Just because someone is on the precipice of adulthood doesn’t mean they get to shun adult responsibilities. First-time students are in that exact predicament. They feel like kids and grown-ups at the same time.
One of the most adult-like things almost every student has to worry about is managing money. That means everything from setting up a student loan to tracking small everyday expenses.
If they want to avoid a massive student debt that will haunt them for decades, they should quickly learn how to keep track of their money. In fact, since college is a money-sucking experience, the best thing a student can do is come on campus armed with knowledge.
Developing good financial habits in college (or before) will be beneficial when real life hits like a ton of bricks. But college leaves a lot of room for trial and error. What’s more, there’s no pressure on students to actually have everything figured out.
That said, if one wants to avoid ruining their financial future with student debt, they should pay close attention to the following tips.
Learn How to Budget
The number one tip for everyone is to set a firm budget. This has nothing to do with college, as it’s advice everyone should listen to, no matter their age.
But college students need to budget more aggressively than others. Namely, they have to track their expenses and set hard limits for themselves.
Setting up a budget isn’t difficult, but it does take effort. The best starting point is that a person should be aware of all their monthly expenses. They should know how much they are paying for:
- College necessities
- Other things
Once they have their list of expenses, they can set hard limits for each category.
The limits depend on the cash flow. What’s more, students can (and should) prioritize categories based on how much money they have coming into their bank accounts each month.
Perhaps the fun money or the “other” category needs to take a bit of a hit to allow for all other expenses to be covered. Either way, the trick to budgeting is sticking to set limits. The difference between a small student debt and a debilitating one might just be the right budget.
Get Money Management Apps and Other Tools
Budgeting is especially hard for someone who’s fresh out of high school and has been financially oblivious all their life. So the next tip is to get help. Students should research and utilize all available management tools they have at their disposal.
There are a lot of budgeting apps out there that will make budgeting (and sticking to a budget) much more manageable. After all, younger generations spend most of their time on phones anyway. Why not make good use of that tidbit of knowledge?
Get a Job
There’s no doubt that working while studying is hard. However, any type of additional income a student can get their hands on during college will help.
All students should also apply for scholarships and grants (especially the FAFSA). But, not everyone is eligible for those. Thus, getting a part-time or a full-time job is the lesser of two evils (the other evil being student loans that lead to student debt, of course).
Trade a Break for a Gig
If a student can’t work during the school year, then they can take up odd jobs during breaks. These jobs probably won’t result in a high payout, but any additional income will come in handy.
Sure, most students would like to spend spring break partying, but being financially responsible is a part of adulthood. Sometimes, that means swapping tequila for a two-week gig.
Avoid Student Loans at All Costs
The best way to avoid student debt is NOT to take any student loans.
Student loans are a slippery slope. There are a lot of private loan companies out there, and they all sound super affordable at first. But they end up being a noose around the student’s neck after college.
Americans currently owe over $1.6 trillion in student debt. That’s a lot of money, no doubt. And, depending on the type of school the student goes to, they might not be able to avoid taking out loans altogether.
If a student does end up taking out a loan, it should be a federal loan rather than a private one. These have better repayment options and are generally easier to pay off later in life.
Tread Very Carefully When It Comes to Credit Cards
Credit card debt is another financial black hole that sucks in new, fresh-faced students way too easily. Because the money the student is spending when they swipe a card is “invisible,” some people tend to think of it as “free” money. Oh, how wrong are they!
Student debt doesn’t come strictly or exclusively from student loans. Credit card debt shoulders a lot of the blame for the massive national student debt. It’s something that sneaks up on a person, especially one that isn’t that used to handling money and keeping an eye on potential debt.
Being Late Isn’t an Option
So if a student does take out a credit card, they have to be extra careful about payments. All money that comes out of the card needs to be paid in time and in full. Furthermore, students shouldn’t forget to take interest into account when making their decision!
Every student should weigh the pros and cons of credit cards. If they are careful and make payments in time, they can start building their credit (something their future self will be eternally grateful for). If not, debt is practically unavoidable.
