Personal Finances and Paying for College
Learning Objectives
How to set financial goals;
Consider jobs and making money;
Learn how to spend less, budget, and avoid credit card debt;
Determine how best to finance your college expenses.
“What if JOY is my only metric for success?”
— Sarah Jones, Magic Lessons podcast
Start Here: Where are you now and Where do you Want to go?
On a sheet of paper or document, assess your present knowledge and attitudes by answering Yes, Unsure or No to the following statements:
I am confident I will make it through university without any financial hardships;
I realize that while in university I won’t have as much money to spend on things as in the past;
I plan to avoid debt as much as possible while in university so I don’t have large loans to pay back after university;
I am willing to make sacrifices and spend less on some things while in university;
I keep track of all my expenditures and maintain a budget so that I know when I am spending too much;
I believe I can have a happy and fulfilling life as a student without having a lot of money;
I know the best kinds of jobs to seek while in university;
I always pay off the full balance on my credit cards when the statement arrives;
I have applied for every possible form of financial aid to help pay for university.
Think about how you answered the questions above. Be honest with yourself. On a scale of 1 to 10 (1 = in financial trouble, 10 = Very financially secure), how would you rate your financial health at this time?
In the following list, which three are the most important financial areas in which you need to improve:
Making more money;
Finding the best job;
Spending less money;
Living more cheaply;
Paying bills on time;
Avoiding overdraft and late-payment fees;
Making a budget;
Sticking to a budget;
Controlling credit card spending;
Getting help with personal finances;
Saving money;
Keeping good financial records;
Building a good credit history;
Applying for financial aid.
Are there other areas in which you can improve your financial well-being and avoid potential money problems while in university? Write down other things you feel you need to work on.
STUDENT EMPLOYMENT
If you’re a new student you may not yet have money problems or issues—but most students soon do. It doesn’t matter whether you’re a “traditional” college student enrolled in just after high school or a “nontraditional” student returning to school.
Younger students are likely to confront money issues for several reasons:
If you are living away from home for the first time, you may have less experience setting and sticking to a budget and handling money in general;
Because you need more time for studying and other aspects of college life, you may have less time to work and make money;
Even if you receive financial support from your family, your funds are not unlimited, and you’ll need to learn to live within a budget;
You will have many new expenses including tuition and fees, room and board or housing and food bills, books and supplies, and so on;
Nontraditional students who have worked or started a family before attending college may have already learned to manage their money well but usually still confront some financial issues:
Because you need more time for studying and college, you likely have less time to work and make money;
You will have many new expenses including tuition and fees, books and supplies, and so on;
You are more likely to have to juggle a budget that may include a family, mortgage, and other established expenses.
Almost everyone eventually has money issues at college, and they can impact your academic success. Money problems are stressful and can keep you from concentrating on your studies. Spending too much may lead you to work more hours than you might otherwise, giving you less time to study. Or you might take fewer classes and thus spend more years in college than needed. Worse yet, money problems cause many students to drop out of college entirely.
But it doesn’t have to be this hard. Like other skills, financial skills can be learned, and they have lifelong value.
What are Your Financial Goals?
Whatever it is you plan to do in your future, whether work or other activities, your financial goals in the present should be realistic to enable you to fulfill your plan. Consider these scenarios:
Keri entered college planning to eventually major in business. Her family was not able to give her much financial support, but she chose to attend college because she thought it would help her get into a good graduate business school. She had to take large loans to pay her tuition, but she wasn’t concerned about a budget because she assumed she’d make a lot later on and be able to easily pay off the loans. Yet when she graduated and had to begin making payments on her private bank loans, she discovered she couldn’t afford to go straight to graduate business school after all. She put her dream on hold for a few years and took a job she didn’t much like.
John had worked a few years after high school but finally decided that he needed a college degree to get the kind of job he wanted. He was happy with his life otherwise and kept his nice apartment and car and enrolled in a couple night classes while continuing to work full time during the day. He was surprised how much he had to study, however, and after a couple months he felt he was struggling. He just didn’t have enough time to do it all—so he dropped first one class and then, a couple weeks later, the other. He told himself that he’d try it again in a year or two, but part of him wondered how anyone could ever get through college while working.
What Keri and John have in common is a conflict between their financial goals and realities. Both were motivated to succeed in college, and both had a vision for their future. But both were unsuccessful in finding ways to make their dreams come true—because of money issues.
Could they have done things differently? Maybe Keri could have avoided such heavy student loans by working summers and part time during the school year. Maybe John could have reduced his living expenses and cut back his work hours to ensure he could balance school and work better. Maybe both were spending thousands of dollars a year on things they could have done without if only they’d thought through their goals and learned to live within a budget.
Taking control of your personal finances begins with thinking about your goals and deciding what really matters to you. Here are some things to think about:
Is it important for you to graduate from college without debt? Is it acceptable to you, or necessary, to take some student loans?
What are your priorities for summers and other “free time”? Working to earn money? Taking non-paying internships or volunteering to gain experience in your field? Enjoying social activities and time with friends?
How important is it to take a full load of classes so that your college education does not take longer than necessary?
How important is it to you to live in a nice place, or drive a nice car, or wear nice clothes, or eat in nice restaurants? How important in comparison to your educational goals?
There are no easy answers to such questions. Most people would like enough money to have and do what they want, low enough expenses that they don’t have to work too much to stay on budget, and enough financial freedom to choose activities without being swayed by financial concerns. Few college students live in that world, however. Since you will have to make choices, it’s important first to think about what really matters to you—and what you’re willing to sacrifice for a while in order to reach your goals.
A job can Help, or it can Hurt
In addition to helping pay the bills, a job or internship while in school has other benefits:
Experience for your résumé;
Contacts for your later job search network;
Employment references for your résumé.
