College life comes with hard lessons on personal finance, especially for the students who do not plan their finances properly. They often find themselves in debt, broke and unable to cope with college life.
Thus, you need a plan to succeed in college. As a student, there are few tips you can adapt to line up your finances and stay afloat financially whilst in college.
Personal finance for college students is no different from personal finance for anyone else, from the working class. Basic principles are the same, same money, live below means and invest wisely.
College students differ in the sense that they don’t have sufficient income source and very few investing opportunities. Also, the age in one of the most definite differentiating factors.
Most students are new to personal finance, investing and budgeting, so it’s all the more important that they follow the principles and lead a life of plenty in the long-run.
Personal Finance for College Students
Learn to budget
Learning to budget is an important skill that must be cultivated and carried to after-college life. Impulsive buying not only dents your pocket but also risks getting you into debt.
Start using free financial tools to budget. I use PersonalCapital, other people use Mint, etc. All tools are great once you know them well.
If there is any product you are very enthusiastic about, make a personal policy to wait for 30 days before buying it. In the meantime, the enthusiasm would die and it is likely to drop in price.
You will also have plenty of time to save up for it and reconsider your motivations for buying that product. Classify your budget into important and urgent groups to enable you to allocate resources to it.
Learn to budget for the little you have, it creates a strong foundation to enable you to budget for millions in your later life.
There is nothing like a ‘good debt.’ Avoid debts at all costs if possible. If it is inevitable, scheme on how to cover it up within the shortest time possible.
Debts impede your efforts to develop yourself and risk harming your relationships. Use of credit cards should also be avoided at all costs while you are in college and still not earning money.
If need be, avoid owning a credit card but if necessary, you may have a single card to start building your credit. Multiple credit cards risk mounting credit debt on you and destroy your credit score.
A single credit card can help you build credit score but learn to use it when absolutely necessary. If possible, use cash for any transactions rather than the card.
Minimize your expenditure
Scout for free and cheap products. Free items can help you save on your daily expenses and cumulatively they bring a significant difference to your finances. Here are some ways to save money for a college student.
However, learn when to buy cheap products as you minimize your expenditure; some cheap products may be more expensive in the long run.
Eat at the cafeteria rather than elsewhere to keep your food costs at an absolute minimum. Get a roommate if possible and share rent and other costs to reduce your expenditure.
You do not need a car whilst in college. A car is a product of channeling your finances to oil companies and you really need to reconsider your decision to buy a car.
Live within your means
Your social circles influence your spending habits. If you hang out with richer colleagues, your expenditure would go higher.
Live within your means and avoid social groupings that live expensively. People tend to live within the means of their closest friends and if your friends live largely, then you are likely to spend hefty sums on unnecessary costs.
Additionally, associate yourself with futuristic and visionary people who help you plan your finances well.
A network of like-minded frugal people would be a gift you can give to yourself while in college and it’ll keep on giving you forever.
Build great social networks that can help you in your academics and plan your career trajectory.
One of the best investments you can do in college is building your network.
Find a job or internship
There are many side jobs for college students. You can find a job or a paying internship to sharpen the skills you learn in school. A job helps supplement your income and also helps avoid unnecessary social interactions that drain your finances.
Additional income won’t hurt and thus it is advisable to seek a job that does not affect your learning process. The additional revenue can be used to pay for tuition or any other necessary expense you are likely to incur in college.
You can enlist academic assistance whilst on your job to balance between academics and your job.
Learn to save
Learn to save and invest any ‘excess’ income you have. Get a piggy bank and empty your pockets daily into it. After a while, it will have enough savings you can take to the bank.
If an investment opportunity comes along, jump onboard and risk your bucks on it. But this must be after thorough analysis and ensure your investments are safe. I wrote some strategies for beginner investors.
It is better t get lower returns for the investment rather than higher returns but with much more risk involved. Small amounts saved and invested can easily grow into larger sums.
It also offers an important lesson on saving and investing for your later life.
Common mistakes college students make with their finances
Getting credit cards often leads to bad credit score and debt. Try to avoid getting credit cards but instead use do cash transactions.
Other unnecessary expenditures of cars, living in your own apartment etc., increase your expenses dramatically whilst they do not add value to your life.
Secondly, wrong social circles can hurt your financial plans. Live within your means and hang out with friends who are within your income bracket.
You can help each other find alternative sources of income rather than hanging out with ‘rich kids’ and barely measuring up to their lifestyle.
Thirdly, avoid chasing the latest products that are trendy and ‘cool’. Hold off your desire to won them and only acquire them only when absolutely necessary.
Fix your cracked iPhone screen rather than getting the latest model.
Concisely, college personal finance planning offers important lessons on money. It must be considered the root of your economic independence and testing ground for your finances policies.
The skills and tips you learn about finances in college go a long way into determining your future financial strategies.