Three Financial Mistakes College Students Make
College is an exciting time. Being out in the world on your own comes with a lot of freedom. But, if you are actually in this position, you are already aware that it also brings a lot of responsibility. Besides having to do your own chores and cooking, you now have to keep track of your own finances. Not only that, but you have bills. Even if you’re living on campus and your rent is covered by student loans, you may still have food costs, cable, car insurance, phone bills, or any number of other expenses. Here are three common mistakes made by college students that you should avoid.
Putting Everything on Loans
If you’re getting student loans, it is possible to get money for more than just tuition. You can ask for money that covers living expenses, books, and other school-associated costs. As tempting as this is, and as easy as it could make your life for a year, it is not recommended. This is the ultimate procrastination. You don’t want to pay $500 for textbooks now, but if you think about it, you may have to pay double if you put it on your loans. The best bet is to only get loans for what you absolutely cannot afford right now. Then you’ll have less to pay off later, and less interest.
Not Paying off Interest as it Accumulates
Most student loans offer the option to pay interest while you are still in school. If you can afford to do this at all, jump at this opportunity. It keeps your interest from compounding and will make the time it takes you to pay off your loans all that much shorter. You also get in the habit of making monthly payments. It gives you a head start on establishing some credit too. Really, the only downside is that you have a little less money while you’re in college, but the future payouts make it well worth having to crack down on spending a bit.
Not Saving Money
While you have some bills to pay, college is still not the “real world”. A lot of your living expenses are bundled into your tuition and housing costs. This means that if you have a job, you probably have some extra spending cash. If this is the case, take this golden opportunity to save it. Even putting $25 a month aside will help you in the future. You are establishing healthy financial habits as well as preparing for the future when extra money is a dream of the past. When you get out of college there are many costs that can hit you in the face if you’re not ready.
Apartments often have steep deposits on top of first and last month’s rent, so even if you get a decent rate, you may have to pay a bundle in order to move into a new place.
Even if you get a grace period for paying off your school loans, eventually the day will come when you have to pay them. The more money you have set aside, the easier this will be.
The percentage of college graduates who get a job in their field right after school is dismally low, so prepare for hard times. If they don’t come, you will still have some extra savings. If they do, you will be glad that you prepared for them. So be wary of these common financial mistakes, and keep yourself and your bank account out of the red.
