
Before you start college, you will want to open a checking account with a bank to deposit your newly acquired student loan money, as this will help you keep track of your spending. However, instead of going to the closest bank and opening an account, you should take the time to research your options, as different banks offer different interest rates and rewards to their customers.
If you are looking to open a new bank account, take a moment to consider the benefits of joining mph.bank. Not only do we offer a competitive interest rate that is higher than the national average, but we also offer additional benefits such as referral awards for each new account you refer. Your new friends at college could become your new source of income as well!