College is expensive, and it’s not easy managing your finances on your own for the first time. From your freshman year to graduation, your savings account will be your first line of defense against consumer debt and financial misery. By building up a healthy ‘savings buffer’ and stretching your college dollar, you’ll graduate with your financial house in order and, most importantly, peace of mind. Here are some key lessons for developing “money smarts” to go along with your book smarts.
One of the biggest problems for underclassmen is overspending. Fortunately, putting a little cash aside can be a great way to cut spending. Here are some ideas:
- Calculate your monthly income from all sources, and use that to create a savings plan and budget. Don’t spend more than you make!
- Avoid credit cards, unless you’re planning on sticking to a strict budget and recording all of your purchases. Credit cards give you a false impression of having more money than you actually do. Don’t assume you’ll be able to make up for a shopping splurge next month. With so many temptations and high interest rates, odds are you won’t.
- Get a part-time job and deposit a percentage of each paycheck directly into your savings account. These small amounts will add up over time and having less cash on hand will force you to forgo frivolous spending. You’ll be forcing yourself to save rather than fighting temptation each time you enter a convenience store. Plus, a sizable chunk in savings will end up being far more satisfying than your gourmet latte routine.
Staying Frugal in a College Town
College is a critical learning period for adopting adult habits, like living within your means. Here are some ideas for living a frugal life that is both happier and richer:
- Avoid luxuries like cable TV or a fat phone plan. You are still a student, not a middle-class consumer, so act like it. Plus, college is no time to be sitting at home watching TV — you’ll get several more decades of that after graduation.
- Buy or rent used textbooks, or borrow them from the school or public library. With the average cost for new textbooks over $1,000 a year, this is an obvious – and easy – place to find some savings.
- Never buy new! You’re not working full-time, so why act like it by buying brand new things? Thrift shops are a fraction of the price, environmentally friendly, and the consensus in cool nowadays.
- Make your own coffee instead of blowing money at an expensive café. A few bucks may not seem like much, but it adds up fast. It’s easy to heat water and use a French press. Give it a try.
- Bike if you can. You’ll be killing two birds with one stone: exercise and transportation. Plus you’ll save on public transit or, heaven forbid, gas and parking.
- Host dinner parties and other fun in-house events instead of going out to restaurants and bars. Again, you’ve got plenty of time after college to enjoy bars, restaurants, and pricey events.
- Make the most of on-campus resources like laundry services, the gym, and the library
- Most college libraries have excellent movie rental selections, so why are you dishing out for Netflix or Redbox?
- More time spent in the gym or library is time spent getting smarter and fitter and not time spent out on the town spending money.
Financially Preparing for Graduation
You may be thinking: college is supposed to be the best time of my life, so why am I wasting it pinching pennies? Well there are a couple problems with this line of thinking. First, if you spend four years racking up debt, barely passing your classes, and living large, then college is going to be the best time of your life…because you’ll spend the rest of your life struggling to pay it back. Second, college can be just as fun without splurging. The fun comes from the camaraderie, adventure, and self-discovery — not from the shopping.
The College Board estimated average miscellaneous expenses to be $2,527 for private colleges and $3,201 for public universities for the 2012/13 school year. Four years of frugal living could save you a few thousand dollars, rather than sticking you a few thousand into credit card debt. Trust me, it’ll come to make a big difference.
Karla Lant is a contributor on The Simple Dollar’s life insurance center. She is currently an adjunct at Northern Arizona University; find Karla Lant on LinkedIn or Google+.