A Short Guide To Financial Planning For Students

Going to college can be exciting, fun…and expensive. And we’re not just talking about tuition, room and board. There can be a lot of unexpected, small expenses that can add up. Expenses like new clothes, school supplies, books, furniture, a computer, and spending money. Get a good start on your higher education by learning, or brushing up on, some personal finance skills while you’re hitting the books. Here are a few tips to help you stay on top of your expenses and be financially fit come graduation day:

 

  • Start out with a “true” picture. Get in the habit of tracking the money you have coming in and what you are spending it on. If you are like most people, you are getting money to pay all your college bills from various sources (i.e. student loans, family financial assistance, grants, scholarships, etc.). List all your sources of money, the amounts, and all the categories of expenses that the money has to pay for (i.e. tuition, room and board, books, phone bill, food, transportation). Remember to note how long each source of money has to last. For example, a loan may have to pay for more than just one year’s worth of expenses. You don’t want to think you can spend money now, when in reality it has to be used for future expenses.
  • Don’t let debt “sneak” up on you. You don’t want to arrive at graduation day and suddenly realize how much income you’ll need just to pay back your student loans and credit card debt. Keep track not only of what regular expenses you have (i.e. rent, car insurance, gas, tuition, food, etc.) but also of your large debts such as financing for school (i.e. student loans, private loans, financial assistance from family members, etc.)
  • Be very careful about using credit cards. It can be easy to start school with student loans, take a job or get some financial assistance from your family for regular expenses, and still feel like you’d like a little more financial “breathing room.” It can be additionally hard when new friends – some of whom have more spending money than you – want you to go out and do things with them. Things that cost money. That’s when it can be hard to ignore those credit card applications that fill your mailbox.It can seem like an easy answer to get a credit card to help make ends meet or finance small, or “fun,” purchases, or nights out, but it doesn’t take long for it to become a habit to use credit cards to finance your lifestyle. And once you are living and spending above what your overall financial situation can sustain, credit cards can be a hard habit to break.

    The first thing to remember is that just because you’re offered – or even approved – for a credit card doesn’t mean you have enough income to pay for the bills. Next, if you do apply for and get a credit card, get a clear picture of how much you’re charging by subtracting your charges from your checkbook (if you have a checking account). That way when the bill comes in the mail you will already have the money set aside to pay the full amount.

    If you find yourself not paying the full amount after three or four months, consider cutting up your credit card and instead using a charge card (that requires payment in full every month) or using a debit card that withdraws money directly from your designated (checking/savings) account for each purchase or charge.

  • Stick to cash. There’s something about actually taking the money out of your wallet that can quickly put spending into perspective. Instead of paying with a credit card or by check, try paying for all of your expenses (or at least your day-to-day miscellaneous and entertainment expenses) with cash. Decide in advance how much miscellaneous spending money you need for a week and take out only that much cash at the beginning of the week (or for each pay period). Having to pay cash for items or services will make you much less likely to overspend.
  • Be wise. Identity theft is on the rise. Identity theft can be more than a nuisance. If someone obtains your personal or financial information, they can create serious problems that can take you years to resolve. Protect your personal and financial information — and that includes your account numbers, your ATM pin number, your Social Security number and your on line passwords — by keeping a close eye on your wallet or purse at all times, shredding receipts or bill statements, and safeguarding your online and bankcard passwords…even from your friends.
  • Balance your checkbook before you “bounce.” If you’ve never had, or used, a checking account, it’s a very good idea to learn how to balance your checkbook before writing a flurry of checks and finding you don’t have the money to cover them all. Take a minute to ask a clerk at your bank for help, or family or friends. If you have had a problem bouncing checks in the past, consider getting overdraft protection to avoid costly “insufficient funds” fees charged by stores and banks for bounced checks. Check to make sure you understand and agree with the terms of your bank’s overdraft protection. Often the protection is considered a “loan” that a bank extends to you to cover the amount of the check. You’ll pay interest on that loan until you pay it back by putting enough money into your account to cover the check and the loan.
  • Identify some practical ways to save. If you’re wondering where the money is going and how you can cut back on costs, first keep a journal of how you spend your money for a few weeks. You might find some easy ways to save right off the bat, such as:
    • Make coffee instead of paying a premium price at coffee shops.
    • Make your own lunch or dinner more often instead of eating out.
    • Shop at discount stores or online for gently used furniture, school supplies and more.
    • Buy used textbooks and sell your textbooks at the end of the semester.
    • Look for people to share a ride home over weekends.
    • Consider taking on an additional roommate.
    • Check to see how much you’re spending monthly on long-distance phone calls. Shop around for a better rate with a different long-distance carrier, cell phone service or pre-paid calling cards.
    • Consider what skills or talents you have to “swap” with friends – i.e. typing term papers, cooking meals, etc.
    • Look for on-campus jobs.
    • Park your car and try walking more or using campus or public transportation.
  • Stay focused on your future…not someone else’s bank account. You’re always going to meet people who have more money to spend than you—and people who have less. You can take control of your own financial future by taking steps now to establish how you will handle your finances responsibly. When you are starting college and meeting new friends and having to pay for things you haven’t had to before, it can be easy to take more notice of other people’s financial situations than planning your own. You need to take responsibility for your own financial well being in the context of your own financial picture, not someone else’s. Remember that YOU will have to pay back the debt you incur, not the person who encourages you to spend money you don’t have. And remember that this is about your future. Being able to get an apartment or a job or loans for big items like a car or a house may be affected by how you handle money now.