Work or internship experience related to your future career has significant value. Not all students can find such opportunities in their community, however. But even a job or volunteering outside your field can have value and say something about you to future employers. Your job may demonstrate that you have initiative, are responsible, are a team player or can work independently, and can take on financial responsibility.
Potential future employers will check your work references. Having an employer from your college years say you did a good job, were always on time to work, and were honest and responsible in doing your job definitely gives you an advantage over students who graduate without having worked at all.
At the same time, some jobs contribute more to your overall college experience. Remember, you’re in college for an education and to gain a wide range of skills—not just for the degree. The best student jobs help you engage more deeply in the college experience, while the wrong kind of job gets in the way of that experience. Here are some factors to consider as you search for a job:
What kinds of people will you be interacting with? Other students, instructors, researchers? Interacting with others in the world of college can broaden your college experience, help motivate you to study, and help you feel part of a shared experience. You may work with or meet people who in the future can refer you to employers in your field. On the other hand, working in a business far from campus, for example, may offer a steady paycheck but can separate you from the academic community and detract from a positive college experience;
Is the job flexible enough to meet a college student’s needs? Will you be able to change your work hours during final exam week or when a special project is due? A rigid work schedule may cause difficulty at times when you really need to focus on your classes;
What will you be able to say about your work in your future résumé? Does it involve any skills—including people skills or financial or managerial responsibilities—that your employer can someday praise you for? Will working this job help you get a different, better job next year?
These factors can make a job ideal for college students, but in the real world many students will have to work less than-ideal jobs. Working at a fast food restaurant or overnight shipping company may not seem very glamorous or offer the benefits described previously, but it may be the only job available at present.
Don’t despair—things can always change. Make the money you need to get by in college but don’t become complacent and stop searching for more meaningful work. Keep your eyes and ears open for other possibilities. Visit the campus student employment office frequently (or check online) for new postings. Talk to other students.
At the same time, even with a dull job, do your best and keep a good attitude. Remember that your boss or supervisor may someday be a work reference who can help (or hurt) your chances of getting a job you really want.
The number of hours college students work per week varies considerably, from five to ten hours a week to full time and everywhere in between. Before deciding how much you need to work, first make a detailed budget as described later. Your goal should be to make as much as you need, and hopefully a little more to save, but first you need to know your true need. Remember your goals in college and stay focused on your education. Cut back on your optional spending so that you don’t have to work so many hours that your studies are impacted.
Where can you Find a job?
Start at your campus financial aid office or student employment office. If they don’t have anything right for you at first, check back frequently for new job postings. For off-campus jobs, check the classified ads in your local newspaper. Many jobs are never advertised, however, so ask friends, family members, and other students. Visit appropriate companies in your area and ask if they have openings. Many government agencies also have summer jobs or internships for college students. This work may be an ideal way to gain experience related to your chosen field.
Do you Want to Work for Yourself?
If you have energy and initiative, you can create your own work. While it may take some time to get started, flexibility and being your own boss can make up for this drawback. Students often make money in ways like these:
Tutor classmates in a subject you are good in;
Sell your technical skills to help others set up new computer hardware, teach software skills such as PowerPoint or Excel, or design Websites. Sell things you no longer need (video games, DVDs, textbooks) on eBay;
Earn a commission by helping others sell their stuff online;
Provide services to faculty members and residents in the nearby community: lawn mowing, snow shoveling, housecleaning, babysitting, pet sitting, dog walking, and so on.
Balance the job you Have With Your Dream job
A growing percentage of students are working full time when they return to school, and many continue in the same jobs. If you’re in this situation, you know that balancing work and college is one of the most difficult things you’ve ever done. You’re used to working—but not used to finding time for class and studying at the same time. You likely feel harried and frustrated at times, and you may even start to wonder if you’re cut out for college. The time may come when you start thinking about dropping classes or leaving college altogether. It may be hard to stay motivated.
If you start feeling this way, focus on your big goals and don’t let the day-to-day time stresses get you down. As difficult as it may be, try to keep your priorities, and remember that while you face temporary difficulties now, a college degree is forever.
Acknowledge that sacrifice and compromise may be needed;
Reduce your expenses, if you can, so you can cut back on the number of hours you work. This may mean temporarily giving up some things you enjoy in order to reach your goals.
If you cannot cut your expenses and work hours and simply do not have the time to do well in your classes, you may have to cut back on how many classes you take per term. Try everything else first, but know that it’s better to succeed a little at a time than to push too hard and risk not succeeding. If you do have to cut back, keep a positive attitude: you’re still working toward your future ideal.
If you ever feel the temptation to quit, talk to your college counselor to explore all your options. Resources may be available that you don’t know about.
How Do I Get And Keep A Job?
The goal of this post is to make it a lot easier for you to complete job applications by helping answer some of your biggest questions and get job-ready. We hope this will help you get organized, apply for, get and KEEP the jobs you want. https://www.dyanavalentine.com/studentsuccess/keepingyourjob
What Documents Do I Need To Have?
Here’s an article that goes through exactly which documents you’ll need and how to get a copy of them if you don’t have them.
You will need to keep copies of various documents such as birth certificates, identification (ID) and social security cards, transcripts, diplomas, certificates, etc. as part of your job application preparation. If you don’t currently have a copy of one or more of these, don’t worry, it’s usually a straightforward process to request a copy. https://www.dyanavalentine.com/studentsuccess/documents
How Do I Ask For A Recommendation Letter?
This article takes you through the process of asking for a recommendation letter– including figuring out who to ask, how to ask them, when to ask, what information to include when you ask, and what to do with the letter once you get it.
Recommendation letters can help you get better jobs, scholarships, even get into schools and training programs. You might need a letter to get into housing or a recovery program, or reenter your community after justice-related experiences.
https://www.dyanavalentine.com/studentsuccess/recommendationletter
How Do I Write A Professional Bio?
