I have spoken to thousands of college students (which I absolutely love) and I almost always share this story below. I love speaking with college students, because I’m teaching them practical financial tips that I know they are not learning in school. College is such a pivotal time; where habits form. I like to think that the solid financial advice that I give to college students can help to form good habits that you will benefit from for years to come. That’s the hope. Below is a story that I share in my talks, to warn them of what not to do!
Here’s a pic of one my talks at a local University.
Now to the story:
It was the first week of college. A new city, a new home, new friends. I’m walking through campus and in the middle of the quad I see a bunch of easels set up with t-shirts draped over them. There it is… It catches my eye… The Bob Marley t-shirt of all Bob Marley t-shirts. It was a super unique shirt that I hadn’t ever seen before. It had the silhouette of Bob Marley’s head on it. Pretty non-descript, but cool, for sure!
Some lady named Chase was selling them, or giving them away, or so I thought. She had a clip board with a stack of paperwork on it. All I had to do was fill out that paperwork, and the shirt was mine! Apparently, the paperwork was for a Chase credit card, and I have no idea what the lady’s name was. Nonetheless, I got my t-shirt!
I rocked it all over camps for a solid couple of weeks. I mean, I took it off every once in a while, but it definitely was under-washed. In about that third week, after completely forgetting about the credit card itself, it showed up to my dorm mailbox. I thought, “Why would I use it?” So, it just sat in my dorm room. After a while, I decided to use it on my Wal-Mart trip for groceries. I paid it off right away. Then, I began using it more and more, and began not being able to pay it off each month. I didn’t have the money in my checking account to cover the balance on the card each month. I wasn’t spending on frivolous things, mind you. Really, just groceries and gas, but I must have lost track of it. I didn’t keep close tabs on it, and it just started to get away from me. I know, that sounds kind of weird, but it’s the truth. Without any training or knowledge of how credit cards worked, I just simply didn’t know. Shame on me.
Long story long, the credit card racked up a balance. I was getting overwhelmed with these small purchases that added up to such a big balance for me at the time. This was my first credit card and I frankly had no idea how to use it wisely. The balance just continued to grow, I’d pay portions of it off, but the revolving balance grew and grew. I wish I had kept the exact numbers because they were bad, especially for a college kid, but I do remember that after about 2 years, I had over $3,000 on that card, and zero big, ridiculous purchases on it. Finally, after getting a good job in my sophomore year of college, I was able to pay it off, but I ended up paying much more than I actually spent because that 28% interest rate was kickin’ my butt! I probably ended up paying close to $4,000 just to pay off my $3,000 of actual purchases over the 2-year period. That’s the power of interest (the wrong way). Not smart, and not what you want to be getting into in college.
So what’s the moral here?
The moral of the story is, as you’re going off to college, don’t fall for this, like I did! Avoid this type of predatory credit card deal like the plague! Beware, that there are people in the “real world” who will take advantage of you in a heartbeat. I was drawn to that t-shirt, and it worked. They got me. Now, you have to understand that there’s nothing wrong with getting a credit card… if and only if you know how to use them. And, after you’ve done extensive research to determine the card that makes sense for you. I had no idea that I was going to be paying 28% interest.
To learn more about credit cards and cards specifically designed with college students in mind, check out this article from Nerdwallet: The Best College Student Credit Cards for 2017
To make matters worse, you have another type of predatory-‘like’ issue going on, that you have to be aware of or it will make you do stupid things with your money… Financial FOMO. Financial “Fear of Missing Out.”
Instagram, Facebook & Snapchat offer you instant access to an image your friends portray, and that total strangers portray. That image is always on point, isn’t it?… always. It seems like every time you open Insta, you see someone visiting Thailand. You think, ‘How can they afford that?” You then feel like you should go to Thailand, or Coachella, or some other super trendy festival or trip… because everyone on your feed is! Don’t fall for it. They are probably broke. Don’t feel victim to financial FOMO. You feel like you need to spend money you don’t have to keep up with your Instagram feed. That’s not going to turn out well and trust me, you’ll be happier living your OWN life, sticking to YOUR principles, living within YOUR means, and getting financially ahead of 99% of those on your social media feed. Over time, you’ll see the truth. You’ll also probably be able to do 10X more than them down the road, and you’ll be able to pay cash for it!
So, what takeaways and tips (other than avoiding bad credit card deals) can you glean from this post, as you head off to college?
1.) Don’t Get in Over Your Head With Credit Cards & Forget FOMO
Here are some of the guidelines and resources that I mention to the thousands of college students that I’ve spoken with:
2.) Know What You Owe
As you’re heading off to college, you more than likely took out a few student loans. The average college student has over $30,000 in student loan debt. For the most part, it is okay that you chose to invest in your future by taking out loans. What’s not okay is forgetting about them until you’ve long graduated. Use a service to help you track your student loans. The people that I’ve encountered who have successfully paid their loans off, tracked them closely, and knew everything about their loans. A funny thing happens when you start to track stuff… you pay attention to them… and what gets attention, experiences change. When it comes to your finances, paying attention to them = good change.
