If you’re a new college student you may not yet have money problems or issues—but most college students soon do. It doesn’t matter whether you’re a “traditional” college student enrolled in college just after high school or a “nontraditional” student returning to school. Show Younger students are likely to confront money issues for several reasons:
You will have many new expenses including tuition and fees, room and board or housing and food bills, books and supplies, and so on. Nontraditional students who have worked or started a family before attending college may have already learned to manage their money well but usually still confront some financial issues:
Almost everyone eventually has money issues at college, and they can impact your academic success. Money problems are stressful and can keep you from concentrating on your studies. Spending too much may lead you to work more hours than you might otherwise, giving you less time to study. Or you might take fewer classes and thus spend more years in college than needed. Worse yet, money problems cause many students to drop out of college entirely. But it doesn’t have to be this hard. Like other skills, financial skills can be learned, and they have lifelong value. This section will help you:
It’s expensive to go to college. College tuition has risen for decades at virtually all schools, and very few students are fortunate enough to not have to be concerned with this reality. Still, there are things you can do to help control costs and manage your finances while in college. Begin by thinking about your financial goals. What Are Your Financial Goals?Whatever it is you plan to do in your future, whether work or other activities, your financial goals in the present should be realistic to enable you to fulfill your plan. Taking control of your personal finances begins with thinking about your goals and deciding what really matters to you. Here are some things to think about:
There are no easy answers to such questions. Most people would like enough money to have and do what they want, low enough expenses that they don’t have to work too much to stay on budget, and enough financial freedom to choose activities without being swayed by financial concerns. Few college students live in that world, however. Since you will have to make choices, it’s important first to think about what really matters to you—and what you’re willing to sacrifice for a while in order to reach your goals. Make More or Spend Less?That often becomes an issue for college students. You begin by setting up a realistic budget and sticking to it. A budget is simply the best way to balance the money that comes in with the money that goes out. For most college students, the only way to increase the “money coming in” side of the budget is to work. Even with financial support from your family, financial aid from the college, your savings from past jobs, and the like, you will still need to work if all your resources do not equal the “money going out” side of the budget. The major theme of this chapter is avoiding debt except when absolutely necessary to finance your education. Why is that so important? Simply because money problems and debt cause more people to drop out of college than any other single factor. This chapter includes discussion of how students can earn money while in college and the benefits of working. But working too much can have a negative impact by taking up time you might need for studying. It’s crucial, therefore, whenever you think about your own financial situation and the need to work, to also think about how much you need to work—and consider whether you would be happier spending less if that meant you could work less and enjoy your college life and studies more. As we’ll see later, students often spend more than they actually need to and are often happier once they learn to spend less. More people get into financial trouble because they’re spending too much than because they’re making (or receiving) too little. Here’s a good place to start:
Essential costs are the big things:
These things are sometimes called fixed costs, but that term can be misleading. If you have the option to move to a less expensive apartment that is smaller or a few blocks farther away, you can partly control that cost, so it’s not really “fixed.” Still, for most people, the real savings come from spending less on optional things. Most people spend by habit, not really thinking about where their money goes or how quickly their spending adds up. If you knew you were spending more than a thousand dollars a year on coffee you buy every day between classes, would that make you think twice? Or another thousand on fast food lunches rather than taking a couple minutes in the morning to make your lunch? When people actually start paying attention to where their money goes, most are shocked to see how the totals grow. If you can save a few thousand dollars a year by cutting back on just the little things, how far would that go to making you feel much better about your finances? Following are some general principles for learning to spend less.
Managing a BudgetBudgeting involves analyzing your income and expenses so you can see where your money is going and making adjustments when needed to avoid debt. At first budgeting can seem complex or time consuming, but once you’ve gone through the basics, you’ll find it easy and a very valuable tool for controlling your personal finances. Why create and manage a budget? Going to college changes your financial situation. There are many new expenses, and you likely don’t know yet how your spending needs and habits will work out over the long term. Without a budget, it’s just human nature to spend more than you have coming in, as evidenced by the fact that most North Americans today are in debt. Debt is a major reason many students drop out of college. So it’s worth it to go to the trouble to create and manage a budget. Managing a budget involves three steps:
Balancing Your BudgetImage by Steve Buissinne from PixabayNow comes the moment of truth: compare your total monthly incoming with your total monthly outgoing. How balanced is your budget at this point? Remember that you estimated some of your expenditures. You can’t know for sure until you actually track your expenses for at least a month and have real numbers to work with. What if your spending total is higher than your income total? The first step is to make your budget work on paper. Go back through your expenditure list and see where you can cut. Remember, college students shouldn’t try to live like working professionals. Maybe you are used to a nice haircut every month or two—but maybe you can go to a cheaper place or cut it yourself. There are dozens of ways to spend less, as suggested earlier. The essential first step is to make your budget balance on paper. Then your job is to live within the budget. It’s normal to have to make adjustments at first. Just be sure to keep the overall budget balanced as you make adjustments. For example, if you find you must spend more for textbooks, you may decide you can spend less on eating out—and subtract the amount from that category that you add to the textbook category. Get in the habit of thinking this way instead of reaching for a credit card when you don’t have enough in your budget for something you want or need. Don’t be surprised if it takes several months to make the budget process work. Be flexible, but stay committed to the process and don’t give up because it feels like to too much work to keep track of your money. Without a budget, you may have difficulty reaching your larger goal: taking control of your life while in college. What If Your Budget Doesn’t Work?Your budget may be unbalanced by a small amount that you can correct by reducing spending, or it may have a serious imbalance. If your best efforts fail to cut your expenditures to match your income, you may have a more serious problem, unless you plan in advance to manage this with student loans