A well-written bio should tell the reader who you are, summarize your skills, boost your credibility, and make it clear how you add value to any team, position or experience. While that might sound like a tough order to fill, this tutorial may help you break the process down into simple steps.
A professional biographical statement (bio) is an important part of applying for a job. You can use your bio in cover letters, as part of a portfolio, on your personal blog or website, as well as on professional networks like LinkedIn, http://linkedin.com/. https://www.dyanavalentine.com/studentsuccess/professionalbio
What Is A Resume And How Do I Make One?
It is important to understand the components of a resume, the role it plays in the job application process and the steps to creating your first one.
The purpose of a resume is to:
Market yourself to employers;
Show off what you have to offer (skills, experience, education, training);
And, most importantly: To land a job interview!
https://www.dyanavalentine.com/studentsuccess/resume
How Do I Get Ready For A Job Interview?
Here’s an article with tips and resources to help you make a great impression with your potential employer. There are a few steps you can take to ensure the interview process goes as smoothly as possible. Pro tip: the more preparation you do to prepare for the interview, the less nervous you will be. https://www.dyanavalentine.com/studentsuccess/interviewprep
Key Takeaways
The best student jobs have value for your college experience and future résumé and network, while the wrong kinds of jobs may detract from your college experience;
How much you work should be based on a realistic budget and your financial goals and needs;
To find the best job for you, use all the resources available.
SPENDING LESS
Most people aren’t really sure where a lot of their money goes. Complete Activity 2 to determine how much you remember about how you have spent money recently.
Your Turn: Activity
HOW HAVE YOU SPENT YOUR MONEY IN THE LAST 30 DAYS?
On a separate sheet of paper or document, do your best to remember how much you have spent in the last thirty days in each of the following categories and write down the amount in dollars:
Coffee, soft drinks, bottled water
Clothes, shoes, other apparel
Movies, music concerts, sports events, night life
Fast food lunches, snacks, gum, candy, cookies, and so on
Social dining out with friends (lunch, dinner)
Music, DVDs, other personal entertainment
Cellphone
Bank account fees, ATM withdrawal fees
Credit card finance charges
Lottery tickets
Cigarettes, smokeless tobacco
Beer, wine, liquor
Gadgets, video or computer games, and so on
Gifts
Hobbies
Travel, day trips
TOTAL:
Now be honest with yourself: is this really all you spent on these items? Most of us forget small, daily kinds of purchases or underestimate how much we spend on them—especially when we pay with cash. You’ll notice also that this list does not include essential spending for things like room and board or an apartment and groceries, utilities, college tuition and books, and so on. The greatest potential for cutting back on spending is in the area of optional things.
What’s Optional Spending?
More people get into financial trouble because they’re spending too much, rather than because they’re making too little. While spending may seem a simple matter— “I need to buy this, I’d like to buy that”— it’s actually very complex. The United States is a consumer society, and we’re deluged by advertisements promising that we’ll be happier, more successful, better liked by more people, sexier, and everything else if only we buy this. Companies have spent billions of dollars researching how to manipulate our buying behavior. No wonder it’s so tough to resist these pressures!
Why does a person feel compelled to buy fast food for lunch, or a new CD with a song they just heard on the radio, or a new video game a friend says is so good, or a new article of clothing? We owe it to ourselves to try to understand our own attitudes about money and spending. Here’s a good place to start:
Having money or not having money doesn’t define who you are. Your real friends will think no less of you if you make your own lunch and eat it between classes or take the bus to campus rather than drive a new car. You are valued more by others for who you are as a person, not for what things you have;
You don’t have to spend as much as your friends to be one of the group. Some people always have more money than others and spend more. Resist any feeling that your friends who are big spenders are the norm. Don’t feel you have to go along with whatever expensive activities they propose just so you fit in;
A positive attitude leads to success. Learn to relax and not get stressed out about money. If you need to make changes in how you spend money, view this as an exciting accomplishment, not a depressing fact. Feel good about staying on a budget and being smart about how you spend your money;
Be realistic about what you can accomplish. Most students have financial problems, and they don’t just go away by waving a magic wand of good intentions. If your budget reveals you don’t have enough money even while working and carefully controlling your spending, you may still need a student loan or larger changes in your lifestyle to get by. That’s OK—there are ways to deal with that. But if you unrealistically set your sights so high about spending less and saving a lot, you may become depressed or discouraged if you don’t meet your goals.
Before you can make an effective budget, you need to know what you’re spending money on now and consider what’s essential and what’s optional. Essential costs are the big things:
Room and board or rent/mortgage, utilities, and groceries;
College tuition, fees, textbooks, supplies;
Transportation, Insurance (health insurance, car insurance, etc.);
Dependent care if needed;
Essential personal items (some clothing, hygiene items, etc.).
These things are sometimes called fixed costs, but that term can be misleading. If you have the option to move to a less expensive apartment that is smaller or a few blocks farther away, you can partly control that cost, so it’s not really “fixed.” Still, for most people, the real savings come from spending less on optional things.
Go over the amounts you wrote in the earlier exercise “Where Does the Money Go?” These things are “optional” expenses—you can spend more or less on them as you choose. Most people spend by habit, not really thinking about where their money goes or how quickly their spending adds up. If you knew you were spending more than a thousand dollars a year on coffee you buy every day between classes, would that make you think twice? Or another thousand on fast food lunches rather than taking a couple minutes in the morning to make your lunch? When people actually start paying attention to where their money goes, most are shocked to discover how the totals grow. If you can save a few thousand dollars a year by cutting back on just the little things, how far would that go to making you feel much better about your finances?
Following are some general principles for learning to spend less. The “Tips for Success” then lists specific ways you can try to follow these principles in your daily life. Remember, spending money doesn’t define who you are!
