College can be a wonderful time. You get to move out on your own and study for your future career. However, it can also be difficult for some because of all the financial hurdles in the way. Adulthood comes with responsibilities, and most of those responsibilities require payments every month. When you think of financial planning, you likely think of planning for retirement, but you can use financial planning tips at any age. Here are three financial planning tips to help college students.
1. Don't take out student loans - unless you absolutely need them to cover tuition and books.
One of the biggest financial blunders that college students make is taking out student loans that they don't need. Sure, it is tempting to get student loans because it can put a lot of money in your pocket. What you fail to remember is that you have to pay them back after you graduate -- with interest. So, while it may seem like a great idea to live off of student loans in college, you actually could be setting yourself up for financial ruin later on.
The only time you should take out student loans is if you need it to cover your college tuition and books. For instance, if you want to go to a college that costs more -- or if you want to go to medical or law school -- you really can't do that on your own without getting student loans.
But, if you are going to a college where your grants and scholarships cover the cost of tuition and books, it is better not to get loans. That way you can hopefully avoid graduating college with a massive load of student debt.
2. Come up with a monthly budget and stick to it.
Part of college for many people is the opportunity to have an active social life. That means eating out, going shopping, going to the movies or concerts, etc. However, it can be difficult to afford to do all of that if you only have time to work part-time. That is why it is important to come up with a monthly budget and stick to it.
You need to figure out how much all of your bills are (i.e. rent, utilities, car, insurance, etc.). Those are the bills that must be paid every month, no matter what. Then, calculate about how much you need to spend on groceries and personal hygiene products. These are also things that you need to pay for every month.
After you add all of that up, you need to subtract it from your monthly salary. The number that you are left with is the amount of expendable income you have for the month.
Now, you may be a little depressed when you see the amount you're left with - or, if you get paid well or don't have as many bills as others do, you may have a nice sum left over. Either way, it is important that you stick with your budget. You may have to miss out on some concerts or buying new clothes on occasion, but it's better than not being able to pay your bills because you didn't stick to your budget.
3. Limit your credit card usage.
Much like student loans, credit cards can also cause problems for college students. But, it can be a good thing to have a credit card with a low credit limit. It enables you to build your credit score, which will be very beneficial later on when you want to buy a new car or a house of your own.
However, it can be tempting to charge things to your credit card that you don't need, such as pricey front row tickets for you and your best friend to see your favorite band in concert. A good rule of thumb to use with your credit card, especially while in college, is to only charge things that you absolutely need.
For example, say you had an unexpected medical bill or needed to get new tires for your car. Instead of taking money away from your bills, you could use your credit card. As long as you don't use the card excessively and you pay more than the minimum due, you should be able to pay off the balance within a couple of months - though it's always good to pay off the entire balance each month if you can afford to. For more tips on financial planning, contact a professional like Peterkin Financial.