Using Financial Smarts in College

You want to go to college, but you want to be financially responsible as well. You might be worried about how you will manage your finances when you are paying a lot for books and tuition, especially if you can only work part-time. A college degree substantially increases your lifetime earning potential, but you need to plan smartly in order to stay on top of your finances for the next four years.

Make a Budget

You should plan what you will need over the next several years for tuition, living expenses and other costs. If you are going to college outside of the area where you currently live, the college may be able to provide some information on typical living costs. With a good idea of what you’ll spend, you can then go on to figure out how much you’ll need to put together in scholarships, grants and loans in addition to any money you earn while working during school.

Get the Money You Need

You can apply for both federal and private student loans in order to invest in your future. Private student loans can cover any additional costs that scholarships, grants and federal loans do not. If you are older and have an established credit record, you may be able to qualify for student loans on your own. If you are just out of high school or have poor credit, you may need your parents or someone else to cosign on the loans.

Be Careful with Credit Cards

It’s not unusual for college students to run into problems with credit cards, running up big balances and graduating with a significant amount of debt. It can be tempting to buy meals out and clothes or even go on vacation with your card, especially if your friends are doing it, but you should resist this urge. With credit card interest rates, you’ll end up paying far more for these things in the long run. Instead, be sure that you build in room for extras in your budget. You shouldn’t be taking extravagant vacations, but if going to see a movie once a week or eating out occasionally is a nice break for you, there should be room for it in the budget.

Plan for the Unexpected

People often run into financial problems when they do not have savings set aside or a plan to deal with emergencies. This can cause money issues to snowball. You can plan ahead for emergencies in a few ways. First, be sure that you have the insurance coverage you need, including for your car and your possessions. Next, consider creating an emergency fund of $500-$1000 or so that you can dip into if necessary. Your parents may help you with this. Finally, you may want to get a secured credit card. You have to put money aside up front for this type of card. It’s a way to build up your credit if you use it and pay it off monthly, or it can be a backup for you in an emergency.