When you enter college, this may be the first time you will have control of your life. That includes taking care of your own money. That is why it is important not to make financial mistakes that could take you years to recover from.
Here is a look at ten of the top financial mistakes people make in college and how to avoid them.
Avoid These Financial Mistakes in College
Getting into too much credit card debt
If you walk onto any college campus, the chances are that you will find credit card companies with tables and free gifts as enticements to get you to sign up for their card.
A problem is that misuse of a credit card could put you into deep debt. Some credit cards charge as much as 29% annual interest. Therefore, you may not want to have more than one credit card and you should be careful not to spend recklessly if you do choose one. Here are some tips on how to lower your risk of getting into trouble with a credit card:
- Do not spend more than 20% of your credit card limit
- Make your payments on time
- Keep track of your credit card charges
Not making loan payments while in school
If you are taking out a student loan, then you may want to pay those back as soon as you are able. If you can afford to start paying back your loans while you are still in school, you can get rid of those loans earlier in life.
Paying your student loans off early may free up your money to spend on a home, investments, and other major purchases.
Not having a budget
It is essential to have a budget, no matter how much money you make. You want to make sure that you do not spend more than what you are making. In fact, there are several free budget apps online that can help you keep track of your money. A simple online search for free budget apps will garner a variety of online tools.
Not understanding the terms of a loan before applying
If you are taking out a loan while in college, you will want to know the terms for paying back that loan. For instance, you will want to know how much the late payment penalties are as well as the interest rate.
Loans can end up costing you a lot more than you expected. Be sure to read up the entire loan term sheet before you hand in your application.
- Not exhausting all scholarship options
Chances are, there may be scholarship options that you can benefit from. Each of these scholarships can help pay off your college tuition.
Here are the following resources that you can use to find as many scholarships as you can get:
- Visit the financial aid office of your school
- Talk to your high school guidance counselor
- Use the U.S. Department of Labor's free scholarship search tool ( studentaid.gov)
- Look at your state's grant agency
- Research financial aid options at your local library.
When you are in college, there will not be the same pressure to attend your classes like high school. However, if you skip a lot of your classes, you are only cheating yourself. That's because you paid for your classes.
Take advantage of all the education that your college has to offer. Be sure to attend as many of your college classes as possible.
- Not taking advantage of free opportunities
When you are in college, you will find several free opportunities and perks that can help you save money. Here are some of the top perks that you can enjoy while you are in college:
- Free access to tracks, athletic fields, and workout rooms - This will prevent you from having to pay for a gym membership.
- College discounts (companies like Amazon, Apple, Microsoft, and other companies offer some college discounts)
- Career centers - Use your college's resources to help you find a job after graduating.
- Dining halls - College dining halls tend to have more affordable food than off-campus restaurants.
- Staying in school for too long
While college is a great place to learn, you don't want to stay there too long. Remember that every extra year that you are in college is a year that you are not earning a full-time income. Try to get your degree as fast as possible so you can enter the workforce and begin making money.
- Not saving and investing
Just because you are in college does not mean that you can't start saving money. The big advantage of saving while you are young is that you can allow time and compound interest to work for you.
- Not building credit
Your credit is your gateway for purchasing your home and getting an auto loan at a low interest rate. The faster you start building your credit, the better. Here are the factors that affect your credit rating:
- The age of your credit - start early and build your credit faster
- Accounts in collections – if you owe any company any money, you may want to pay that off quickly.
- Credit card utilization - remember, spend less than 20% of your total credit card limit
- Hard credit inquiries - try not to apply for too many loans and credit cards. Too many hard credit inquiries can adversely affect your credit score.
You can check your credit report for free once per year at annualcreditreport.com. You can see your credit score for free at CreditKarma.com. It is recommended that you check your credit score at least once a month. Also, be sure to check your credit score before you apply for a loan.
Getting a jump start on your financial future
It is never too early to take control of your financial life. Make sure you avoid the most common financial mistakes that people make in college, and you will be well on your way to a bright financial future.