You’re young and you have a bright future ahead of you — if you learn to manage your money the smart way, that is.
You should start making smart choices about your money now in order to set up a solid financial foundation for the future.
You can do just that with these top 10 money tips for college students.
1. Avoid Student Loans (When Possible)
Many college grads end up taking out more student loans than they need. In fact, a recent article from CNN Money stated that the average student loan debt in 2013 was $35,200 and 50 percent of those students said it would take nine years to pay back those loans. The truth is student loans can be very hard to get rid of.
Student loans aren’t always avoidable but you should do everything in your power to take out minimal loans. If you do take out student loans, make sure you’re calculating your ROI on your student loan debt.
2. Spend Less Than You Earn
One of the most powerful money moves in the history of time is spending less money than you earn. When you have an excess of cash each month you can invest in your future and make purchases without the stress of taking on debt.
If you want to be a millionaire, look at what your typical millionaire does: they spend less than they earn!
3. Create a Budget
A budget is a very powerful tool. When you create a budget and track your spending you have insight to where your money is going and where you need to cut back. Living on a budget doesn’t mean you can never have any fun, it means the fun you do have won’t prevent you from paying the bills.
There are several online budgeting tools and spreadsheet templates to help you get started. We also love the free tool Personal Capital to track everything.
4. Make a Plan to Tackle Debt
If you did end up racking up a lot of student loans, personal loans, or credit card debt, you need a plan of attack.
There are a couple ways you can go about paying down debt but you should ultimately pick whichever method keeps you motivated. In order to create a solid financial future you need to attack your debt head-on as early as possible.
5. Pay Yourself First
The best time to start paying yourself first is now. You may have a hard time making this a habit if you succumb to lifestyle inflation in the future.
Don’t worry, you don’t have to pay yourself a lot, you just need to start paying yourself something as soon as you receive your paycheck. You can always increase the amount in the future.
6. Take Out a Limited Amount of Credit Cards
Credit cards can be good financial tools in the sense that they help you build your credit score if used wisely. They can also be very dangerous. Limit the number of credit card accounts you open and always pay your balance in full each month.
If you’re thinking about getting a credit card, check out our best credit cards for college students.
7. Start Investing Now
The sooner you start investing the more time your money will have to build interest. You’ll also have to invest less money to reach your retirement goals if you start at an early age.
Investing is a lot simpler than you think. You can open an account online with a minimal amount of money and schedule withdrawals from your bank account to your investing account each month.
8. Create an Emergency Fund
Emergency funds are essential for optimal financial health. You never know when your car will break down or when you’ll have an unexpected medical bill.
If you’re working on paying down debt, start a small emergency fund with about $1,000. Once you pay off your debt and start earning more money, you can increase your emergency fund.
9. Know What Insurance You Need
There’s insurance available for practically everything under the sun. As a college student it’s important to know what types of insurance you need.
If you’re not married and don’t have any children then you probably don’t need life insurance quite yet. However, you do need health insurance, auto insurance, and renters or homeowners insurance. It’s important to set these things in place so that you’re protected.
Confused? Check out these resources:
10. Create Savings Goals
You have a lot of financial goals. You’ll be faced with big purchases in the near future, if you haven’t been already. You’ll decide whether or not to buy a house or car, among other things.
Think about your future now and create goals to work toward. If you think you’ll be purchasing a home in the next few years, create a down payment fund. If you’ll be purchasing a car, start saving for that. Try to save as much cash as you can for those big purchases.
Once you hit one goal work toward the next.
Have Some Fun Too!
You only live one life. While it’s important to be smart with your money, you need to enjoy your life as well. Create a smart balance between saving for the future and living in the moment.
If you follow these 10 tips you’ll be able to create a healthy balance and a solid financial foundation for the future.
Are there any tips that we’re leaving out that you would add?