or other funds. First, think about how this situation occurred. When you decided to go to college, how did you plan to finance it? Were you off in your calculations of what it would cost, or did you just hope for the best? Are you still committed to finding a way to continue in college? If you are motivated to reach your college goal, good! Now look closely at your budget to determine what’s needed. If you can’t solve the budget shortfall by cutting back on “optional” expenses, then you need more dramatic changes. Are you paying a high rent because your apartment is spacious or near campus? Can you move a little farther away and get by temporarily in a smaller place, if the difference in rent makes a big difference in your overall finances? If you’re spending a lot on your car, can you sell it and get by with public transportation for a year or two? Play with the numbers for such items in your budget and see how you can cut expenses to stay in college without getting deeply in debt. If you worry you won’t be as happy if you change your lifestyle, remember that money problems are a key source of stress for many college students and that stress affects your happiness as well as how well you do in college. It’s worth the effort to work on your budget and prevent this stress. If all else fails, see financial aid at the college. Don’t wait until you’re in real financial trouble before talking to someone who may be able to offer help. What If You Get in Financial Trouble?People often don’t admit to themselves that they have a problem until it becomes unmanageable. We human beings are very good at rationalizing and making excuses to ourselves! Here are some warning signs of sliding into financial trouble: For two or three months in a row, your budget is unbalanced because you’re spending more than you are bringing in. You’ve begun using your savings for routine expenses you should be able to handle with your regular budget. You’ve missed a deadline for a bill or are taking credit card cash advances or overdrawing your checking account. You have a big balance on your credit card and have paid only the required minimum payment for the last two months. You have nothing in the bank in case of an emergency need. You don’t even know how much total debt you have. You’re trying to cut expenses by eliminating something important, such as dropping health insurance or not buying required textbooks. If you are experiencing any of these warning signs, first acknowledge the problem. It’s not going to solve itself—you need to take active steps before it gets worse and affects your college career. Second, if you just cannot budget your balance, admit that you need help. There’s no shame in that. Start with your college counsellor or the financial aid office; if they can’t help you directly, they can refer you to someone who can. Take your budget and other financial records with you so that they can see what’s really involved. Remember that they’re there to help—their goal is to ensure you succeed in college. Saving for the FutureIf you’re having problems just getting by on your budget, it may seem pointless to even think about saving for the future. Still, if you can possibly put aside some money every month into a savings plan, it’s worth the effort: An emergency or unexpected situation may occur suddenly. Having the savings to cope with it is much less stressful than having to find a loan or run up your credit cards. Saving is a good habit to develop. Most college students work while in school. Whether you work summers only or part time or full time all year, work can have both benefits and drawbacks. The difference may result as much from the type of job you work as from the number of hours you work. A Job Can Help or HurtPhoto by Ahsan S. on UnsplashIn addition to helping pay the bills, a job or internship while in school has other benefits:
Here are some factors to consider as you look for a job:
Student JobsThe number of hours college students work per week varies considerably, from five to ten hours a week to full time and everywhere in between. Before deciding how much you need to work, first make a detailed budget as described earlier. Your goal should be to make as much as you need, and hopefully a little more to save, but first you need to know your true need. Remember your goals in college and stay focused on your education. Cut back on your optional spending so that you don’t have to work so many hours that your studies are impacted. Balancing the Job You Have with Your Ideal JobA growing percentage of students are working full time when they return to school, and many continue in the same jobs. If you’re in this situation, you know that balancing work and college is one of the most difficult things you’ve ever done. You’re used to working—but not used to finding time for class and studying at the same time. You likely feel harried and frustrated at times, and you may even start to wonder if you’re cut out for college. The time may come when you start thinking about dropping classes or leaving college altogether. It may be hard to stay motivated. If you start feeling this way, focus on your big goals and don’t let the day-to-day time stresses get you down. As difficult as it may be, try to keep your priorities, and remember that while you face temporary difficulties now, a college degree is forever.
Credit cards are such a big issue because they are easy to get, easy to use—and for many people, easy to accumulate debt. Credit cards do have legitimate purposes:
Your first goal with a credit card is to understand what you’re getting into and how you are charged. Read the fine print on your monthly statements. You should understand about rate increases and know what happens if you miss a payment, pay less than the minimum, or pay late. Setting LimitsAll credit cards come with a limit, the maximum total amount you can charge, but this is not the same as the limit you should set for how you use the card based on your budget. If you bought something that cost $400, for example, would your monthly budget let you pay it off when the bill comes? If it will take you two or three months to have that much available in your budget, are you also including the interest you’ll be paying? What if an unexpected need then arises and you need to charge more? Set your personal use limit by calculating how much your budget allows you to charge. If you are using the card just for convenience, such as to pay for meals or regular purchases, be sure you have enough in those categories in your budget left at the end of the month to make the payment. If tempted to buy a significant item with your credit card, do the calculations in advance. Avoiding DebtIf your credit card debt is not limited by your age, that balance can surely rise. Following are tips that will help you avoid slipping into credit card debt:
Stop carrying your credit card. If you don’t have enough willpower to avoid spontaneous purchases, be honest with yourself. Don’t carry the card at all—after all, the chances of having an emergency need for it are likely to be very small. Having to go home to get the card also gives you a chance to consider whether you really need whatever it is that you were about to buy. Identity theft is a serious and growing problem. Identity theft is someone else’s use of your personal information—usually financial information—to make an illegal gain. A criminal who has your credit card number or bank account information may be able to make purchases or transfer funds from your accounts. Someone with the right information about you, such as your social security number along with birth date and other data, can even pretend to be you and open new credit accounts that you don’t know about—until the bank or collection agency tries to recover amounts from you. Although innocent, you would spend a lot of time and effort dealing with the problem. Follow these guidelines to prevent identity theft:
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