College is one of the biggest expenses you will have in your lifetime, but it is an investment that will pay off in higher income, expanded career opportunities and greater personal satisfaction throughout your life. Along with its financial obligations, your journey to college also opens the door to financial freedoms you've never had before - opportunities that can come back to haunt you if you don't exercise good financial judgment along the way. College life is full of temptation to live beyond your means, so now, more than ever; you need a plan in place to make sure you remain on a smart financial path.
Take a look at the statements below. How many of the items can you truthfully check off?
- I have a budget that works for me.
- I use my credit card(s) wisely.
- I know how to apply for financial aid.
- I completely understand my student loan(s).
- I am aware of the consequences of defaulting on my student loan(s).
- I know ways to help avoid identity theft.
- I know how to request a free credit report.
- I understand my credit report.
- I know how to use financial calculators.
- I know how to live within my resources.
- I have a healthy savings account.
- I have realistic expectations about my future salary.
- I balance my checkbook regularly.
- I know the steps to take to clean up credit problems.
If the number of items you checked above - and your knowledge of financial fundamentals - is a bit low, let the topics outlined in the next sections and the links to specific websites guide you toward the world of "financial literacy" and a plan to help you make the most of your money and your future.
Living like a college student
Racking up debt without a solid financial footing can lead to disaster. While your debt may seem manageable at the moment, interest and finance charges have an ugly way of adding up. If you are not able to pay off your debt each month, you may be forced to cut back later. While you may dream of making big bucks upon graduation, your best bet is not to spend your money as if you've already landed that great paying job.
There are some very simple and basic things you can do today to help ease the financial burden.
- Be aware. Keep track of everything running through your student account. Small purchases and fees may not seem like much, but the accumulative effect may leave you with less money than you were counting on. Be aware of what type of items you are placing on account at the bookstore. Your financial aid awards may pay for the majority of the items placed on account, but if they do not, you will be responsible to pay for any items that are not covered.
- Be smart with your credit cards and any other lines of credit you may have. Charge only the amount you expect to be able to pay when the bill comes in each month and never let anyone else borrow your card. Limit the number of accounts you have to one or two.
- Learn to say no to your friends. In a group, it's often easy to just go with the flow, but that flow could soon translate into money leaving your wallet. Chances are, others are also feeling a financial pinch, so every once in a while, suggest an alternative that requires less (or no) money.
- Talk to your roommate(s) about money matters. Make sure it's clear up front what each person's responsibilities are. Know what's shared and what's up to you to provide or contribute. This is even more important if you live off campus - discuss everything from rent and utilities to food and incidentals.
- Take advantage of student discounts and ask around for special student offers. It usually involves no greater effort than flashing your school I.D.
- Avoid rent-to-own stores, pawn shops and check cashing stores. The instant gratification you may get from using these establishments is sure to be overshadowed by the increased cost you pay for doing business with them.
Creating a budget . . . and using it
Sure, sticking to a budget isn't always easy. But it's the best way to put yourself in the driver's seat when it comes to making sure your money goes toward the expenses that matter most to you. There are multiple websites that will help you create a budget. Below are just a few.
Putting money into savings
Taking charge of your finances should also involve regular contributions to a savings plan. As a college student, you may feel you're merely trying to get by one semester at a time, operating without the extra funds required for lofty goals like padding a savings account. In reality, it's not that big of a stretch. Even small contributions made on a regular basis will work to your benefit. The younger you start, the better off you'll be - in terms of the smart habits you create and the amount of money you'll earn because of those habits.
Simply put, establishing a savings account is the best way to handle both the uncertainties of life (such as job loss or medical expenses) as well as to reach your financial dreams (like a car, travel or retirement).
Make it happen by paying yourself first. Even when money is tight, make it part of your routine to put money toward your savings before you spend it on other things.
- When you receive your paycheck or other money, deposit a portion of the funds into your savings account or electronically transfer the funds into the account.
- Ask your employer to directly deposit some of your earnings into your savings account.
- Save loose change in a jar and set a goal for how much you want to gather. At the end of each month, deposit your collections into your savings account.
Review your credit report
Your credit report is a collection of information about you and your credit history. It can have a major impact on your life. The three reporting agencies are Equifax, Trans Union and Experian.
Know whether you have a credit report. If you have ever applied for any of the following, you have a credit report.
- credit card
- student loan
- auto loan
Understand who looks at your credit report. Your credit report maybe looked at by:
- potential creditors
- potential and current employers
- government licensing agencies
- insurance underwriters
Know what these entities are asking.
- How promptly do you pay your bills?
- How many credit cards do you hold?
- What is the total amount of credit extended to you?
- How much do you owe on all of your accounts?
Be aware of the consequences of credit mistakes. Any negative information found on your credit report (late payments, bankruptcies, too much debt) can have a serious impact on your ability to:
- get credit
- get a new job
- advance in your current job
- rent or buy a home
Be aware of how long information stays on your credit report.
- positive information - indefinitely
- inquiries - 6 months to 2 years
- most negative information - 7 years
- some bankruptcies - 10 years
Request your free credit report. You are entitled to one free credit report a year from each of the three credit reporting agencies. Request yours at www.annucalcreditreport.com. Be aware of web sites with similar names that may require you to subscribe to a service in order to receive your "free" credit report.
Check your free credit report. Make sure the information is accurate and be sure to report information that is not.
Know your credit score. A credit reporting agency evaluates various components of your credit history to determine your credit score, including:
- payment history
- outstanding credit owed
- length of time your credit has been active
- types of credit you have
- acquisition of new credit
Preventing identity theft
Identity theft is the fastest growing crime in America. Perpetrators use someone else's personally identifying information to commit fraud, including borrowing money in another person's name. Victims of identity theft face debt and credit problems that require extensive time and effort to sort out.
Millions of Americans have fallen victim to identity theft. The stereotypical college student who is careless with personal information and unaware of credit changes can be an enticing mark for a would-be identity thief. Don't become a statistic!
Keep your information safe.
- Protect your social security number. Don't carry your social security card in your wallet or write your social security number on a check. Give it out only if absolutely necessary.
- Don't give out personal information on the phone, through the mail or over the internet unless you know who you are dealing with.
- Never click on links sent in unsolicited e-mail messages. Instead, type in a web address that you know.
- Shred financial documents and paperwork with personal information before you discard them.
- Use firewalls, anti-spyware and anti-virus software to protect your home computer - keep them up-to-date.
- Don't use an obvious password like your birth date, your mother's maiden name or the last four digits of your social security number.
- Keep your personal information in a secure place at home, especially if you have roommates, employ outside help or are having work done in your house.
- If you pay bills by mail, send your payments through a postal mailbox instead of leaving it for a carrier in your home mailbox.
Monitor your financial information. Review your various financial accounts and statements on a regular basis.
Act quickly when you suspect identity theft.
You should also understand identity theft as it relates to student loans. For instance, a federal student loan may be canceled if it was falsely certified as a result of the crime of identity theft.
Find out more on Financial Literacy
There are several web-based financial literacy education programs and student success programs offered on the internet. These are programs that are structured for an individual to go through at their own pace and complete. If you are interested in learning more, please visit and participate in some of the life lesson sessions offered at the following sites.