Be aware of what you’re spending. Carry a small notebook and write down everything— everything—you spend for a month. You’ll be able to track your habits and be able to make a better budget to take control;
Search out alternatives. If you buy a lot of bottled water, for example, you may feel healthier than people who drink soft drinks or coffee, but you may be spending hundreds of dollars a year on something that is virtually free! Carry your own refillable water bottle and save the money;
Plan ahead to avoid impulse spending. If you have a healthy snack in your backpack, it’s much easier to not put a dollar in a vending machine when you’re hungry on the way to class. Make a list before going grocery shopping and stick to it. Shopping without a list usually results in buying all sorts of unneeded (and expensive) things that catch your eye in the store;
Be smart. Shop around, compare prices, and buy in bulk. Stopping to think a minute before spending is often all it takes;
Make your own lunches and snacks;
Read newspapers and magazines online or in the library;
Cancel cable television and stream programs online for free;
Buy generic products instead of name brands;
Shop at thrift stores and yard sales;
Pay with cash instead of a credit card;
Cancel your health club membership and take PE courses instead;
Compare prices online;
Avoid ATM fees by finding a machine on your card’s network (or change banks); avoid checking account monthly fees by finding a bank with free checking;
Get cash from an ATM in small amounts so you never feel “rich”;
With larger purchases, postpone buying for a couple days (you may find you don’t “need” it after all);
Seek out free fun instead of movies and concerts—most colleges have frequent free events. If you pay your own utility bills, make it a habit to conserve: don’t leave lights burning or your computer on all night.;
Use good study skills to avoid failing a class—paying to retake a course is one of the quickest ways to get in financial trouble!
How to Create a Budget That Works for you
Budgeting involves analyzing your income and expenses so you can track where your money is going and making adjustments when needed to avoid debt. At first budgeting can seem complex or time consuming, but once you’ve gone through the basics, you’ll find it easy and a very valuable tool for controlling your personal finances.
Why create and manage a budget? Going to college changes your financial situation. There are many new expenses, and you likely don’t know yet how your spending needs and habits will work out over the long term. Without a budget, it’s just human nature to spend more than you have coming in, as evidenced by the fact that most Americans today are in debt. Debt is a major reason many students dropout of college. So it’s worth it to go to the trouble to create and manage a budget.
Managing a budget involves three steps:
Listing all your sources of income on a monthly basis;
Calculating all your expenditures on a monthly basis;
Making adjustments in your budget (and lifestyle if needed) to ensure the money isn’t going out faster than it’s coming in.
Track Your Income
Many college students receive money or financial assistance from a number of sources. To track income in a monthly budget, consider all your sources of funds and convert them to a monthly number. For example, you may receive a student loan once during the year or you may work more in the summer and save up money then. To calculate your monthly projected income, add up your income sources and divide that number by the number of months you will be using the income. For example, if you have saved $4,800 that you can spend over two years of college, divide the $4,800 by twenty-four months to arrive at a monthly income of $200 from those savings. Do the same with scholarship grants, student loans, monetary gifts, and so on.
If some of your college costs are being paid directly by parents or others, do not include that money in your budget as either income or an expense. Base your monthly budget on just those funds and expenses that involve you directly.
Use Activity 3: Monthly Income and Funds to record and total all your income on a monthly basis. If you must estimate some sources, estimate low rather than high; it’s a bad trap to assume you’ll have more money coming in than you actually do—that’s a real budget buster.
Your Turn: Activity
MONTHLY INCOME AND OTHER FUNDS
On a separate sheet of paper or document, write down the amount in dollars you may have in sources of income or funds:
Job income/salary (take-home amount);
Funds from parents/family/others;
Monthly draw from savings;
Monthly draw from financial aid;
Monthly draw from student/other loans;
Other income source:
Other income source:
Other income source:
Total Monthly Incoming:
TRACKING EXPENSES
Tracking expenditures is more difficult than tracking income. Some fixed expenses (tuition, rent, etc.) you should already know, but until you’ve actually written down everything you spend in a typical month, it’s hard to estimate how much you’re really spending on cups of coffee or smoothies between class, groceries, entertainment, and the like. The best way to itemize this side of your budget is to write down everything you spend—everything, every bottle of water and cookie, coins into parking meters, and so forth—for a full month. Then you can total up the different categories of expenses more realistically. We urge you to immediately start writing everything down in a small notebook you carry with you. You may be astonished how small purchases add up.
While you’re writing this down for a month, go ahead and work through the expenditure half of your budget, using Activity 3. Set aside an hour or two to revisit your past financial records, checkbook register and debit card transactions, past utility bills, credit card statements, and so on to get the numbers to put in your expenses budget. Make estimates when you have to, but be honest with yourself and don’t underestimate your usual spending. There will be plenty of time down the road to adjust your budget—but don’t start out with an unrealistic plan. Write “est” (for estimated”) next to numbers in your budget that you’re guessing at.
Once you have listed your routine expenditures using Activity 3, write out your own budget categories that fit how you actually spend money. Everyone is unique, and you want your budget to be easy to use for your own life and habits.
As noted previously with income, if some of your expenses are paid directly by others, do not include them here.
Base your monthly budget on just those funds and expenses that involve you directly.
