Going to college can be exciting time but learning to avoid the money mistakes college students make can make campus life a lot more fun.
For many teens, their college experience includes the introduction of budgeting, debt and other lessons in money management. With their newly found freedom and lack of financial experience, for many students, those lessons come at a cost.
They need to learn how to prevent the money mistakes college students make. Here are some of the most common financial pitfalls and how to avoid them:
Budgeting. It’s critical for college students to be able to live within their means, so creating a budget is key. To begin, list all sources of income including any monthly allowance from parents, wages, and savings. Next, subtract all your living expenses for the month. The difference is your discretionary income. An online personal finance management tool like Mint.com can easily help you manage your budget and keep you on track.
Credit Card Debt. Does anyone carry cash anymore? Credit cards make paying especially easy, and often cards offer attractive rewards for using them. Honestly, who wouldn’t want cash back? The biggest issue with using credit is that you’re more likely to spend money you don’t have. If you make minimum monthly payments, you won’t pay off the balance any time soon. Another drawback? Interest rates are ridiculously high. Use a credit card only if you can pay it off at the end of the month. Make sure it fits within your budget.
Damaging Credit. College students don’t realize that their out-of-control credit card debt can seriously affect their credit rating. High balances, missed payments, and numerous credit inquiries are all negatively reflected in your credit rating. Some negative marks remain on your credit history for as long as seven years. Imagine applying for a car loan after graduation and being haunted by a bad financial decision you made in college. Yikes!
Using Student Loans. College is expensive but student loans are one way you can fund your education. Just make sure your loan money is used solely for school expenses. Using this money for anything else will likely be the first step on a slippery slope. Keeping your debt to a minimum is key, especially since you’ll be paying it back once you graduate.
Going to college is an exciting time but it also comes with some big responsibilities. It’s easy to make mistakes when things are new. With these tips and a little discipline, you’ll make the grade when it comes to money management.