The notion that the typical college student has a lower net worth than the average collection of pocket lint is by no means nothing new. College students are now graduating from post secondary institutions with greater student loan liabilities and credit card debt than ever before in our nation’s history. The rising cost of tuition and necessary yet unlearned basic financial principles are putting the average undergraduate in a very dire financial position when they enter the working world. By learning and applying a few sound and time-tested principles, students can position themselves so that they may be in a much better place financially upon reaching graduation.
The reason this article is being written is so that the student population may know and apply sound financial wisdom passed down through the ages. These are the basic principles and mechanical steps to take and apply in order to be successful in money management while in a university setting. By following these principals, the author of this article was able to eliminate several thousand dollars of student loan debt in the time-period of one year. Practicing sound financial principles is of the utmost importance and should not be ignored or set aside. Listed below are five precepts that every college students should take heed of and apply in their own lives.
Get a job. Being too busy for employment in a university setting is not an option, it is a requirement. The idea that students need to focus on their studies and do not have time for jobs just does not add up. There are one-hundred and sixty-eight hours in each week, use them wisely. There is more than enough time to fulfill your academic requirements as well as working in the private sector. The author of this article himself works on average thirty-five hours a week during the school year.
Finding a job is not difficult. There are a variety of resources available to students in order to seek gainful employment. Dakota State University’s Career Services provides job listings and interview coaching. Additionally, the State of South Dakota has an employment office in town. If all else fails, there is always the local newspaper classifieds.
Do not forget having a summer job either. Working full time during the summer is a great opportunity to hedge the rising cost of tuition. Finding employment is extremely important, because without employment, there simply is no money to manage and no financial traction will be made.
Make a budget and stick to it. The creation of a monthly budget is not nearly as difficult as one might think and is requisite in order to move forward financially. A budget is merely you telling your money what to do, rather than having your money just slipping away from you.
The budgeting process should occur once a month, every month. In order to begin the budgeting process, one must ascertain where he or she is at the beginning of the month. List the balances of all of your bank accounts, student loans, credit cards, and other assets and liabilities. Add the sum of your assets and subtract the sum of your liabilities and the number derived is your net worth. The term net worth is simply the value of your assets. With this information, one can proceed forward.
The second step in this scenario is to list out your income. Write down each source of income for the month, and how much money you will be getting from that source. Whatever the source may be, your parents, a job, or otherwise, list it. Add up all of the money that you have coming in for that month, and the number we arrive at is what we have to work with for the month. This dollar amount is used to do a variety of things, such as pay for living expenses, reduce debt, and save for the future.
After figuring out your income, the next step is to determine where it goes. We cannot have everything we want, thus prioritization is necessary. First, pay for groceries, utilities, rent, transportation, and clothing. Everything else is secondary. The reasoning for this is that one should provide for the bare necessities of life before worrying about anything else fiscally. After these necessities, you should have some money left over. These excess funds can be used to pay other expenses and bills, eliminate debt, and save for the future.
It is necessary to pay off debt and save money. This is the only way one will gain traction and move forward in a positive financial direction. A good percentage of your income should go to savings and debt reduction, this is where your financial situation improves. The more you save and the more debt you pay off, the better position you will be in. If you have multiple debts, I suggest using the advice of Dave Ramsey, a Christian financial adviser. He suggests that we use a system called the debt snowball. In this, you list your debts from smallest to largest, paying minimums on all of them but the smallest one and putting all of your focus on the smallest one until it is paid off. Move up the list until they are all paid off, then keep saving!
Now that we know where you are at the beginning of the month, what you’re getting, where it’s going, now we can figure out where you will end up at the end of the month. List all of your accounts again, but this time where you will be at the end of the month, after you save money and pay down debts. You should make progress every month, otherwise you are spending more money than what you have and are moving backwards and that’s bad. If that’s the case, you need to spend less money or make more money, it is as simple as that.
If it sounds too good to be true, it is, period. There are so many scams and get rich quick schemes out there that lure college students in and cause them financial pain. Just yesterday, I received an unsolicited phone call from someone I know who signed up with some pyramid scheme, and his boss tried to get me under my friends “down line.” I knew better and told him I was not interested, but many young people do not. The gentleman on the phone asked me, “Do you want to make some extra money?” Who says no to a question like that? He then proceeded to invite me down to his office to discuss what they had to offer. It happens, and it happens more often than you think. You need to have a level of discernment to know whether you are involving yourself in an honest and financially sound operation. No, The deposed king of Nigeria does not need your help in wiring money out of the country.
Avoid debt like the plague. Traditional financial advice tells you that debt is a tool, which can be both good and a bad thing. The truth is, debt is much more a bad thing, than a good thing. Yes, debt is the easy- way out for just about everything. Getting through college, buying a car or another item. The motto seems to be, “I can have it now, and pay a low monthly payment!” Sounds good, right? Not exactly. The problem with debt is that it adds an incredible amount of risk to your life and puts you in a form of bondage. One payment might be okay, but do not be fooled for a second that this is just “The one thing” that I’m going to use debt to buy. What happens when you want a new car, or a bigger TV? More payments. These payments eventually snowball, and all of your money will be going in, and all of your money will be going out and you will be making no traction what so ever. What happens when you lose your job? Where is the money going to come from? How do you know when you have too much debt? These are all very important questions you need to ask yourself. It makes much more money to save up for things rather than to take a guess on what your financial future will be. No one has ever regretted paying off a debt.
Student loans are no exception. It seems as if they are a requisite for a majority of students. Yes, you can graduate from college without student loans, it is not easy by any means, but it can be done, and you will thank yourself afterwards for doing so. It requires work, a lot of work, applying for scholarships, keeping a tight budget, but it can be done. Not everyone will take the challenge and do this, but this does not mean you should just let your self go financially in college. You should still work, budget, save money and reduce debt. You might not be totally debt free after graduation, but you will be in a much better position after graduation.
Be Disciplined. If you do smart things with your money for one month, you might not notice all that much of a difference. The absolute key is to do smart things with money, and keep doing smart things with money. Once you have some traction, it will keep building, and you will be going in a positive direction. The first month might not be all that noticeable, but a year or two down the line, you will be miles ahead.
In this day and age, anyone talking about finances will tell you that they are not offering financial advice for legal purposes, whatever the medium radio, television, or print. The reasoning for this legal firewall is because those giving you advice do not believe what they are promoting and do not want to be sued if someone follows his or her advice and fails. The author of this article is not making that statement. I am offering you financial advice-good financial advice. Go ahead, and take it.