College is an exciting time for students because it marks a new level of independence in their lives. The flip side of independence, they say, is responsible and without the constant supervision of parents, a number of financial mistakes a college student makes. College students must carefully make numerous decisions that have the potential to impact the rest of their lives.
The new status of these students, who are now legally considered adults, can be challenging financially. Fortunately, the biggest challenges can be addressed with a bit of effort. Here are a few basic mistakes that, if avoided, can help college students sail relatively smoothly through to their graduation and beyond.
6 Financial Mistakes College Student Make
Mistake #1: Not exhausting financial aid options
The college has become more and more expensive over the years and student loans help make higher education accessible for thousands of students.
However, there is a big negative consequence of getting large student loans – you may spend a significant amount of your life struggling to repay it. Fortunately, there are plenty of scholarships and other financial aid opportunities that you can avail.
Don’t hesitate to apply for multiple financial aid programs because it is certainly possible to get your entire tuition fee and living expenses covered this way. Exhaust every option.
Mistake #2: Not choosing an employable major
“If you do what you love, you’ll never work a day in your life.” Marc Anthony
We’ve all heard this catchy saying and marvel at the wisdom behind it. As tempting as it may be to follow, the idea of pursuing a career in a field you love is not always practical.
I’ve seen several photography enthusiasts turn their hobby skills into lucrative careers, for instance, and the same may be said for professional sportsmen.
On the other end of the spectrum are people who deliberately treat their hobbies as nothing more than hobbies because a career in the field may be short-lived or uncertain.
Before deciding which field to major in at college, it’s a good idea to research the rate of employment and average starting salary in the relevant industry so students can be aware of the risks they face.
Mistake #3: Not creating a frugal budget
It’s not only tuition fees that students have to worry about at college, but also the cost of housing, groceries, clothing, healthcare and of course, entertainment.
That is a lot to take on for someone who has previously been fully dependent on his/her parents for these things. Without a basic budget to control the outflow of money, students may find themselves struggling to make ends meet.
Simple frugal decisions like cooking your own food, skipping daily dine outs, avoiding branded clothes, sharing accommodation and using public transport instead of a personal car, can save a lot of money in the long run.
Mistake #4: Not understanding the perils of credit cards
During college, students are aggressively lured towards various debt instruments (student loans, car leasing agreements, and credit cards) by a different business.
With an over supply of credit and limited understanding of how interest rates exponentially multiply debt, many students run the risk of being perpetually trapped in a state indebtedness.
Students may not realize that each month they delay the repayment of their debt, the outstanding amount increases exponentially, especially because compounding interest rates on credit cards are pretty high.
Relying on new debt to repay old debt will most likely make matters worse for students who have limited income anyway if any.
Of course, credit cards have many advantages too (such as improving one’s credit score), but it is equally important to know the various disadvantages of using them as well at this early stage in life.
The bottom line is that even though it’s easy to take out more debt through credit cards and other short term loans, it is preferable not to because the interest rates are extremely high on these and can cause your debt to spiral out of control.
Mistake #5: Not asking relatives for help
Some cultures encourage teenagers to be highly independent at the age of 18, which is usually when they head to college.
It is certainly admirable to see these young adults pull their own weight at this age, but this is deemed rather unreasonable in other cultures, where it is considered normal for parents to fully support their children well into adulthood, and that includes boarding, lodging and education expenses.
Keeping this in mind, if college students suddenly find themselves desperate in deep debt for whichever reason, before seeking help from loan sharks and applying for yet another credit card, they should consider taking their family into confidence in hopes of a better solution.
A friend of mine found himself sinking in debt year after year while attending college, despite working several campus jobs. When his elder brother finally found out, he offered to pay a large chunk of the dues, all for nothing in return.
My friend had learned an important lesson and finally found his footing in the real world, and is now a financially stable guy.
It is possible that by sharing your predicament with your family, nothing fruitful will emerge but the opposite may also be possible, so this option should be considered.
Mistake #6: Not considering the cost of skipping classes
It can be tempting to skip a few classes when in college because there is no one to hold students accountable like in high school. The attendance requirement may be considered a green pass to attend the minimum number of classes like it is was some people I know 🙂
The attendance requirement may be considered a green pass to attend the minimum number of classes like it is was some people I know 🙂
It is entirely up to students how they wish to spend their time in college, but they must remember the true cost of each class they have been assigned, which could run into hundreds or even thousands of dollars.
Plus, if a lack of attendance leads to failing the course, the tuition fee needs to be paid again to repeat the classes for a better grade. That’s a lot of money down the drain.
Thanks for reading through this article. Did you choose a career that stems from a hobby? How did that turn out for you? Please, your thoughts in the comment section below.
About the Author: Fehmeen is the editor of Top Money Hacks, a blog which shares simple yet practical personal finance tips to help everyone save and earn more money.