As a college student, you’re often faced with challenges and learning experiences. One of those challenges can be forming healthy money management skills instead of bad habits. Learn more about some of the common financial pitfalls college students make so you can avoid them and build solid financial skills.
One way students often get into financial trouble is by misusing student loan funds. If you’re like many students, you’re relying on student loans. When you receive your student loan check, you might be tempted to use these funds for other expenses, like a spring break trip or other lifestyle activities. Typically, financial aid is to be used for educational expenses only. If you receive any excess funds, consider returning them to the loan servicer to help reduce the overall amount you borrow while you’re in school. The less you borrow, the less you’ll pay in interest charges over time, which means a lower monthly payment in the future.
Because many students rely on financial aid to pay for their education, it’s important that they don’t miss any important deadlines so they can receive the maximum amount of funds available. Stay in touch with your financial aid department so you know when applications are due for the FAFSA, course registrations, and scholarships. Many schools offer year-round scholarships and have a small application window. Use a calendar app to set reminders for any important deadlines regarding your financial aid or payment due dates.
You may think that not having a steady income or significant amount of money means you don’t need to have a budget; however, you’ll benefit from properly managing whatever funds you do have. You may have inconsistent or minimal income, which is why it’s so important to manage your funds and avoid overspending. You can start by creating a simple budget that tracks the money coming in and going out each month. Once created, track how you spend your money going forward so you can see any areas you may need to cut back. Building healthy budgeting habits now can put you on the right track to save and continue good habits in the future as your income increases.
Building credit at a young age can help you achieve your financial goals faster. Many college students ignore their credit until after mistakes have been made. Make sure you’re making all your monthly payments on time and that everything on your credit report is accurate. Any missed payments or negative marks can stay on your credit report for up to seven years in most cases. You can access your credit report for free once a year from each of the three credit reporting bureaus at www.AnnualCreditReport.com.
College students may have lower or inconsistent incomes, but that doesn’t eliminate the need for savings. Emergencies can pop up at any moment, leaving you in a bind or putting you in a position where you have to borrow money and possibly create debt for yourself. By setting aside a small amount of funds each month, you can build emergency savings that you can rely on when the unexpected occurs. As your savings grows, aim to have six to nine months set aside in an emergency fund that you can access instead of using credit cards or calling a family member for help.
There’s no denying that tuition is expensive. Many college students enter school undecided, and as a result, end up taking courses that don’t apply to their major. Before class registration starts, sit down with an academic advisor and map out your education plan. By taking courses you don’t need or dropping them mid-term, you’ll end up paying extra tuition costs that can severely impact your future loan payments and budget.
Practicing good money habits now can set you up for future financial success after graduation and beyond. For more financial tips and tools for college students, visit our WalletWorks page.