Your Turn: Activity
MONTHLY EXPENDITURES
On a separate sheet of paper or document, write down the amount in dollars you may have monthly expenditures:
Tuition and fees (1/12 of annual);
Textbooks and supplies (1/12 of annual);
Housing: monthly mortgage, rent, or room and board;
Home repairs;
Renter’s insurance;
Property tax;
Average monthly utilities (electricity, water, gas, oil);
Optional utilities (cell phone, Internet service, cable television);
Dependent care, babysitting;
Child support, alimony;
Groceries;
Meals and snacks out (including coffee, water, etc.);
Personal expenses (toiletries, cosmetics, haircuts, etc.);
Auto expenses (payments, gas, tolls) plus 1/12 of annual insurance premium—or public transportation costs;
Loan repayments, credit card pay-off payments;
Health insurance (1/12 of annual);
Prescriptions, medical expenses;
Entertainment (movies, concerts, nightlife, sporting events, purchases of CDs, DVDs, video games, etc.);
Bank account fees, ATM withdrawal fees, credit card finance charges;
Newspapers, magazines, subscriptions;
Travel, day trips;
Cigarettes, smokeless tobacco;
Beer, wine, liquor;
Gifts;
Hobbies;
Major purchases (computer, home furnishings) (1/12 of annual)
Clothing, dry cleaning;
Memberships (health clubs, etc.);
Pet food, veterinary bills, and so on;
Other expenditure:
Other expenditure:
Other expenditure:
Other expenditure:
Other expenditure:
Total Monthly Outgoing:
BALANCING YOUR BUDGET
Now comes the moment of truth: compare your total monthly incoming with your total monthly outgoing. How balanced is your budget at this point? Remember that you estimated some of your expenditures. You can’t know for sure until you actually track your expenses for at least a month and have real numbers to work with.
What if your spending total is higher than your income total? The first step is to make your budget work on paper. Go back through your expenditure list and decide where you can cut. Remember, college students shouldn’t try to live like working professionals. Maybe you are used to a nice haircut every month or two—but maybe you can go to a cheaper place or cut it yourself. There are dozens of ways to spend less, as suggested earlier. The essential first step is to make your budget balance on paper.
Then your job is to live within the budget. It’s expected that you'll have to make adjustments at first. Just be sure to keep the overall budget balanced as you make adjustments. For example, if you find you must spend more for textbooks, you may decide you can spend less on eating out—and subtract the amount from that category that you add to the textbook category. Get in the habit of thinking this way instead of reaching for a credit card when you don’t have enough in your budget for something you want or need.
Don’t be surprised if it takes several months to make the budget process work. Be flexible, but stay committed to the process and don’t give up because it feels like too much work to keep track of your money. Without a budget, you may have difficulty reaching your larger goal: taking control of your life while in college
WHAT IF YOUR BUDGET DOESN’T WORK?
Your budget may be unbalanced by a small amount that you can correct by reducing spending, or it may have a serious imbalance. If your best efforts fail to cut your expenditures to match your income, you may have a more serious problem, unless you plan in advance to manage this with student loans or other funds.
First, think about how this situation occurred.
When you decided to go to college, how did you plan to finance it?
Were you off in your calculations of what it would cost, or did you just hope for the best?
Are you still committed to finding a way to continue in college?
If you are motivated to reach your college goal, good! Now closely examine your budget to determine what’s needed. If you can’t solve the budget shortfall by cutting back on “optional” expenses, then you need more dramatic changes. Are you paying a high rent because your apartment is spacious or near campus? Can you move a little farther away and get by temporarily in a smaller place, if the difference in rent makes a big difference in your overall finances? If you’re spending a lot on your car, can you sell it and get by with public transportation for a year or two? Play with the numbers for such items in your budget and determine how you can cut expenses to stay in college without getting deeply in debt. If you worry you won’t be as happy if you change your lifestyle, remember that money problems are a key source of stress for many college students and that stress affects your happiness as well as how well you do in college. It’s worth the effort to work on your budget and prevent this stress.
If all else fails, consult with a financial aid counselor at your college. Don’t wait until you’re in real financial trouble before talking to someone who may be able to offer help.
WHY PEOPLE SPEND TOO MUCH, EVEN ON A BUDGET
Old habits die hard. Keep monitoring your spending habits and track things you’re spending money on without really thinking about it.
Credit cards. Never use them if at all possible. They make it easy to spend too much or be unaware of how much you’re spending. Save them for emergencies;
Easy access to cash. Just put your card in an ATM and get some cash! It’s so easy to do, and an automatic habit for so many, that it’s easy to bust your budget with small amounts daily;
Temptations are everywhere. Even when we’re careful, we’re often easily influenced by friends to go out or spend time in other ways. Remember why you made your budget in the first place and keep your priorities in mind. The guilt you’ll feel tomorrow about spending a whole week’s food budget on one expensive dinner out probably isn’t worth the pleasure of it;
We buy things to feel good. If that’s been a longtime habit for you, it will be hard to break. Often, it’s better to find small things that make you feel good rather than trying to go without everything. Rewarding yourself with an ice cream treat for a week’s budgeting success won’t break your budget.
Video
This video offers three psychological tricks to help you save money, https://bit.ly/savingmoneymindhacks.
What if I get in Financial Trouble?
People often don’t admit to themselves that they have a problem until it becomes unmanageable. We human beings are very good at rationalizing and making excuses to ourselves! Here are some warning signs of sliding into financial trouble:
For two or three months in a row, your budget is unbalanced because you’re spending more than you are bringing in;
You’ve begun using your savings for routine expenses you should be able to handle with your regular budget;
You’ve missed a deadline for a bill or are taking credit card cash advances or overdrawing your checking account;
You have a big balance on your credit card and have paid only the required minimum payment for the last two months;
You have nothing in the bank in case of an emergency need;
You don’t even know how much total debt you have;
You’re trying to cut expenses by eliminating something important, such as dropping health insurance or not buying required textbooks.
If you are experiencing any of these warning signs, first acknowledge the problem. It’s not going to solve itself—you need to take active steps before it gets worse and affects your college career.
Second, if you just cannot budget your balance, admit that you need help. There’s no shame in that. Start by speaking with a counselor or the financial aid office; if they can’t help you directly, they can refer you to someone who can.
Take your budget and other financial records with you so that they can get a complete picture about what’s really involved. Additionally, SMC offers free workshops on personal finance, http://bit.ly/C20_SMCPF, and classes such as Bus 45 Individual Financial Planning and Bus 47 Personal Finance for Students.
