10 Tips For Managing Your Money as a College Student
Managing money as a college student
College is a great time to learn how to manage your finances and build habits that will help set the stage for financial success for the rest of your life. With more clarity on your spending and saving habits, you can work toward bigger goals, such as paying off student loan debt, traveling and saving money for future milestones like moving to a new city after college.
While the main focus is, of course, getting a quality education, college also provides a great opportunity to develop the money skills you'll need after you graduate. You should start making smart choices about your money now in order to set up a solid financial foundation for the future. That means building a foundation of financial literacy now.
Too many students are graduating in the red and facing difficult financial choices when they are just starting out.
If you want to get on the right track and ensure you leave college in good financial shape, read on to learn 10 money management tips for college students.
1. Set a budget
The idea of mapping out a budget may seem overwhelming at first — Who has the energy to sit down and plan out the finer points of their financial situation after a long day of classes, exams and other obligations? — but it can actually be fairly easy to do.
A budget is a very powerful tool. When you create a budget and track your spending you have insight to where your money is going and where you need to cut back. Living on a budget doesn’t mean you can never have any fun, it means the fun you do have won’t prevent you from paying the bills.
Spend some time thinking about all of the expenses you are responsible for each month. Start with the basics — tuition, room and board (or rent and utilities, if you’re living off-campus), textbooks and class supplies, phone, car payments and insurance (or public transportation costs), haircuts, toiletries and, of course, food. When you've made a plan for the money you have, you can rest easy knowing your priorities are covered.
Having a budget of your own to balance and knowing how your work dollars affect it is one of the best ways to learn good financial habits.
2. Track your expenses
The easiest way to stay on top of your finances is to track where you money is going. Regularly take a look at what you’ve been spending your money on and see where you can make cuts or spend more effectively. You might not realize how much your small, daily purchases add up to until you take a look at your income and expenses.
Creating a budget is one thing; sticking to it can be more complicated. The next step is to track your expenses through an app like Mint on your phone, or even on paper, to determine if they match with your real world experience or require fine tuning.
Tracking expenses by date is also key. For example, if you’ve budgeted $120 for your monthly food budget but use it up in two weeks, you know you’ll need to make adjustments.
Another reason to check on your expenses—you can catch fraudulent charges to your account early and contact your bank to reverse them.
There are a variety of budgeting apps available to help you. Just get into the habit of plugging in your daily or weekly spending to get a quick view of how you’re doing and where you may be overspending.
Check out apps like Wally, Mint, or Acorn to help you track exactly where your money is going in order to stick to your budget.
3. Open a savings account
Lots of people struggle with this, so it’s important to start developing this habit early. It’s tempting to spend your money first and then save whatever is left over, but you’ll end up limiting how much you save this way. Instead, pay your bills first, contribute to your savings, and then use a little on yourself.
In the words of Warren Buffet, “Do not save what is left over after spending, but spend what is left over after saving.”
Now that your budget is in place, you can identify areas where you may be able to spend less and save toward your longer-term goals. Here are a few ideas to get you started:
Consider switching to a less expensive meal plan if you find you regularly have money left in your account.
Rent or buy used textbooks instead of new editions at the bookstore. Your college may offer other less expensive options for coursework materials as well.
If you find yourself in need of new tech for class, try a refurbished, rather than brand new, model.
Consider walking, riding your bike or taking campus transportation rather than paying to fuel, insure and park a car during your college years.
Like so many things in life, budgeting and saving are skills that take time and practice to get just right. If you find yourself making mistakes or going over budget now and then, don’t worry. You can make adjustments to get back on track. Just keep focusing on building healthy financial habits that will serve you for many years to come!
4. Start building your credit score
Your credit score will factor into everything, from renting an apartment to buying a car to purchasing your first home. There are many ways to try to build your credit.
If you have student loans, consider making small payments of $25-50 while you’re still in school to pay down interest and have some positive repayment history on record.
The two biggest ways to grow your credit are to make payments on time and to borrow only what you need. You can also check your credit report for free at credit karma.
Learning about the factors that influence your credit report and FICO score and what you can do to improve your score are essential steps towards controlling your financial future. Also be careful with credit card debt. Many, many college students have ruined their credit by taking easy money from credit cards and digging themselves a debt hole they can't get out of.
That's because using cards can be tough to navigate when you're just starting out—and you don't want to learn about fees and interest the hard way.
One strategy some students use to build up their credit is to only use their credit card for one specific expense such as buying textbooks or gas to drive to and from school.
