Top 5 Money Management Mistakes College Students Make
With the cost of college tuition continuously rising, the number of students going into debt to pay for their education is increasing alongside admission prices. Many students go into debt thinking their degree will land them a lucrative career, enabling them to pay back loans. While obtaining a degree does aid in securing a well-paying position, college attendees should be wary of high-interest loans and reckless spending, which can set them back for years to come.
Often, college students living off minimum wage jobs find it hard to manage their money, with many disregarding their tight budget, trading it in for reckless spending. Young adults are prone to poor budgeting skills because many have never lived independently before. However, students must practice healthy financial habits to steer clear of debt and drained savings.
Creating a budget sets a limit on how much you can spend, which allows you to track spending habits and set up a financial safety net. In addition to creating a detailed money plan, college students should steer clear of crippling money management mistakes to ensure financial security in the future.
Misusing credit cards/overlooking the importance of good credit
Many college students using credit cards for the first time find it difficult to manage, as an open line of credit can feel like free money with no consequences. However, young adults may find themselves with racked-up debt and late fees from overspending without proper usage and a payment plan. Late or missed payments tank your credit score, barring you from lower-interest offers and big-ticket purchases down the road.
However, all hope is not lost. By tracking your spending to a T, abstaining from large credit purchases, and paying off your card in full every month, you can raise your score and get back on the financial success track. In addition to healthy spending habits, college students should be wary of high-rate credit card offers and stick to low-risk student cards.
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Not knowing where your money is going
Often, young adults look at their bank statements at the end of the month, wondering where all their money has gone, only to find they've blown through it on fast food and entertainment. However, by creating a detailed budget and carefully tracking purchases during the month, you gain a clear picture of where your money goes and how to manage it correctly. Once you've pin-pointed expenses, look for areas you can cut back on, like eating out or subscription services.
Thinking a want is a need
For young adults making their way through university, money may be tight as they pay off loans, class fees, and living expenses. However, many students confuse wants and needs, justifying purchases throughout the month that set their budget back. By being selective and sticking to a financial plan, you can sidestep economic stressors that pop up when bills are due. For example, instead of hitting up your favorite coffee shop every morning before class, pick one day to indulge and brew a fresh pot at home to save cash. After all, every little bit adds up.
Abusing student loans
Although some students have no other choice than to take out loans for tuition, college attendees should be wary of pulling out large loans with steep interest rates. For instance, if tuition plus room and board are fifty thousand dollars, don't pull out seventy-thousand to pay for a lavish lifestyle. Instead, look for ways that you can cut back on your expenses and get a part-time job to pay for items you can't give up.
Succumbing to peer pressure
College is a time in your life when you're supposed to go out and have fun with your friends. However, be wary of how you spend when going out. Although it may be challenging to say no to friends, setting boundaries, staying in occasionally, and finding cheap or discounted entertainment can save you cash in the long run. After all, planning a bowling tournament with your friends is just as memorable as expensive nights on the town.
Although budgeting in college isn't an easy task, it's necessary to avoid missed payments and incurred fees. By setting a solid financial plan, prioritizing necessities over entertainment, and utilizing loans responsibly, you can make your way through college without debt and negative balances.