Remember that they’re there to help—their goal is to ensure you succeed in college.
SAVING FOR THE FUTURE
If you’re having problems just getting by on your budget, it may seem pointless to even think about saving for the future. Still, if you can possibly put aside some money every month into a savings plan, it’s worth the effort:
An emergency or unexpected situation may occur suddenly. Having the savings to cope with it is much less stressful than having to find a loan or run up your credit cards. Saving is a good habit to develop. Saving for the future will prepare you well for the increasing financial complexities of life after graduation;
You may need your savings to help launch your career after graduation. If you’re broke when you graduate, you may feel you have to take the first job that comes along, but with some savings you may have time to find the job that’s perfect for you;
You may change your mind about future plans. Maybe you now think that you’ll go to work at a good job right after graduation, so you’re not concerned about saving—but maybe in a couple years you’ll decide to go to graduate school, law school, or business school—or to start your own business, or to join a volunteer program. Your savings may allow you to pursue a new goal.
Start by saving in a savings account at your bank or credit union. You can have a certain amount transferred from your checking account every month into a savings account—that makes it easier and more routine. A savings account allows withdrawal anytime but pays lower interest than other accounts. Ask at your bank about money market accounts and certificates of deposit (CDs), which generally pay higher interest but have restrictions on minimum balances and withdrawals. Savings bonds are another option. All of these options are federally insured, so your money stays safe. Risky investments like the stock market are generally not appropriate for college students on a budget.
How Can I Learn About Money And Budgeting?
Many college students have financial struggles at some point or another and for a variety of reasons such as being poor, living away from home without support for rent, utilities and transport, new responsibilities and time obligations of school, and new expenses such as tuition, books, technology and learning supplies.
Whatever your challenges, it’s important to educate yourself on financial strategies and systems that will help you support yourself, your family, and achieve your goals.
Here’s an article with tips and resources for becoming more financially savvy as a college student. https://www.dyanavalentine.com/studentsuccess/finances
Key Takeaways
Financial success while in college depends on understanding and controlling your expenditures;
There are many ways you can spend less on optional expenses, and even essentials, and still have a full life and enjoy your college experience;
A detailed monthly budget that lists all income sources and expenditures makes it easier to track expenses and avoid sliding into financial trouble;
Spending too much can quickly lead to financial problems. If you notice the signs that you’re starting to have money problems, take steps quickly to prevent trouble before it snowballs out of control;
While it may seem difficult just to make ends meet, make it a goal also to attempt to save something for future needs.
Your Turn: Activity
MONEY BELIEFS
On a sheet of paper or in a document, do the following:
List the top three optional expenditures you usually make every week;
List three tips for spending less that you feel you will be able to use routinely to avoid running out of money while in university;
For each of the following statements, decide which ones are true or false for you:
It’s OK to miss a deadline for paying your phone bill as long as you pay on time at least half of the time;
There’s really nothing wrong with not having any money in the bank as long as you have a credit card for emergencies and major purchases;
You should balance your checkbook every month when you receive your bank statement;
A good way to save money is to try to get by without buying expensive textbooks;
You only need to write up a budget if you’ve gotten deeply into debt and need to consult with a financial advisor to get out of debt.
CREDIT
Credit cards are such a big issue because they are easy to get, easy to use—and for many people, addictive.
Credit cards do have legitimate purposes:
In an emergency, you may need funds you cannot obtain otherwise;
You generally need a credit card for travel, for hotels, and other needs;
Often, it’s less expensive to make significant purchases online, and to do that you usually need a credit card. (Many ATM debit cards also function like a credit card for online purchases);
If you are young, responsible use of a credit card is a good way to start building a credit rating-but only if you use the credit card responsibly and always make sufficient payments on time.
Even though federal regulations require banks to disclose all fees and make it more difficult to increase fees or rates without warning credit card holders in advance, many people overuse credit cards and pay high interest rates and fees for making late payments. Currently, 46% of American credit card holders are carrying credit card debt. The proportion is almost certainly higher among college students with credit cards.
Your first goal with a credit card is to understand what you’re getting into and how you are charged. Read the fine print on your monthly statements. You should understand about rate increases and know what happens if you miss a payment, pay less than the minimum, or pay late. It also pays to shop around.
Set a Limit
All credit cards come with a limit, the maximum total amount you can charge, but this is not the same as the limit you should set for how you use the card based on your budget. If you bought something that cost $400, for example, would your monthly budget let you pay it off when the bill comes? If it will take you two or three months to have that much available in your budget, are you also including the interest you’ll be paying? What if an unexpected need then arises and you need to charge more?
Set your personal use limit by calculating how much your budget allows you to charge. If you are using the card just for convenience, such as to pay for meals or regular purchases, be sure you have enough in those categories in your budget left at the end of the month to make the payment. If tempted to buy a significant item with your credit card, do the calculations in advance. You avoid slipping into credit card debt.
Credit History and Reports
Many younger college students are just beginning to develop a credit history. Older students likely have had credit cards for years, as well as automobile and other types of loans, possibly a mortgage, and other financial transactions that add up to a credit history. But everyone needs to understand what a credit history is and how your monetary habits now can affect your future financial well-being and your future options. For example, frequent overdrafts on a debit card can prevent you from being approved for a credit card, or late credit card payments can prevent you in the future from obtaining a car loan.
Credit bureaus collect financial data on everyone. The credit report they issue is a detailed history of many years of your financial habits. It includes the following:
Current and past credit accounts (credit cards and store charge cards);
History of balances and credit payments;
History of late or missed payments;
Inquiries into your credit status (e.g., if you’ve applied for a number of credit cards, this is recorded even if you did not receive the cards);
Bankruptcy or mortgage foreclosure proceedings.
All this information remains in your credit report for up to seven to ten years. What you do today can really come back to haunt you!
