Learning financial literacy at an early age can make a significant difference when you enter the workforce. Taking control of your finances before you graduate can help offset college expenses and ensure there is cash on hand if emergencies arise. Strategies such as budgeting, building credit, and maintaining a work-life balance will teach basic financial skills so you are off to a good start after graduation. Here’s more information on the top financial strategies for college students.
How to Develop Good Financial Habits in College
1. Create a Budget
Being mindful of how much you spend can seem overwhelming, but it’s critical in order to stay ahead of expenses and cut costs. You don’t want to be stuck in a situation where you’ve run out of money by the end of the semester while focusing on final exams and projects. Keep track with a spreadsheet, notebook, an expense-tracking app, or checkbook to get a clear picture of cash flow.
Identify costs such as housing, dining, and transportation bills. Consider which expenses are fixed, or essential, such as rent, groceries, transportation, and insurance vs. bills that are variable such as dining out, entertainment, traveling, and memberships to streaming services like Netflix. Ask yourself if you need or are even using certain subscriptions to gyms, streaming networks, or apps. This will help you spend money more efficiently moving forward.
If you’re unsure of where to begin, refer to bank and credit card statements. If spending habits vary month-to-month, calculate three months’ worth of expense spending, and then divide by three to find the average monthly cost for said expense.
2. Compare Student Loan Rates
Many students need to take out a federal or personal loan to cover tuition costs. Compare loan rates and seek out expert advice to avoid significant student loan debt. Avoid borrowing more than you need for tuition and other essentials and consider chipping away at your loan balance when possible. Even focusing on paying off potential accrued interest can help you in the long run.
As you approach your senior year, be mindful of student loan payment schedules and available repayment options such as a standard fixed plan, income-driven repayment, or extended repayment. You can also refinance your loans for new terms and lower rates once you build your credit and earn a higher income, among other options.
3. Work a Part-Time Job
Part-time jobs can help cover costs such as rent, food, transportation, and academic supplies. This can also hone time-management and leadership skills, as well as facilitate opportunities for networking with leaders in your field. It’s best to try to find a relevant work-study program or paid internship that can instill skills you may use in your future career. Working on campus can also help cut down on transportation time and costs so you can effectively manage academics, work, and time for rest.
Students can also turn towards freelancing gigs to offer skills and services on a timeline that allows more flexibility. Websites and apps such as Fiverr, Upwork, and TaskRabbit are ways to gain cash here and there for services. You can also try selling crafts on platforms such as Etsy or drive for ride share services like Uber or Lyft.
4. Build Credit Early
Building credit is important in order to make bigger purchases such as a house or car down the road. Your credit score depends on a few factors such as the age of your accounts, history of repayment, and amounts owed. Students can begin building credit by opening a credit card account that is tailored towards students with low spending limits and no annual fees. It’s also critical to compare interest rates, annual percentage rates (APRs), and cash rewards points so you can get the best deal.
After opening an account, consider spending small amounts on purchases such as gas and then paying off the balance quickly to build credit. You can also save credit cards for emergency expenses such as car troubles. However, it’s best to have a plan in place to pay off any expense, as interest can accrue and raise your balance.
To avoid missing payments, automate monthly bills and don’t spend beyond your means so you can pay the bill each month. Carrying a balance month-to-month can affect your credit and lead to a higher balance due to accrued interest.
JG Wentworth and its affiliates and subsidiaries do not provide financial or legal advice. You should consult with independent professionals for such advice.