Spending Hazards

Covering college costs is a challenge, with little often left for other needs or savings. However, adjusting spending habits can lead to better financial health and even savings. Below are some common spending hazards and tips to get you started:

• New spending responsibilities: If you’re starting college right out of high school, this may be the first time you’ve had your own checking account or received regular income from a job. Track your spending beyond tuition and books, and look for savings opportunities like discounts and sales.
• Using credit cards: Young college students are often targeted by credit card companies because they have comparatively few financial responsibilities and generally have clean credit records. Use credit cards wisely. They can help build credit but also lead to debt if not managed carefully.
• Neglecting to pursue scholarships: Many college students are either unaware of scholarships they qualify for or they just don’t follow through and apply. Investigate and apply for scholarships; don’t miss out on available financial aid.
• Recreational activities: Unlike high school students, college students don’t generally have classes all day, so they may find themselves with hours of free time. Manage leisure spending by considering less expensive or free activities. ^[1]
• Not realizing you’re paying for something: This can happen with monthly subscription services you don’t need or use, or it can be a fee you pay to your bank to have a checking account. Regularly review ongoing subscriptions and memberships to ensure they are still needed and cancel any that are not.

Can you identify areas in your life where you are losing money by paying fees on your checking account or interest on your loans? What about subscriptions you forgot you have and no longer use?

Saving Strategies

Whether you are starting college as a single eighteen-year-old or you are older, working, and raising a family, there’s a set of basic financial strategies that can help you lower your expenses and save money while you’re in school. Analyzing your spending habits is the first step. Next, you can try the following:

• Create a detailed budget: Budgets will enable you to treat yourself while avoiding overspending. For example, you might allot $50 a month for going out with friends. If you’ve already spent $50, you should find alternative recreational activities for the rest of the month so you don’t have to borrow money that you set aside for other expenses.
• Cut down on meal costs: Looking for deals and using coupons at grocery stores will save more money than eating out. Students living in dorms may not have a lot of space and supplies for cooking, but they may still have room for a refrigerator and coffee maker to avoid overspending on snacks and trips to Starbuck’s.
• Save on transportation: Cut down on the cost of gas by walking to class, riding a bike, or using public transportation. Check to see whether your college offers free or reduced-price student bus/train passes.
• Look for discounts and used items: As long as a textbook isn’t outdated, you can often purchase used or discounted copies online or from other students. Need to furnish a dorm room or off-campus apartment? You’ll save a lot of money by borrowing household goods from friends and family or by purchasing them from secondhand stores.
• Apply for scholarships and minimize loans: Scholarships don’t have to be repaid, and they don’t rack up interest! Do your best to apply for everything and anything that you qualify for, scholarship-wise. Winning a scholarship can have a big impact on your budget and financial health, even if some would consider it small.

Remember the Big Picture

When you think about becoming more financially secure, you’re usually considering your net worth, or the total measure of your wealth. Earnings, savings, and investments build up your assets — that is, the valuable things you own. Borrowed money, or debt, increases your liabilities, or what you owe. If you subtract what you owe from what you own, the result is your net worth. Your goal is to own more than you owe.

assets, liabilities and net worth

• An asset is something that a person or a business owns and has value. Assets can help to generate income or be sold to generate cash in the future.
• A liability is something that a person or a business owes to someone else, typically in the form of debt or a financial obligation. Liabilities can be a burden on a person’s finances, as they require regular payments and can impact their credit score.
• A person’s net worth is the total measure of their wealth, calculated by subtracting what one owes (liabilities) from what one owns (assets):
  Net Worth = Assets (Owned) – Liabilities (Owed)

When people first get out of college and have student debt, they often owe more than they own. But over time and with good financial strategies, they can reverse that situation. You can track information about your assets, liabilities, and net worth on a balance sheet or part of a personal financial statement. This information will be required to get a home loan or other types of loans. For your net worth to grow in a positive direction, you must increase your assets and decrease your liabilities over time.

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