Don’t Make These Money Mistakes in College!
Learn now what money mistakes not to make while in school so you’ll have a stronger financial start to life post-graduation.
Attending classes, studying and turning in homework, searching for internships, holding down a part-time job, getting enough exercise and drinking enough water, participating in club activities—as a college student you already have a lot on your plate, and wisely managing your finances on top of everything else can often feel like one responsibility too many.
But what if being a master of your money tied into your existing responsibilities? Here are common financial blunders to avoid in your everyday student life that will better prepare you for total independence and adulthood after college.
- Overpaying for a dorm room or apartment. High-end student housing comes with a steep price and flashy amenities that many students won’t ever use enough to get value for their money. If you saw the breakdown of how much you’re paying for access to a rock-climbing wall, tanning beds, jacuzzi, or smoothie bar, you might be shocked to see the price of these luxuries.
The easiest way to cut down on cost is to share living space with one or more roommates. It’s universally cheaper, you can split the cost of utilities, and you can share the expense and use of big-ticket items like furniture.
- Bringing a car to campus. It might sound practical, but it many cases, it’s a quick way to pay $8,000 or more per year for your car to sit in a special parking lot. Student parking permits are notoriously expensive in busy college towns and cities to encourage students to walk, bike, carpool, and use public or university transportation. There’s also the cost of insurance and gas to consider.
- Misusing student loan money. It’s a tempting idea to use the student loan money in your checking account for non-educational expenses, like living in a plush apartment or taking a fancy spring break. But misusing your student loans like this is a poor investment. Think of it this way: would you take out a loan for $4 to buy a chocolate bar to munch on if you knew you’d end up paying $30 for that snack over the life of that loan? Probably not!
- Making poor academic decisions. At most universities, if you drop a class after the “drop date,” you won’t get a full reimbursement, which is like ripping up money. The same goes for failing a class and having to retake it or missing a required class for your degree and having to return to school for an extra semester. Regularly meeting with your academic advisor can help you avoid these costly mistakes.
- Not understanding the terms (and cost) of student loans. Paying back student loans is regularly the number one concern of recent and not-so-recent graduates. Leaving school with massive student debt and unfavorable terms can stunt your life for years after graduation, preventing you from going to grad school, traveling, buying a new car, or paying for a house. Before signing any loan paperwork, make sure you understand all of the terms of the loan: what minimum monthly payments are, how long it will take to pay it back making minimum payments and how much overall interest you’ll pay, when interest begins accruing, what the deferment terms are, and how your parents will be affected if they cosign for you and you don’t make payments.
If you can, it’s smart to make payments against your loans while in school, even if it’s only $10 here and there. You might be surprised how much you’ll save yourself in interest payments just by chipping away while in school.
- Not using a budget. Building a budget is as easy as making a list of needs vs. wants and their costs, then comparing them to your income. Knowing exactly what you have coming into and leaving your checking account will help you avoid overspending and further debt (if you have student loans) and it will hone a skill you’ll need post-graduation.
- Not saving. Most students will need a good chunk of money right after graduation to get themselves established in life—whether that’s moving for a first job, putting a deposit down on a first apartment, buying a more reliable car, or affording grad school. And if you have student loans, you’ll need to start paying those, too.
- Accumulating credit card debt. Right as you’re entering college, you’re probably also receiving offers for credit cards. They are a convenient way to pay for things, help you establish a credit report and score, and offer appealing incentives; however, they also come with high interest rates, unfavorable terms, and the inviting opportunity to spend beyond your means. If you don’t want credit card debt on top of student debt right out of college, use credit cards wisely: always pay on time and keep the monthly balance low enough you can completely pay it off each month to avoid paying the high interest rate.
- Ruining your credit score. Access to credit cards comes with the ability to ruin your credit score. Missed or late payments and other negative marks will remain on your credit history for seven years. It’s much harder and takes longer to build up your score than to tear it down. It would be terrible to leave college with a bad credit score only to realize you need a healthy score for a car loan or a mortgage. Property management companies and even certain jobs will run a credit check on you before offering an apartment or a job.