Consumers 101 Personal Finance Series
College is stressful enough without having to worry about financial issues. Avoid these five common money mistakes to stay on track with your spending.
Not Setting a Budget
There are a lot of expenses when you’re a student. Tuition and textbooks aside, you also need money for things like rent, utilities, and going out with friends. It’s easy to quickly burn through your money without realizing how much you’re spending. This is why it’s so important to set well defined budgets.
Budgets for different spending categories will keep you on track and will help prevent you from spending above your means. Look at your recent transaction history to gauge how much you typically spend on expenses like utilities, groceries, and entertainment. Set a modest and reasonable goal for each category and work on not exceeding your budget.
Paying Bills Late
Many students don’t realize that late bill payments can negatively affect their credit. You start to develop credit history right away, so financial irresponsibility during school could have an impact later in life. Credit history is a factor when you’re seeking new lines of credit, applying to rent an apartment, and sometimes even in a potential employment opportunity.
Always pay your bills on time. Include all bill payments in your budget and set reminders so that you don’t lose track during a busy semester.
Spending Too Much on Credit Cards
Credit cards are convenient. It’s easy to spend hundreds of dollars without thinking about when you have to pay it back. But overspending on your credit card means you risk spending more than you can afford.
If you only pay the minimum balance each month, you could end up paying excessive interest fees. Spending more than 30% of your available credit can also have a negative effect on your credit overall. For example, your credit score may take a hit if you spend more than $300 on a card that has a credit limit of $1,000.
Keep your credit usage below 30% and always pay off your balance in full and on time every month.
Not Paying Off Student Loan Interest During School
If you have student loans, you may be wondering why you should bother making payments while you’re still in school – you aren’t required to, and there’s even a grace period after you graduate for most loans.
Unsubsidized loans start to accrue interest as soon as they’re disbursed. This means that your loan amounts are slowly creeping up even when you’re still in school. Eventually, you’ll have to pay interest on top of this interest.
Depending on your interest rates, it may be entirely manageable to keep up with these payments during school. Small payments each month now could mean thousands of dollars in savings later on.
Spending Money on Things You Don’t Need
It’s easy to spend money on items you don’t really need – new clothes for a party, brand new furniture, new cookware. You should have some room in your budget for unexpected expenses and fun purchases, but don’t go overboard.
Before you buy something new, decide if you really need it or if you can find it cheaper elsewhere. Not only will this help you stick to your budget, it will also mean you have fewer things to pack up and move when it comes time to graduate.
Previous posts in this series: