For most people, college is the first time they are in charge of managing their finances and making independent money decisions. The confusing bit is that there is often so much they need to spend on, that the money they have seems like a joke. From high costs of tuition, books, and accommodation, to clothes and food, there always seems to be something that requires money. Although resources may be limited, strict money management will help you navigate college without getting into too much debt. Here are some common mistakes you need to avoid.
There is no denying that most students find it hard to afford college. For many who find money standing in the way of them getting the quality education they need for their preferred careers, student loans offer a concrete solution. Getting higher education is a way to invest in your future and getting a loan to finance that investment is worth every penny, at least in most cases.
That said, you should remember that while student loans give you the money to spend when you need it, the funds are from a loan that you will need to repay. Don’t abuse the flexibility offered by student loans as you can find yourself crushing under the weight of insurmountable debt. The money is sent directly to your account, which opens doors for misuse.
Some students qualify for and take more student loans than they need. They end up using the funds to finance lavish lifestyles on campus. The outcome of such habits is that students end up with huge debts they could have avoided that can derail their financial progress for years after graduation. Students should avoid viewing additional loan money as a source of income or they may end up with huge debts that they cannot repay.
Although it can be tempting to get some extra loans to help you with entertainment and eating out, understand that doing so comes with serious implications. The money you will repay for the student loans you take will accrue interest over the years. In other words, you will need to repay way more than you borrowed.
- Ignoring the Need to Save
Another financial mistake you need to avoid when in college relates to ignoring the importance of saving. Students tend to struggle to keep up with the multiple college expenses and setting aside money for emergencies seems impossible. While your sources may seem inadequate, there is no better term to start saving than as a college student.
Setting aside some money in a savings account ensures that you have money to cover you in case of an emergency of whatever kind. You can also save for specific expenditures, including travelling, buying a computer, or attending an event. Avoid the temptation to spend everything you have and set aside money consistently for a more secure financial future. The money you save can come in handy when buying coursework from professionals online.
Another mistake college students make when managing their finances is misusing their credit cards. Student credit cards are crucial tools that help you afford things and improve your purchasing power. When used well, a student credit card will improve your credit rating and enhance your chances of getting financing in the future.
After graduation, you will need proof of a good credit history when buying a car, renting a house, or looking for a job. If you misuse your credit cards, you compromise your financial future and destroy your credit rating, which can take you years to rebuild. To start building your credit, make small purchases using your card and make sure to repay the balance in full or in part each month. This allows you to avoid hefty fines and improves your chances of building a healthy credit score. Using credit cards responsibly also helps you build positive money habits that could benefit your financial future.
You have probably heard that creating and using a budget is one of the smartest financial decisions you can ever make. However, you will be shocked by the number of students who ignore this advice, misusing their limited funds by buying things on impulse. Maybe you come across a necklace that speaks to you and seems like it would be a good addition to your wardrobe, but costs a fortune and wasn’t a part of your budget. What do you do? The right thing would be acknowledging the item, but recognizing that it wasn’t a part of your plan. You could buy it next time as long as you have included it in your financial plans.
Making impulsive purchases is quite popular among college students as they live their lives on the edge. However, such habits are risky and could leave you in a deep financial hole. Avoid buying things based on your emotions. Marketers appeal to your emotions when they don’t want you to think rationally and weigh whether you need the items. Avoid buying things just because they make you feel good. You will be using emotions to justify your poor spending habits. Smart money management means coming to your senses and properly differentiating between wants and needs.
The Bottom Line
We all have less money than we wish, and knowing how to prioritize is a crucial money management skill. Create a budget that captures what money you have available for any given month before preparing a list of your expenditures. You will then need to organize this list according to the items’ level of importance. You need to understand that there is a significant difference between needs and wants.
While need implies those items that we must have if we are to survive, wants can be important, but are not a requirement for existence. Wants are your desires and should never be prioritized over wants. Students who can differentiate wants from needs can decide where to focus their limited funds and avoid overspending. You don’t want to go hungry because you spent money buying a luxury necklace.