The average American carries around $38,000 in personal debt. That's credit card bills, car loans, and student loans all piled up. But here's the thing: you don't have to let debt weigh you down before you've even launched your career. Take charge of your finances now and build healthy habits during your college years. With the following nine financial tips for college students, you can set yourself up for success long before you don that graduation cap.
The key? Start getting real-world experience with saving, budgeting, and spending now, so debt doesn't dictate your financial future. Let's dive in, exactly how to make your money work for you while still on campus.
1. Track Your Spending Like a Pro
Before you can master these financial tips, you need to have a clear picture of where your money's going. How much are you spending monthly? Where are your dollars disappearing?
Begin by rounding up all your paycheck stubs, bills, bank statements, and receipts. Then, take the raw information and enter it into a spreadsheet-or use a budgeting app-to get your spending organized into categories such as:
Food & Groceries
Travel & Transportation
Entertainment
School Supplies
Rent & Utilities
Once these categories are laid out, you'll see where exactly your money is going, and then you'll be able to start taking control.
2. Create a Budget and Stick with It
Now that you have monitored your spending, it's time to make a budget. Decide how much you want to save per month, and in what area you need to cut back. Make spending limits in each category according to your needs-after all, you probably need to spend a lot less on entertainment than on rent, right?
This categorizing of your expenses will make you less likely to over-spend in certain categories, which will help keep you on target to reach your savings goals. Additionally, a good budget will help you achieve your long-term goals, whether that be tuition payment or studying abroad.
Remember: A budget isn't something you "set and forget." It is a document you will regularly review and adjust.
3. Plan Ahead to Reduce Debt
When debt starts building up, it is an uphill battle that never seems to end. That is why it always pays to have a plan for working your way out of debt.
Identify, first of all, which are the debts that you have to pay off most urgently. Typically, high-interest debts, such as those from credit cards, will be paid before lower-interest loans. This will help one avoid small debts snowballing into an overwhelming burden-a good strategy for debt reduction.
Also, pay extra attention to your regular expenses and try to cut back wherever possible, putting the savings toward debt reduction. A little each month will add up substantially!
4. Understand and Lower Your Taxes
Taxes might be a way out in some galaxy far, far away, but let me reassure you, April 15th will be here before you can bat an eye! Take the time to understand your tax obligations now-especially if you work part-time or freelance. Knowing your filing status and potential deductions you are eligible for-like education credits or student loan interest deductions-can save you a ton of money.
If you are feeling overwhelmed with all this, it's time to get the help you need from a financial advisor or to utilize some free online resources to help you wrangle your taxes. You will thank yourself later!
5. Start Investing Early Yes, You Can!
It's never too early to invest! The sooner you start, the more time your money has to grow-even if you're working with tiny amounts. If you're just starting out in investing, start with a micro-investing app such as Acorns or Stash. Both of these apps round up your purchases, investing your spare change for you, automatically.
You could also open a Roth IRA for a retirement fund that grows tax-free. It sounds like a pipe dream, but starting young really gives you a serious leg up in the long run.
6. Build an Emergency Fund for "Rainy Days"
Or did you know that 65% of Americans do not save money on a regular basis? And almost 60% have less than $1,000 in savings. What if an emergency comes up? Whatever it is, a medical expense, a car repair, or just a last-minute flight home-the emergency fund is what you need to fall back on.
Set up a savings account and start building an emergency fund for some small, achievable goal. Try the 52-week challenge: you'll save $1 in week one, $2 in week two, all the way to the end of 52 weeks-you'll have $1,378! Have this rainy day fund to pay for those unexpected expenses without having your budget derailed.
7. Cook at Home and Save Big
College students are notoriously bad at wasting all their money on food-be it late-night takeout or coffee shop runs. This financial pit tends to be bottomless, devouring very quickly whatever budget may have existed. Cooking is a far superior alternative to eating out.
Create a grocery budget for the month and plan your meals ahead of time. Create a shopping list and attempt to avoid impulse buying. You also can go online to look for coupons or discounts. If you are really strategic with meal planning, you can even reuse some ingredients across several dishes, which cuts down on both food waste and costs.
8. Cut Unnecessary Subscriptions
Sure, it's fun getting monthly subscription boxes in the mail, ordering meal kits, and streaming your favorite content. The thing is, though, all of those little subscription services can add up fast. Take stock of all the subscriptions you have and then ask yourself, are you using these enough to justify the cost?
Cancel the subscriptions you don't use often, and also cancel auto-renew. You will be surprised at how much you may be able to save by removing a few memberships that aren't being utilized very often and investing that money into your savings instead.
9. Be a Savvy Shopper and Saver
Spending smart does not mean one is depriving himself; rather, it involves being tactful over what you spend on. Whenever possible, buy generic food, medication, household goods, or other products. These items are often just as good as brand names but at a fraction of the price.
When it comes to textbooks, never buy new unless you absolutely have to. See if you can rent them, buy them used, or if your library has copies. Sell your books back at the end of the semester to regain some of your costs.
Finally, look out for home energy savings such as quicker showers, turning off lights, and using energy-saver bulbs to reduce utility bills across the board.
Save Now, Stress Less Later
Paying off now will pay dividends later. Follow these nine financial tips to avoid the debt trap far too many graduates fall into and set up a great foundation for the rest of your life.
Start applying these tips today in order to become a savvy spender and a master saver. By building smart money habits now, you'll have more freedom and less financial stress down the road!
Are you ready to take your financial game to the next level? Let's get it going; your road to independence!
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