The first year of college is a time of great change and growth both for the new student and for parents. Freshman year means lots of new freedoms and responsibilities; for many its the first time out on their own, first time having to make and manage their own budget and first time having to handle their own finances. Starting off strong and building a good foundation is essential to a great college experience and a successful and fulfilling life. Here’s Personal Finance Mastery’s top tips for the beginning college freshman – and it’s a good primer for everyone else too!
1. Live Within Your Means
Even though its great being free and out on your own it’s important to remember that you’re a student not a rockstar. While you don’t have to live by the Starving Student stereotype it is important that you aren’t out every day buying everything in sight or out every night burning a hole in your wallet at the local nightlife. The key to preventing this kind of overindulgence is knowledge; it means knowing where your money is and where it’s going. In other words you need a budget and you need to stick to it. There are lots of ways you can begin tracking your finances:
- A free online budgeting site
- A paid more professional online budgeting system with a free trial
- If you have a smartphone like an iPhone then there are plenty of apps that you could download and use to track your finances
- A great budgeting software you could have on your computer and use to manage and track your finances.
Once you have decided how you will keep track of your finances then the next step is to sit down and create a budget for yourself. My 6 Steps To A Financial Forecasting Plan is a great place to start on learning how to do that.
2. Show Your ID
In many college towns local merchants offer discounts to students. You could find yourself with great savings at restaurants, movie theaters, retail stores and many more. Also you could look at buying a $20 Student Advantage card, these cards offer great discounts on travel prices and even online retailers like BarnesandNoble.com and others.
3. Get to Work
Those late night coffee runs, dinners out with friends and let us not forget Spring Break can all add up to some pretty major budget busters. Finding some part-time or even full-time work can fill in some of those gaps in your budget, after all the last thing you ever want to do is put these kinds of costs on a credit card. You can look for work at local restaurants and retail stores, many schools offer resources on finding a job and have placement programs. If you have the Entrepreneurial streak then you could even look at starting up your own business to work part-time as you go to school. A job can also help to limit the amount of money you need to borrow for school; graduating with a mountain of debt and student loans is a recipe for disaster and you can find yourself paying off your 4 years of college for decades to come. Our report on the graduating class of 2010 and 2011 and how debt was affecting their future should be enough to scare you straight.
4. Protect Yourself
It’s important that you get into the habit of routinely checking your finances and accounts, keeping a close eye on your cards and never flaunt around wads of cash. Even if you think you don’t have many assets or much credit the damage from identity theft can be devastating and will take lots of time, energy and effort to correct. Don’t go around openning an account with every credit offer you get; the risks are just to high. Either you could be tempted to spend all this free money and get yourself in a bunch of debt or with so many accounts keeping track and stopping identity theft right at the beginning can be very difficult. Also with it being the first time out on your own, far away from home in an unknown place and typically, especially at the beginning, without the strong social connections and network you have back at home makes Freshman prime targets for robberies, muggings and even date rape.
5. Savings and Investing
It’s never too early to start saving and planning for the future. As Einstein said, Compounding Interest is the 8th Wonder of the World; and the sooner you start the better off you will be. Even if all you can do is put aside $20 a month it’s a powerful start and most important of all it will help you to establish essential financial habits. What I highly recommend you do is open a Roth IRA and fund it with all the extra money you have from your job. With even some conservative diversified portfolio options you will be amazed how your investments will grow over the years and the best part is that when the time comes to pull the money out it is all TAX FREE!