You’re in college and on your own, but you may still be learning to navigate the world of personal finance. Below are common financial mistakes many students make and some tips on how to avoid them.
- Spending all your living expense money early in the semester – You’ve probably set aside spending money for personal expenses if you live off campus, or you may have financial aid funds to use for room, board, or other educational expenses. That money needs to last through the entire semester, but many students spend it within the first few months. How can you avoid spending your money too early? Use these financial management tips and this budget worksheet to help develop a monthly spending plan.
- Not taking advantage of part-time employment opportunities – Most schools offer part-time employment options for students through Federal Work-Study, and by posting on- and off-campus jobs. You might worry that a job will conflict with academic work, but studies show that students who work between 15 and 20 hours while in school are generally more confident and successful. Having a job helps bring in money regularly throughout the semester and can help build your resume. Your college financial aid office awards Federal Work-Study and generally posts related job opportunities. Work-Study is based on financial need and requires that a Free Application for Federal Student Aid (FAFSA) be filed. Other part-time jobs may be posted by the Career Office, Student Affairs, or elsewhere on campus. Check your school website for more information.
- Accumulating credit card debt – You’ve probably already received credit card offers in the mail and noticed giveaways and travel rewards that make the offers sound appealing. Be careful – as a new credit card holder, your interest rates will be high, and credit card offers tend to have many fees attached. Be sure to read the fine print and note that the initial low interest rate offered may expire in just a few months. You can quickly accumulate credit card balances that can swell out of control, especially if you’re only making minimum payments. Here’s an overview of credit card pros and cons, along with additional information about other matters to consider.
- Taking out student loans without first understanding them – Student loans have become so common that students often look at them as just another type of financial aid. There is an important difference; student loans must be paid back. While student loans can be a useful way to pay for your education, be sure to keep your borrowing to a minimum. It’s a good idea to know what your monthly loan payment will look like when you get out of school and to understand what you can realistically afford to borrow. It is also important to know about the types of education loans, the terms of those loans, and the options available. To get a general idea of what your monthly loan payment may be when you finish school, Federal Student Aid provides an easy-to-use repayment calculator.
The earlier you can learn the basics about managing your finances, the better off you’ll be in the long run. These simple steps should help you build the foundation you need for a successful financial future.