Part of the learning experience of being a college student is managing your own finances for the first time. That independence can also introduce a wealth of pitfalls! Here are some common money mistakes college students make. Learn from our mistakes so that you can avoid them.
1. Failing to Set a Budget
Start by determining a budget. Items to include in your budget: any monthly bills, expenses like groceries, miscellaneous charges, and a fund to cover unexpected expenses. Know how much ‘fun money’ you can spend each month and when it’s gone, stop spending! This is the number one of the college budget mistakes to avoid. It may sound simple but you need to have a handle on your income and be able to distinguish needs from wants.
Now is the best time to learn smart budgeting habits that can benefit you beyond college. Here are some tips to learn how to set a budget or try a free and easy app like Mint that automatically helps set up a budget you can customize.
2. Letting Credit Card Debt Add Up
How much is a t-shirt worth? Financial institutions often offer enticements like t-shirts or discounts if you apply for their credit card. However, if you don’t pay off the balance every month, the interest piles up fast. Not only does each item you charged end up costing a lot more than you bargained for, but this will affect your credit score as well.
DaveRamsey.com advises students
“…credit card companies take advantage of this lack of knowledge by making college students—especially incoming college freshmen—their target audience…The college-bound kids you know will more than likely fall into this trap of “normal” unless you arm them now before it’s too late! They don’t realize that the decisions they will make in the next four years can affect them for the next 40 years.”
3. Overspending Financial Aid
Some financial aid will let you apply funding towards eligible living expenses like housing, food, and school supplies. But that doesn’t mean you can go crazy with expensive meals and over-the-top decor. Read “Seven Ways Students Overspend” in this article and don’t fall into these traps. To make your money stretch further, explore cheap food to buy when you’re broke and focus on essentials.
Students should understand that their funding has to last throughout the semester. Try to use it to pay for only necessary items. Then if you have money left over at the end of the semester, they can roll it forward to use for the next semester, which cuts down the amount of money you will need to borrow.
4. Not Shopping Smart
Watch for items that can make you easily overspend; tech, clothes, food, textbooks. Do you need the brand name or would a less expensive substitute suffice? Doing your homework on price comparisons can save you a pretty penny. One of the best ways to shop smart is to use the Textbook Price Comparison Tool at BookScouter.com to see the best prices to Buy, Rent, and Sell textbooks.
Don’t miss the chances to save money as a student–get student discounts, use the campus facilities to save money on a gym membership, attend free events at school rather than paying to go out.
5. Not Scheduling Classes Right or Failing a Class
At first glance, this might seem like a small thing, but it can still cost you in the long run.
If a student wants to drop a class and do it before the deadline, it’s fine. But if you miss it there are fines, which is just wasted money. And failing a class is even worse. In both cases, you’ve also lost time by missing a chance to take a class to help graduate on time. Even adding a single additional semester adds up financially and could delay graduation. It could also mean that you have an overloaded semester to make up the difference which is a bigger strain on your time.
Extra time in school means more than just extra tuition, it means years of lost wages, and less money put into retirement. So prepare wisely to avoid mistakes with your schedule and use resources like your college advisor to plan out a clear path to graduation.
In conclusion, for many young people, college is their first money management experience. One of the leading reasons that students drop out of college is because of finances – which is often due to poor money management. See the bigger picture with a long future ahead of you and learn how to make better decisions with your money!