 

College is a great time to discover what you want your future to look like. Begin charting a course to financial security by developing some basic personal financial habits now…you’ll be glad you did.

5 Important Money Management Tips Every College Student Should Know

Going to college can be exciting, fun…and expensive. And we’re not just talking about tuition, room and board. There can be a lot of unexpected, small expenses that can add up. Expenses like new clothes, school supplies, books, furniture, meals and spending money. Unfortunately too many college students turn to loans, credit cards or a combination of both to finance their college years only to find out that it’s far easier to get into debt than to get out of it.

Nearly two-thirds of all college students carry some debt and their total debt load is rising. According to a 2006 USA Today/Experian survey all types of debt among college students is on the rise:

  • The average student loan balance is $14,379
  • The average credit card balance among college-student cardholders is $5,781
  • The average balance on installment loans (i.e. car loans) for college students is $17,208

As college students’ debt load is rising, their ability to repay their loans is on the decline. Experian reported that nearly half of all college-age students have stopped paying on their debt which can result in collection agency action, repossessions or even having to face the prospect of filing for bankruptcy.

Laying a good foundation for money management as early as possible in your college career can enable you to accumulate less debt and take advantage of more opportunities – such as studying abroad or pursuing a job you’re really interested in after school – because you won’t have to be as concerned about, or work toward paying off debt and/or loans after graduation. According to Experian:

  • Twenty-two percent of all college graduates surveyed say they have taken a job they otherwise wouldn’t have because they needed more money to pay off student loan debt.
  • Twenty-nine percent say they have put off or chosen not to pursue more education because of their debt load, and
  • Twenty-six percent have put off buying a home, 11 percent have put off marrying and 14 percent have put off having children because of their debt.

To avoid mounting debt that could limit your ability to make choices in the future consider a few tips to help you stay on top of your expenses and be in charge of your financial future come graduation day:

  • Budget
  • Clamp down on credit
  • Balance your checkbook
  • Create a bill-paying system
  • Keep focused on your financial reality
  1. Budget today and you’ll be glad tomorrow. Get in the habit of tracking the money you have coming in and what you are spending it on. If you are like most people, you are getting money to pay college bills and expenses from various sources (i.e. student loans, family financial assistance, grants, scholarships, jobs, etc.). List all your sources of money, the amounts, and all the categories of expenses that the money has to pay for (i.e. tuition, room and board, books, phone bill, food, transportation). Remember to note how long each source of money has to last. For example if you have a two or three-year loan ensure that you pace your spending (and spend only on what you’re supposed to spend it on) so that you don’t run out of funds before the term of the loan. You don’t want to think you can spend money now, when in reality it has to be used for future expenses.
  2. Clamp down on credit. It can seem like an easy answer to get a credit card to help make ends meet or finance small, or “fun,” purchases, or nights out, but it doesn’t take long for it to become a habit to use credit cards to finance your lifestyle. And once you are living and spending above what your overall financial situation can sustain, credit cards can be a hard habit to break.The first thing to remember is that just because you’re offered – or even approved – for a credit card doesn’t mean you have enough income to pay for the bills. If you do apply for and get a credit card, get a clear picture of how much you’re charging by subtracting your charges from your checkbook (if you have a checking account). That way when the bill comes in the mail you will already have the money set aside to pay the full amount.

    If you find yourself not paying the full amount every month, it’s a good idea to cut up your credit card and instead using a charge card (that requires payment in full every month) or using a debit card that withdraws money directly from your designated (checking/savings) account for each purchase or charge.

  3. Balance your checkbook before you “bounce.” If you’ve never had, or used, a checking account, it’s important to learn how to balance your checkbook before writing a flurry of checks and finding you don’t have the money to cover them all. Take a minute to ask family, a friend or a clerk at your bank for help in getting started. If you have had a problem bouncing checks in the past, consider getting overdraft protection to avoid costly “insufficient funds” fees charged by stores and banks for bounced checks but make sure you understand and agree with the terms of your bank’s overdraft protection. Often the protection is considered a “loan” that a bank extends to you to cover the amount of the check. You’ll pay interest on that loan until you pay it back by putting enough money into your account to cover the check and the loan.
  4. Create a bill-paying system. This will likely be the first time you have been responsible for paying your own bills. Did you know that paying your bills late can affect your ability to borrow money in the future for things like a car and a home, and how much interest you’ll be charged for those loans? Start creating good financial habits by making bill paying easy — set up a place and schedule a regular time to pay bills; mark the due date on your calendar and create scheduled online payments from your checking or savings accounts.
  5. Stay focused on your future…not someone else’s bank account. When you are starting college, meeting new friends and having to pay for things you haven’t had to before, it can be easy to spend more time noticing other people’s financial abilities than taking control of and planning your own. You need to take responsibility for your own financial well-being. Remember that YOU will have to pay back the debt you incur, not the person who encourages you to spend money you don’t have. And remember that this is about your future. Being able to get an apartment or a job or qualify for a car loan or even a home can be affected by how you handle money now.

College is a great time to discover what you want your future to look like. Begin charting a course to financial security by developing some basic personal financial habits now…you’ll be glad you did.