Financial Tips College Students Should Know
By: Ian Golightly MBA
Graduating from high school and entering adulthood is a giant step. Going to college is an excellent milestone, but having a pile of debt is not ideal. Here are some vital financial tips first-year college students should know. Having a solid foundation as early as possible will be incredibly beneficial for the years to come.
Affordable Housing Is An Must:
When I was attending Illinois State University, they made all freshmen live in the dorms. After the first year, students are allowed to move out of the dorms. Being in a college town, renting is expensive on campus and also off-campus. Real estate investors are racking in the cash when they own a house and apartments on campus by charging rent per bedroom. Many houses have three bedrooms that charge anywhere from $800 a month per bedroom, which means renters are co-living while the investor is bringing in at least $2,400 in the rent roll.
For the college student that is $9,600 a year just in rent, that needs to be considered while budgeting. There are other expenses to consider like utilities, transportation, food, and so forth. Living on your own can provide memories and incredible experiences forever, but you want to avoid going through the significant debt experience.
Once you get living arrangements all figured out, the following foundation to learn is creating a budget.
Basics Of The College Budget:
The basic principles of budgeting are taking all the income sources and making sure they can cover routine and potential expenses. Depending on your situation, income sources may be limited. On the other hand, life in general always introduces expenses that were never wished for.
The most important thing that college students must be ready for are expenses that are out of the ordinary. It is always good to shop around to make sure you are getting the best deal for the buck for routine costs. Sometimes bargaining can do wonders, and it will also help with negotiating skills later in life. Another way to save money is to buy higher quality products that will last for a reasonable amount of time. Also, it’ll save personal time on having to repurchase the item frequently.
It is critical to distinguish between wants and needs. The process is not easy, nor is it fun, but it’s essential to understand the behaviors of spending money. Ask yourself, is partying three days a week worth it versus once a week? Should you go out to eat every night versus learning to prepare meals for yourself? The list goes on, but it’s imperative you figure out your wants and needs.
If you want to be savvy and sack some cash for the future, you should consider investing in assets that will create value for you later on down the road. If you want to be like the 1%, you need to take action on what the other 99% are not doing. Having the skillset of determining wants and needs is half the battle of life’s problems dealing with finances.
The banking sector loves students because the majority of college students lack financial literacy. So yes, banks love to prey on college students. During the Fall and Spring outside events, you’ll find banks with tents trying to market to college students. Taking 1-2 hours a week to understand the banking world is essential as a college student and as an adult. Understanding the banking world is vital if you’re thinking about ever buying a home or getting a loan to purchase a car.
Some banks offer special accounts for college students with some perks. When I was in graduate school, I utilized PNC who has special bonuses for college students. I wanted to go with a common bank around the area/region to avoid ATM fees when choosing a bank. The fees are not that much, but they do add up over time.
Credit Cards Smarts And Not Just Book Smarts
As explained above, banks love to prey on college students but so do credit card companies. During my undergraduate days, I knew friends who had the mentality of going wild and out because they could pay it later. It’s a good idea to have a credit card during college, but cardholders need to be aware not to overspend. However, getting credit early on will help build a credit score, so you can qualify for loans that you may need later down the line once you graduate and with a decent-paying job.
College books can be expensive, especially if you buy them on campus. When I was attending Illinois State University, there was a campus store where you could tell them your professor’s name and class; then, they’d pull the book off the shelf for you. Since it was out of convenience, the books’ price was sometimes 100-300% overpriced. Because of the internet, you need the ISBN to see what Amazon or any other store sells them to get the best price. Shopping around may take a few hours, but it will save you money. You will always pay more for convenience.
Keeping Tabs On Your Student Loans
The student debt crisis is a real thing. Many years ago, the United States took an enormous hit because of a collapsed housing market, and we may see another collapse due to student loans. Student debt is a personal debt that can last for many years, depending on how fast you can pay it off. Thousands of students everywhere accumulate over $100,000 in college debt after getting their bachelor’s degree. So you must keep tabs on how much you are accumulating just in student debt.
Presented above are some key financial foundation traits every college student should have before starting college. Financial literacy is not taught at all in today’s era and is usually taught by experience after the damage is done. Trying to figure it out through experience is humbling. Still, with today’s inflation in the dollar, the next generation of college students must be mindful and understand finance early on.