There are a lot of ways that you can try to avoid getting into money troubles before you enter college. Many mistakes are made by college students before, during, and after their college years, and these mistakes can cause serious damage. These financial problems can then adversely affect your life going forward, hindering your ability to buy a house, or even a car. That is why we have put together our best tips for avoiding such financial nightmares before college, so you can benefit from them!
No “Wants” Are Financed
Try your best to stay as far away from debt as humanly possible. If you don’t have the money for something, avoid using credit cards and/or loans unless it is absolutely essential. Financing anything before or during college should be a last resort. Finding yourself in debt when you end up leaving college will make things harder, as this is when your wages will be the lowest, and you don’t need loan payments taking a chunk out of your hard-earned cash.
This does not include your student loans, which we know are pretty much unavoidable. There are options for dealing with these loans in the best way possible, including finding the best private college loans, considering a student loan refinance after college, and more. (Quick reminder: student loan eligibility can vary, especially if you’re not in the U.S., so it’s best to check before making plans for college.)
One Credit Card Only
Building your credit history is an important aspect of your personal finance, and credit cards are great to have if an emergency occurs. However, it is easy to get carried away when you don’t have to pay off what you are spending right away. Use cash if at all possible and use your credit card sparingly. Your credit balance should always be paid off in full every month. There should also be no need to have any more than one credit card while you are in college.
Always Save Money (If Possible)
This is a tip for life, and not just while you are in college. Saving often and early will give you a great foundation with your savings, and this is especially true before and during college. After graduation, it may become more difficult to save, as you might be living in a new place and have more bills, etc. It is recommended to have a three-to-six-month cash reserve on hand, in case of any emergencies.
Part-Time Jobs Are Cool
Your first job should not be after you graduate. Plan to look for and apply to jobs so you can work part-time before and during college. This can benefit you in many ways, you can start saving earlier as your bills should be lower while in college, you can make a dent in your college expenses as well while you’re still in college, and hey, you might have a little more money to enjoy yourself with as well! If you are able to pay some of your college tuition upfronts, it will significantly reduce the amount of student debt you will have after you graduate. Having smaller student debt will prevent students from having to refinance student loans in the future.
Insurance Is Essential
Insurance is too important not to have. Although it might seem expensive and a bill that you do not want to pay every month, one emergency or incident could bankrupt you. Renters insurance and health insurance are two types of insurance that can save your finances if something happens. You do not have to get the most premium packages out there, for example, the catastrophic health insurance plans are the most affordable, but will cover any huge bills in the case of an accident.
Budget Your Money
It is frightening how many people do not budget their money. Whether you are getting money from your parents or working part-time, it is most likely that money will not be abundant during your college days, so planning a budget before you enter college is a good idea. Keeping a budget will ensure that you have money for food every week, and money for all of the extra-curricular activities that you want to attend. The main categories of your budget will be transportation, housing, food, entertainment, and more.
Do you know what frugal means? Well, if you don’t, look it up, because you’re about to embrace the frugal lifestyle once you enter college. If you get caught up in trying to live a lifestyle that is out of your budget, it can lead to big problems down the line. You will be able to have fun, but it is very important to keep in mind how much eating out, going on vacations, and other activities cost. If you are eating out, maybe look for certain deals or a happy hour menu. Yes, this isn’t the most exciting thing to do, but you’re a college student, and it’s better to have money in the bank instead of running into financial problems living above your means. Taking steps like these can help to avoid having to opt for a student loan refinance in the future.
Remember, the financial decisions you make before and during college can greatly impact your life after college, even if you get a great job right after graduation. Be careful! If you have any other suggestions around avoiding financial nightmares before college, we’d love to hear them in the comments!