Personal Finance 101: How to Graduate From College Debt-Free

Financial Goals, How To

(Kristian D.)

There is a long-running joke that college is not the time to make your body a temple. The typical dorm diet of pizza, chips and beer does little to help you stay fit or healthy. For most students, that saying also applies to their finances. The party-filled adventures of college make it difficult to even come up with a plan to manage money, much less stick to it. Luckily, that doesn’t have to be an excruciating chore. Below, we’ve featured ten painless ways to graduate in great financial shape.

Create a Spending Plan

Your finances will never be under control until you establish a range of money you are comfortable spending in each major category of your life. The usual college student objection here is: “but I don’t even make a ton of money, so what’s the point?” The point is that habits are hard to break, and regardless of your current income, you are establishing habits right here and now. Whether you thoughtlessly blow every dime, save every penny or something in between, that spending pattern is becoming the norm. That said, you don’t need to budget down to the exact penny – just establish a range (say, “I’m comfortable spending between $80-$100 per week on food”) in each category and do your best to honor it week in and week out. It will take some getting used to, especially if it’s the first budget you’ve ever created. But this step alone will immediately make your financial life more manageable and cement the fact that you are in control of it (not vice versa.)

Pay Yourself First


Every college student needs to pay themselves first – that is, save something. Here, too, typical objections include, “I don’t make enough money to save anything” and “I don’t have anything to save for.” Both of these are usually just rationalizations to delay the changes in behavior needed to save. The fact is, most students don’t have a clue where their money goes. Stopping to examine their current spending habits will usually reveal at least a few dollars that can be saved. As for what to save for, the answer is: any short or long-term goal you have. Perhaps you want to buy a new car someday soon, or make a down payment on an apartment for you and your girlfriend. Goals like that always require a substantial amount of money, and the likelihood that you will just miraculously have it when the time comes is slim to none. Resolving to save something – anything – is more important than how much is saved, although more is certainly better. Again – forming the habit counts more than the immediate results.

Establish an Emergency Fund


Ask the typical college student what they’d do in the event of a financial emergency and you’ll probably hear “call mom and dad.” That’s okay in high school, but you’re in college now. It’s time to step up and start taking care of your own financial obligations. An excellent first step is to create an emergency fund. By emergency, we mean any consequential yet unexpected expense. A flat tire, a broken laptop, a lost textbook – anything that could make life uncomfortable until it was dealt with. Most college students probably cannot afford to save up for every conceivable emergency, so just save for the most predictable and difficult ones. It’ll be worth it when something goes wrong and you can confidently reach into your emergency fund rather than take out the credit card.

Examine Your Current Spending


A major reason more college students don’t manage their money more intelligently is that they don’t really have a clue how they currently spend it. Sadly, far too many students simply spend their money on whatever is most immediately appealing with little regard to an overall financial plan. If the guys are going out for pizza tonight, that’s where the money’s going. There’s nothing wrong with that, but most students would benefit from sitting down with their last credit card statement and taking an honest look at where most of their money is going. It might surprise you to find out that 80% of your money goes toward food, for instance, when you can actually eat for free on campus. But you’ll never know this or anything else about your spending if you don’t spend an afternoon to figure it out. For some students, this will be all the motivation necessary to start making the other changes on our list.

Be Careful With Credit Cards

(The Consumerist)

Lots of financial authors tell college students not to get credit cards unless they absolutely need one. This is borderline dangerous advice in our modern economy. Fact is, you generally cannot rent a car, book a flight or complete any number of other routine transactions without a credit card. Furthermore, not having a credit history will prevent you from getting a mortgage or auto loan. Having a credit card (and good credit) isn’t just a good idea, it’s a necessity. That said, college students need to exercise special caution in using them carefully. Too many students see their credit cards as all-purpose cash dispensers that let them buy anything they can’t already afford. That is the incorrect way to use credit. Rather, you should make few purchases that you pay off immediately within the grace period. This way you’ll avoid paying interest, while building credit.

Adopt a “Zero Tolerance” Policy on Debt

(Andres Rueda)

Here’s a hard-and-fast rule every student can rely on. If what you are considering going into debt for does not appreciate in value, do not go into debt for it. Under this rule, about the only things it makes sense to take on debt for are student loans (since your degree will raise your income), a mortgage (since real estate tends to appreciate) or starting a business (though that’s fairly risky, considering the high rate of business start-ups). Financing a car is fine provided you are demonstrably able to make the payments on time. What you absolutely should not go into debt for are things like clothes, music, fast food, alcohol, spontaneous vacations, or pretty much anything else the typical college student nonchalantly puts on his credit card. What do all these things have in common? You guessed it – they all decrease in value. Paying interest and fees for items that are progressively worth less is not smart and will only delay achieving your other financial goals. You should have a goal for how much credit card debt to have and that goal should be zero.

Don’t Immediately Buy Your Textbooks


Every year, college students across the country waste money buying textbooks they arguably never needed. That’s right – it’s possible that you actually do not need some or all of the textbooks your professors instruct you to buy. Many English classes, for instance, revolve around short stories that can be found online for free (without infringing any copy rights). Just look them all up ahead of time using your syllabus. Other professors refer to the textbooks only once or twice during the semester, in which case it’s smarter to borrow a a friend’s copy than spend hundreds on a book you’ll use for less than an hour. Still other professors literally never use the class texts. Of course, many professors will use the required texts, but if you can avoid buying even one or two textbooks a semester, that can easily translate to hundreds of dollars that go to your savings goals instead of the campus bookstore. At a bare minimum, wait for a week of classes to elapse before deciding to buy a textbook or not.

Take Advantage of Student Discounts

(The Consumerist)

On most campuses, local merchants offer student discounts, sometimes as much as 10%-20% off your purchases. A little investigation into which merchants offer these discounts can add up in a hurry, especially if they’re from places you visit frequently. In fact, many businesses offer these discounts, not just those located near your school. It’s common for electronics retailers, theme parks, restaurants and even certain movie theaters to offer price breaks to people with student IDs.

Increase Your Income


Students are often advised to forget about making more money during college and focus solely on academics. That said, increasing your income may not be as tough as you think. Just ask yourself: how can I make myself useful and justify earning more? If you’re a good writer and communicator, sign up for and offer to write articles for someone. (Artists and graphic designers can find freelance work there, too.) See if there are any paid internships in your field of study. If you’re feeling super ambitious, see if any of your friends are interested in starting a small business in your spare time (just be sure to keep your start-up costs to a minimum). There’s no question that college is time-consuming, but your financial life will benefit from every extra dollar at your disposal, and plenty of students are capable of balancing a robust work and school life.

Ignore “Hecklers” Who Question Your Plan or Priorities

For some people, making a mess of their own finances isn’t enough – they need to harass and guilt-trip people who are making smarter choices. These “hecklers” are on every college campus and will give you a hard time whenever you place your priorities above what they want you to do. It can be be tempting to “forget” that you decided to save your last $50 for your next car when everyone else is pressuring you to go to the club. There is only one way to deal with these people: ignore them. The fact that you have consciously chosen where your money is going to go puts you above 90% of your peers. Properly executed, your financial plan will pay off in ways you cannot even imagine right now. Surrendering to people who don’t understand your plans or share your values puts them in control of your life. The only way to manage your money effectively during college is to stand up for your priorities whenever they are challenged.

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