Payment Plans and Other Escape Routes
If the student does succumb to the seduction of loans and credit cards, they should make a payment plan for their student debt immediately.
Carelessly ignoring credit card and student loan payments could be detrimental for any budget plan (especially a student one) So every student should treat them as a last resort.
In other words, students should use them only when absolutely necessary and only for those things that they can’t go without (like, say, tuition or food). Hopefully, by the end of their college life, they won’t have too much to pay off in terms of credit card and student debt.
But no matter what the final number is, there should be a sound plan for tackling debt. The loans with the highest interest rates should be the first ones on the list of payments. What’s more, prioritizing debt and making payments that aren’t merely the bare minimum is an excellent way to get rid of it quickly.
The Importance of an Emergency Fund
Emergency funds are something that every student needs. Those aren’t savings or money the student sets aside for a specific thing. An emergency fund is there in case something goes horribly, terribly wrong.
Of course, more often than not, the “horribly, terribly” in a student’s life means their car breaking down or losing a security deposit. However, emergencies can also be severe and quite costly (like unexpected surgery, for example).
That’s why every student must have an emergency fund. It’s money for a “rainy day,” set aside, not to be touched unless there’s an emergency.
The emergency fund will help the student avoid dipping into their savings or charging the unexpected cost on their credit card. As a rule of thumb, it’s always good to have $1,000 set aside for “God forbid” situations.
But students who have jobs or a couple of different streams of income ought to keep in mind that the emergency fund shouldn’t stagnate. If the student’s income is growing, so should their emergency fund.
Make Good Use of All Student Discounts
A lot of stores offer student discounts, especially those that are close to campuses and university grounds. On top of that, big companies like Apple, Amazon, and Microsoft offer deals on various products that appeal to the student money-saving mentality.
Students should look up stores, vendors, restaurants, services, and events online to see if they offer any discounts. What’s more, a frugal student will only go somewhere (or buy something) if they can get it with at least a bit of the price shaved off.
Utilizing the student status to get discounts is a great way to spend less and be under the hard limits of the pre-set budget. Once the student gets the hang of how things work in their area (where they’ll get a discount and where they’ll have to pay full price), they’ll be able to integrate that knowledge into their budgeting strategy and perhaps allocate some of the saved funds to other budget categories.
Buy Used Textbooks If Possible
Textbooks are unfairly expensive. However, since that is the reality the students are living in, they usually accept it and find ways to work around it. One of the best financial tips for students is buying used textbooks and later reselling them to the next bright-eyed generation. Getting their hands on a used textbook isn’t hard, as there are plenty of online and brick-and-mortar shops around the campus that sell nothing but books. If not, there’s always the power of social media, which will surely connect the student with people willing to part with their textbooks.
Buying used things isn’t limited to books. Students should always be on the lookout for second-hand shops and stores that offer great value for money. Anything and everything can be found in a little shop like that.
Students need quite a lot of stuff, but the good news is that all of them need the same stuff. Therefore, mini-fridges, kettles, and even furniture can be easily found in stores around campus. One class will sell them, and another one will be quick to buy them.
Investment Isn’t Just for Grown-Ups
Every student that has a bit of money lying around should consider investing it. Well, that might be a misleading statement since not many students actually have a lot of cash at the end of the month. Still, it’s never too early to start investing.
A student who learns how to invest money early on in their college career is doing a favor to themselves. The sooner a person starts investing, the faster they can achieve the financial stability that will lead to a comfortable retirement. That isn’t something that many students necessarily think about. However, investing a small portion of money during college can go a long way later in life.
Students can use Roth IRAs, tax-free retirement accounts, to invest some money. Of course, before deciding to partake in this adventure, they should look into fees, market changes, and generally do their research.
Every budget should have a financial goal — something that every person is working toward. When it comes to students, they usually have singular financial goals: avoid or tackle student debt.
However, aside from these “big picture” goals, a student should also have smaller, more achievable ones. That will give them a sense of accomplishment and fuel their desire to deal with their bigger financial goals.