To know what you owe, you need to do a little work. Use software to help you organize your loans. There’s a very good chance that you have some federal and some private student loans. In some cases, people have a handful of them. You’ve got to track them, and get them in one place to “Know What You Owe.”
One of the best tools to help you ‘Know What You Owe,’ is: StudentLoanHero.com
This is a service that will help you keep track of your student loans so that you can, “Know What You Owe.” If you have multiple loans, arrange them by interest rate. Likely, you have federal loans, which typically carry a lower interest rate than private loans, and payments are typically not due until after graduation. That’s no reason not to start tracking them though! Arrange them with the highest interest rates at the top, and the lowest interest rates at the bottom. That’s a great way to pay them off too. Once you start to make payments, pay towards all your loans so that you’re are in good standing, and put extra payments towards the higher interest rate loan first, until it’s paid off. Use Student Loan Hero’s software to help you make a plan. Toggle payment amounts and see how long it will take to pay them off at different payment amounts. There are other methods to paying off debt too: The Debt Snowball Method
You can click the link above to learn all about it, but it’s essentially organizing your debts from smallest balance to highest, and putting extra payments towards the smallest balance loan first. Then, once you’ve paid off the smallest balance loan first, you get some positive momentum and take the amount you put towards that smallest loan, you just now add to the next loan in line. I like this method too, because I’ve seen lot’s of people use it successfully.
This one is super important. I know, you cringed a little when you read that one. But TRUST ME, you are going to be so much better off if you start a budget and continue to work it while in college. Budgets are the source of good financial habits and you want to start establishing good money habits now! They will pay massive dividends down the road, even if you don’t really have any money now! So, grab one of these tools below:
Mint.com or Everydollar.com (the free versions) and start tracking your money. In college, now more than ever, it’s so important to have a plan for your money. Download the app to your phone, and input a little information.
Just do it. Don’t think about it, just start a budget. I don’t care if it’s on a piece of paper! Just be proactive!
4.) Download an App
Life as a college student can be crazy. Ever heard the expression, “Out of sight, out of mind?” Don’t let your finances get out of sight in college. By downloading an app and checking on it once in a while, you’re being proactive. Aside from downloading a budgeting or loan tracking app, also download your bank app so you can check you balance once in a while. You may also want to download an RSS feed app, or something that will present you with great articles from the internet about frugal living, or how to financially survive college. Knowledge is power! The college students that I’ve seen get themselves in real financial trouble, stuck their head in the sand and pretended that if they don’t look at it, it would just go away. Don’t do that. Be proactive. Remember, you’re adulting now, so act like a responsible adult!
5.) Get a J.O.B
Okay, this may not be a super popular recommendation… and I’m okay with that. I know college can be tough. I know you are taking 400 credits this semester and I know you’re feeling stressed. You know yourself better than anyone, and you need to pay attention to your own self… BUT, I do think that the benefits of having a job in college, far outweighs the costs (stress, time, etc…) Every dollar you earn as a college student, is/should be, one less dollar that you need to borrow to pay for college. If you didn’t borrow anything for college, then use that money to start saving for your first house! Creating the habit of working, is something that is irreplaceable. I worked through college and one of my favorite jobs was campus security! They only hire the biggest, baddest people for that job! Haha, I’m kidding. But, I was able to do a lot of studying during my shifts. There are plenty of jobs on campus that allow you to study during your shifts. So, don’t use the “I have to study” excuse. Get paid to study!
6.) Act Like a College Student
A.) For those in college; enjoy it, have fun, and embrace frugality
B.) For Seniors or those graduating; continue to act like a frugal college student for 4 years after you gradate!
Yes, you should have fun in college. Meet new people, stay up too late, and take mid-day naps. Embrace your college self and all the “cheapness” that it entails. You’re in college, you can’t afford much… now is the time to play that up and embrace it to the fullest. Learn and establish some great frugal habits now.
To my second point; for those near graduation, continue to act like a college student for 4 years after you graduate. Eat Ramen noodles (at least 1X/week!), buy things on sale, conserve and be frugal. This is a huge time in your life and I’ve just seen way too many people get a new job right out of school, get some coin in their pocket, and begin to live “the good life”by spending more than they should, then they go backward. If you continue to live frugally for those 4 years after college, while making some good money out of college, you’ll be able to do so much more down the road. Trust me on this, you’ll thank me later.
So, college students, there you have it! Tips and tools to help you financially make it through college. There are so many resources out there to be proactive with your money. You just need to make a few good and early decisions. Do that, and you’ll get and keep control of your finances and then college truly becomes some of the best years of your life!
Other resources to check out:
Student Loan Hero resources – Tons of great information here
The College Investor – Information about strategies to pay off your debt and build wealth
Budgets are Sexy – Awesome budgeting tools and inspiration to pay your loans off
Student Aid – Find and track down your loans
Loan Repayment Options
Loan Repayment Calculator
What are you most excited about heading off to college? What are you most nervous about? Do you use any of these tools mentioned?
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