YOUR FICO SCORE
To sum up your creditworthiness, credit bureaus analyze all your data to come up with a single number, called your credit score or FICO score. (FICO is short for the Fair Isaac Credit Organization, which created this method analyzing data.) The calculations of each credit bureau differ somewhat. The score may be anywhere between 250 and 336 (poor credit risk) and 843 and 900 (excellent credit risk). The score is based on the following:
The length of your credit history;
The total amount you owe;
Your payment history;
The types of credit you have.
Credit bureaus are not required to tell you the FICO score that they report to a lender who inquires about your credit history. Check with any of the individual credit bureaus listed earlier, if you need to know your score. Or you may be able to get this information from a lender with whom you have a loan. Most students have no need to know their credit score, except to understand how banks and other lenders make their decisions if you are applying for any type of loan.
PROTECTING YOUR IDENTITY
Identity theft is a serious and growing problem. Identity theft is someone else’s use of your personal information—usually financial information—to make an illegal gain. A criminal who has your credit card number or bank account information may be able to make purchases or transfer funds from your accounts. Someone with the right information about you, such as your social security number along with birth date and other data, can even pretend to be you and open new credit accounts that you don’t know about—until the bank or collection agency tries to recover amounts from you. Although innocent, you would spend a lot of time and effort dealing with the problem.
Your Turn: Activity
MONEY, A CASE STUDY
Read the following case study and reply to the questions below.
Maria’s Financial Dilemma
When Maria decided to attend university after working full time a few years, she was confident she could afford it. She had saved enough money to pay tuition for two years, and she cut back to part-time work that paid enough, she calculated, to live on. With great enthusiasm she registered for the fall term.
Her money problems began in November when her car broke down on the way to her job. The mechanic said her transmission had to be rebuilt and her car also really needed new rear shocks. The bill was well over a thousand dollars. She paid with her Visa card. At the end of the month, she didn’t have enough in her checking account to pay the credit card bill in full. She almost decided just to pay the minimum, but then she checked her statement and saw the 18 percent interest rate and decided to pay the full balance from her savings. She wouldn’t need that money for tuition until next year anyway, and that gave her a long time to save it up.
The first week in December, she slipped on an icy sidewalk and sprained her ankle. Unfortunately, she couldn’t do her job on crutches and had no sick time built up, so she lost two weeks’ pay.
Still, “that’s life,” she thought, although she was so worried about money now that she almost decided to register for just two courses the next term. But university was her priority, so she took a full load and increased her work hours for a couple months to help her get caught up financially. But then as midterm exams grew closer, she felt unprepared because she hadn’t had enough time for studying. Because of the stress she wasn’t sleeping well, and one day she fell asleep in class . .. She found herself daydreaming about the coming summer and being free of classes. To feel better, she took long drives in her car on the weekends.
She did pass her midterms, though she did not do as well as she’d hoped. She still hadn’t been able to save enough for next year’s tuition but felt that she had the summer to work full time and make up for it.
In April, her boss told her that business was too slow to be able to increase her hours to full time for the summer. He was very sorry, but she could keep working part time if she wanted.
Now Maria really doubted if she’d be able to make it. Her family could spare no money to help her out. She had enough for rent, food, and her car, but that was about it. If she didn’t figure something out, she couldn’t afford tuition in the fall. Even with an installment plan to break up tuition payments, she just wasn’t making enough to cover it. She didn’t know what to do.
What is the first step Maria should take to start sorting out her financial situation and learn about her options?
Maria’s financial planning was based on making enough to cover what she spends and using her savings for tuition. If she were to make a monthly budget and analyze every expenditure, might she be able to cut back and save more for unexpected expenses that come up? List areas in which she would likely be able to spend less if she used a budget;
Maria’s attitude toward her credit card is a healthy indicator that she wants to avoid debt. If this proved to be the only solution, however, should she consider a student loan to cover the tuition for her second year? Why or why not?
If Maria was considering not attending university the second year but instead finding a new full-time job that would allow her to save up tuition money again, what advice might you give her?
Key Takeaways
Credit cards have several important benefits when used carefully, including building a credit history and having emergency funds available;
Don’t charge purchases up to the credit card’s limit but set your own personal limit that allows you to pay the balance in full every month;
Avoid high credit card balances by using the card minimally, paying cash when you can, and avoiding cash advances;
How you manage your credit and finances now affects your credit history and creditworthiness in the future.
FINANCIAL AID
Follow these general guides to ensure you receive any aid for which you are qualified:
Apply to your college for financial aid every year, even if you do not qualify in your first year. Your situation may change, and you want to remain eligible depending on the awards or loans that may become available;
Talk to the financial office immediately if you (or your family) have any change in your circumstances;
Complete applications accurately, fully, and honestly. Financial records are required to verify your data. Pay attention to the deadlines for all applications;
Research possible outside financial aid based on other criteria. Many private scholarships or grants are available, for example, for the dependents of employees of certain companies, students pursuing a degree in a certain field, or students of a certain ethnic status or from a certain religious or geographical background, and the like;
Do not pay for financial aid resource information. Some online companies try to profit from the anxieties of students about financial aid by promising to find financial aid for you for a fee. Legitimate sources of financial aid information are free.
The Santa Monica College Financial Aid and Scholarship office, www.smc.edu/financialaid, website has a ton of resources to help you learn about and navigate your financial aid options! The SMC Financial Aid office also has a handbook, http://bit.ly/C20_SMCFAhandbook, to assist you with more information on financial aid including eligibility, applying, deadlines and more!
Scholarships and Grants
Scholarships and grants are “free” money—you do not have to pay them back, unlike student loans. A scholarship is generally based on merit rather than demonstrated financial need—based on past grades, test scores, achievements, or experiences, including personal qualifications such as athletic ability, skills in the arts, community or volunteer experiences, and so on. Don’t make the mistake of thinking scholarships go only to students with high grades. Many scholarships, for example, honor those with past leadership or community experience or the promise of future activities. Even the grades and test scores needed for academic scholarships are relative: a grade that does not qualify for a scholarship at one college may earn a scholarship at another. Never assume that you’re not qualified for any kind of scholarship or grant.