Having achievable financial goals can also help students save money. These can be points of reference and something to measure other (frivolous) expenses against.
Here’s a good example. If a student wants to take a short vacation in the countryside, each time they get the opportunity to spend money on something non-essential (like takeout), they might ask themselves, “Is this more important than the vacation? Do I want it more than I want the few days of freedom in the countryside?”
This train of thought is often enough to help them decide what they actually want to spend their money on. In the end, goals give students (and others) perspective and something to work toward.
Implement a “No-Spend” Day Each Week
A great way to save money is to simply not spend any of it. Yes, it sounds redundant, and students know better than most how hard it is to go a day without spending any money. But setting aside one day per week when there won’t be any expenses can do wonders for the budget.
Of course, this isn’t something they can simply jump into. A “no-spend” day requires planning and tight organization. For example, the student will have to pre-plan meals and buy groceries for them. What’s more, they’ll have to get out of the house or dorm earlier to get to classes (or wherever) on foot and avoid paying for transportation.
A “no-spend” day is an excellent boost not just for the budget, but for the student’s morale as well. They’ll feel better about saving money, and even though they know one day won’t get them out of student debt, it’s a step in the right direction.
Saving money isn’t just about not spending it (although that’s an excellent tactic). No matter how much they try, students can’t avoid all expenses. One simply has to eat, right?
However, that doesn’t mean that they should overpay for necessities. If the groceries are too expensive in the shop near campus, they ought to go elsewhere. Once they figure out which shops have the best and most affordable goods, they’ll quickly forget about the convenience of a nearby store.
Research Pays Off
Just like most penny-pinching strategies, this trick requires some leg work. Still, if the student lives in a big city, they can check out online price comparison websites.
Those who are unconvinced that the price difference can save them a lot of money should just find a couple of websites and compare their weekly grocery bill with the prices in multiple stores. The savings can go up to 30%, depending on the grocery list and the area.
Cutting Out the Little Things
An essential part of every budget strategy is tracking costs and expenses. When a student does that (when they write down every penny they spend), they’ll see how much money goes toward little, inconsequential things they don’t really need.
Sure, eating out is neat, especially for those who don’t know or like to cook — but it’s costly. Luckily, as soon as they compare the prices of cooking vs. takeout, an average student will want to figure out their way around a stove pretty quickly.
Some Luxuries Aren’t Worth It
And it’s not just takeout that’s an issue. It’s a well-known fact that coffee makes up around half of the average student’s chemical makeup. However, buying a cup of coffee every time they need a caffeine hit is potentially ruining (both health and budget-wise).
In contrast, making coffee at home and avoiding giving $3 for a daily cup of Joe can save them around $1,000 per year. That’s an entire recommended emergency fund!
Of course, being a responsible spender and cutting out the little things they don’t actually need might diminish a student’s quality of life a tiny bit. But in the end, it will be a tremendous financial lesson.
Get a Money Buddy
Students sometimes have a hard time sticking to their goals. Other times, they fall victim to convenience. They will spend money on something because it’s handy, instead of putting in a bit of work and finding a money-saving version of the same thing.
Therefore, having a money buddy, someone they can track expenses with, can help with this issue. This tip is practical because it relies on peer pressure.
However, that’s not all. According to the social proximity effect, good habits can be shared. In other words, students can pick up habits from each other — financial and otherwise.
Living a Financially Sound Life in College
Being a financially responsible college student is, by no means, an easy task. Yet it’s these money habits that people learn in college — when their budget is the thinnest — that will lead them to potential financial stability in the future.
Still, students shouldn’t forget to take advantage of their limited responsibility in college. Simply put, they should never worry about money so much that they forget to have fun and get the full “college experience.”
Of course, being temporarily broke and pinching pennies is an integral part of that experience. But it doesn’t mean that students should let themselves be buried in student debt. A careful cost-benefit analysis and implementation of some of these tips will go a long way during college (and beyond).