If you make small purchases and regularly pay the balance off in full, you'll avoid racking up interest charges, but still get that boost to your credit score.
5. Cook on a budget
A food budget is a fact of life for adults. No matter who you are, you gotta eat and eat regularly. But there are also many different ways to go about feeding yourself and the decisions you make have a huge impact on your bottom line.
Learning how to cook on a budget is an art and a skill that you can rely on for the rest of your life. Finding out how to make foods you like to eat that don't break the bank is a balancing act that can also be a fun experience at the same time.
If you put a few simple, delicious dinner recipes in your cooking arsenal, you'll find it much easier to save money in the future by pulling together a low-cost meal at home instead of relying on expensive take-out or unhealthy fast food for a quick bite at the end of the day.
Check out food blogs and recipe sites like Serious Eats or Allrecipes.com to sift through recipes and watch how-to videos. You could also find some classic Julia Child videos on YouTube or turn on the Food Network.
6. Create an Emergency Fund
Having a financial safety net is an essential part of being independent. In order to prepare for emergencies and avoid unexpected debt, getting in the habit of always setting aside a part of your paycheck—10% is a good benchmark—is a mental trick that makes it easier to save.
Work on saving up an emergency fund. Whether it's an essential car repair, a pet illness, or something more major, everyone needs a chunk of change saved up when large expenses arise, which they inevitably will. Depending only on credit to get you through an emergency will cost you in interest and fees.
If you’re working on paying down debt, start a small emergency fund with about $1,000. Once you pay off your debt and start earning more money, you can increase your emergency fund.
One easy way to save is to have it taken out automatically. If the money remains in your checking account, it's more tempting to spend it. When your brain is trained to expect a smaller amount in your account, you'll automatically limit yourself to that budget.
Along the same lines, saving up for a big purchase can be a fun way to develop discipline in spending.
7. Have a debt payoff plan
According to The Institute for College Access and Success, two out of three graduates in 2018 had student debt. Once you finish school and the grace period is up, you'll have to start making student loan payments. It may seem jarring to go from paying nothing to paying several hundred dollars a month. If you look at your total projected debt, repayment plans, and interest, you can create a long-term debt payoff plan that puts you in a good place after you graduate.
If you did end up racking up a lot of student loans, personal loans, or credit card debt, you need a plan of attack.
There are a couple ways you can go about paying down debt but you should ultimately pick whichever method keeps you motivated. In order to create a solid financial future you need to attack your debt head-on as early as possible.
8. Start investing now
The sooner you start investing, the more time your money will have to build interest. You’ll also have to invest less money to reach your retirement goals if you start at an early age.
Investing is a lot simpler than you think. You can open an account online with a minimal amount of money and schedule withdrawals from your bank account to your investing account each month. Whether it’s opening an IRA or investing in the S&P 500 do your research before deciding on one.
9. Test out financial planning apps and resources
There's a lot more to managing money on your phone than just your bank's app. Nowadays, there are a myriad of different budgeting websites like Mint and You Need A Budget that help frame your finances in ways that make it easier to save.
Try out a few and just see how they work. They may not be the ones you want to use long-term, but understanding how each app works can help you to sort through different techniques for managing your money to find the one that's best for you.
When it comes to financial literacy, your work is never done. Like everything else in the world, the money world is ever-evolving and constantly rebranding.
The tools and knowledge you've developed may be enough now, but you never know what financial challenges and opportunities are on the horizon.
10. Get a part time job
There are many advantages to working while you are in college. It looks great when you begin to apply for jobs, especially if you can find work in your field. Finding a good college job will make it easier to manage your money and gain work experience while in school. You might even benefit from tuition assistance and other employee benefits offered by your company. Plus, the more money you put toward tuition, the less you have to borrow, which will save you in the long run.
If you choose to work only during summers, make the most of your summer job. Consider picking up extra shifts in order to stash a little extra away. You might also take an internship—if it's a paid one, you'll combine an income with real-world experience.
You might opt to work full-time and go to school part-time to avoid going into debt. While it makes for a very full schedule, this work experience can help you as you plan your transition from school to the workplace.
Success doesn’t happen overnight, so keep working on these habits every day. As a college student, you may not have a ton of extra money now. But making smart decisions about how to pay for college could help you keep more of your hard-earned money after you graduate. If you follow these 10 tips you’ll be able to create a healthy balance and a solid financial foundation for the future. Learn more about ways to pay for college here.
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