By Andrew Housser
A college degree often leads to a better-paying job. But in the process of earning that degree, you may incur debt and financial problems. These can plague you for decades if you are not careful. Be smart and protect your future by sidestepping these financial blunders.
1. Blunder No. 1: Skipping the budget. Even if mom and dad are still providing spending money, you need to make sure your key expenses are covered before upgrading to the latest and greatest cell phone. At the start of each month, write down how much money is coming in and how much is going out (in rent, credit cards, utilities, school fees and other). The remaining amount is what you have left to live on until the start of the next month. Give yourself an allowance for dining out, clothes and other activities. Make sure you set some cash aside in savings for unexpected expenses.
2. Blunder No. 2: Carrying too many credit cards. Half of all college students have four or more credit cards. Credit card companies love college students. After all, many students are on a limited income. This makes the "buy now, pay later"promise enticing. College students also are unlikely to spend much time reading the fine print of credit offers. This is unfortunate, as most students are offered cards with high interest rates and lots of hidden fees. Make sure you understand your card's rates, fees and credit limits. Of equal importance is paying on time, and charging only what you can pay off in full each month. Skipping payments or failing to pay on time can stay on your credit history for seven years and negatively affect your credit score. A poor credit score can haunt you throughout adulthood, affecting your ability to rent an apartment, finance a car, buy a home or even land your dream job. Used wisely, though—by making small charges that you pay off each month by the due date—credit cards can play an important role in helping to build a solid credit history that will benefit you as you start out on your own.
3. Blunder No. 3: Ignoring loan stipulations. Members of the graduating class of 2012 left school carrying an average of $26,600 in student loan debt. More than 40 percent of student loan borrowers will become delinquent in repaying during the first five years after college. A college job (even part-time) can help reduce the amount of loans you need. Remember, these loans are meant to be used for schooling and not a spring break trip to Mexico or the latest techno gadget. Before you borrow, make sure you take advantage of any possible scholarships, grants and other awards. Next, take a look at federal loans, which offer lower interest rates than private ones. After graduation, you may be able to defer student loan payments for a short period while you job hunt or get started in your career. The income-based repayment method also can help lower your loan payments. You can learn more about financial aid opportunities and loan repayment at the National College Finance Center.
4. Blunder No. 4: Treating financial info frivolously. Nearly one-third of identity thefts happen to people between the ages of 18 and 29. One reason is that people in this age bracket are more open to sharing credit card and banking information with roommates and significant others. They also may carelessly leave this information lying around. Keep this private information just that: private. You can further protect yourself by not logging into credit card or bank accounts via unsecured wireless networks, or on public computers like those in libraries and coffee shops.
When choosing a college and a career, keep your long-term financial outlook in mind. Think about smart financial ways to get that college degree. For instance, attending a local state school or community college, or taking online classes for a year or two, can save thousands of dollars on room and board, as well as tuition. State schools may charge a fraction of the costs of private schools (especially if the school is in your state of residence); however, you may receive more financial aid from a private university. It is a good idea to regularly talk to both your student loan officer and your academic counselor. This will help you in the quest toward obtaining employment to meet your financial obligations once you have your degree in hand.
Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.