A grant also does not need to be paid back. Most grants are based on demonstrated financial need. A grant may be offered by the college, a federal or provincial program, or a private organization or civic group. Oftentimes, grants are provided with student loans to those with demonstrable financial needs.
Every year, the SMC Financial Aid and Scholarship Office, www.smc.edu/financialaid, awards many scholarships to SMC students. For more information on how to apply, deadlines and for a list of scholarships, visit the SMC Scholarships website, www.smc.edu/scholarships.
Student Loans
Because many universities do not have sufficient funds to offer full grants to students with financial need, financial aid packages often include a combination of grant and loan money. Ideally, one would like to graduate without having loan balances to repay later on. However, many full-time college students will need student loans to pay for college.
Unfortunately, this is a necessary reality for many students. For most, graduating from college owing some money is preferable to not going to college at all. With smart choices about the type of loan and a structured repayment program for your working years after graduation, there’s no reason to fear a loan. Just remember
that the money eventually has to be repaid—it’s not “free” money even though it may feel that way while you’re in school.
Student loans provided through the government do not begin accruing interest until after graduation. If you borrowed $20,000 over four years and interest accrued during this time, you could owe as much as $25,000 upon graduation, so this can be a substantial saving over the course of your degree.
Cooperative Education Programs
Co-operative education programs are another type of financial aid. They are administered by universities and are becoming increasingly common in the areas of business, economics and engineering. They allow students to earn money while gaining valuable work experience prior to graduation. Because they are run by college staff, students receive recognition of program completion on their transcripts and they have access to additional support and preparatory services prior to, during and after their co-op placements.
How Do I Get Paid To Go To College?
This is a common concern for anyone thinking about going to college: But how am I going to pay for it? The good news is that there are many resources available for any person looking to go to any college, usually in the form of loans, grants, scholarships or fellowships.
Here’s an article that breaks it all down, complete with resources.https://www.dyanavalentine.com/studentsuccess/moneyforcollege
Key Takeaways
Many forms of financial aid are available for college students. Apply every year and notify the college financial aid office if you have a significant change in circumstances;
Consider all forms of financial aid—not just the aid managed by your college. Research private scholarships and grants;
Carefully consider how much to borrow in student loans;
Controlling your finances while in college is important both for your future well-being and for eliminating stress that can impede your academic success;
Meeting your financial goals while in college may require some financial sacrifice but need not result in hardship;
The best student jobs offer benefits beyond just the money;
There are many ways to reduce expenditures while in college. Tracking your spending with an effective budget is the first step toward taking control of your finances;
Understanding your own spending habits and practicing a few simple principles for spending less help prevent unnecessary debt. Make and use a budget to take control of your financial life;
Credit card spending can lead to out-of-control debt. Use credit cards minimally and wisely;
Protect your financial identity by maintaining good records and preventing criminals from obtaining your personal or financial information;
Research all forms of financial aid and apply for all aid for which you may be qualified. Do not take more in student loans than you really need.
Your Turn: Activity
CHOOSE YOUR OWN MONEY ADVENTURE
Make a résumé, https://www.dyanavalentine.com/studentsuccess/resume, or update one you already made. Make a list of your experiences, qualifications, and references that you will put on your future résumé;
What areas seem weak to you?
What kind of job, internship, or other experience could you potentially have now in your college years that will strengthen your résumé?
Choose a friend you enjoy spending time with and ask if they will help you with a “freexperience.” Make a list of five fun free things to do over the next two weeks. Make it your goal to spend as little as possible for two weeks, cooking meals together if practical, taking lunches and snacks to classes, and finding new ways to enjoy your free time inexpensively. At the end of this experiment, compare what you spent with the two weeks prior to your “freexperience;”
Make a budget based on realistic estimates for your monthly expenditures and income sources and amounts. Compare your prospective (estimated monthly money out and in) to your retrospective (what actually happens next month), and write a paragraph or two about your experience. Would you do it again? What did you learn?
Make an action list for each category below:
Spending
I spend too much money every week on:
My action plan to spend less includes the following:
Lifestyle
The area of my lifestyle where I know I spend more than most other university students is:
I can make these adjustments in my lifestyle to reduce this expenditure:
Job in College
Ideally, I’d like to work no more than this many hours a week:
What I’d most enjoy doing is:
I can learn more about possible jobs close to my ideal by:
Saving Money
I believe I can realistically save this amount of money a month if I track my spending:
This is where I will put my savings:
I will allow myself to spend this money only for something major like:
Budgeting and Tracking Spending
Here’s how I have kept track of what I spent in the past:
So that I can maintain a budget now and in the future, I know I need to record every expenditure. I will do this by:
Credit Card Use
In the past, I usually used my credit card to buy things like:
If you have not always been able to pay off your balance every month: I will try to avoid using my credit card as much by taking these steps:
N.B.: The Student Success Library item was customized for Santa Monica College (SMC) in Santa Monica, CA. You may come across SMC-specific resources, links, or activities that do not apply to you. Search for your own school’s resources or google for similar tools that can help you where you live, study and work.
This work, Personal Finances and Paying for College, is part of the Student Success Library, which is a derivative of Student Success, originally modified by Vanessa Bonilla, Dr. Tyffany Dowd, Jackeline Felix, Dyana Valentine, Olivia Vallejo and Daniella Washington from the original Student Success by Graciela Martinez, Anh Nguyen, and Liz Shaker under CC BY-SA 4.0. Student Success Library is licensed under CC BY-SA 4.0 by Dyana Valentine. Last edit date: July 2022.