College is time to learn and grow, but personal finances seem to get put at the bottom of the priority list.

 Not every college student is in the same financial situation. Each one has the difficult task of trying to pay for school and cover living expenses, all while trying to enjoy college. It’s no surprise why so many college students make mistakes when it comes to money. Unfortunately, these mistakes can cause damage that lasts for decades. Making sure your finances are in order while you’re young will go a long way in helping you get a good start after school.

I’ve met with hundreds of college students and learned their financial mistakes and setbacks. Hopefully, you’ll be able to learn from their mistakes. These are real situations I have observed working with students. 

1. Waiting to Save

College is not the time to be raking in the big bucks. But, a common phrase I hear is, “I don’t save money because I don’t have any.” They say, “when I graduate and start my career, then I will have enough to save.” They wait for the perfect time to start saving, which unfortunately doesn’t always come.

“I don’t save money because I don’t have any.”

Expenses tend to rise with income. It’s basic human behavior and it’s called lifestyle inflation. The average household savings rate in America in 2017 was 2%. You’re never going to get anywhere saving 2%. The way you manage $100 is the same way you’ll manage $100,000. If you’re not willing to take $10 out of $100, how are you supposed to take $10,000 out of $100,000? I don’t care if you have $10 and you decide to save $1, the habit of saving is more important than the amount.

To get in the habit of saving, you need a separate savings account. If you try and save what is leftover in your checking account at the end of the month, it will get spent. Guaranteed. To create a consistent savings habit, transfer money to a separate savings account each time you get paid.

Don’t hold off saving your money just because you are in college. Even if it is a small amount. More important than the amount is the habit.

2. Living at home while working and blowing money

There is no easier time to save money. You live with your parents, you don’t pay for food, rent, or other things, yet you somehow find a way to spend your money on things that won’t benefit you in the future. What do you spend your money on? Many can’t answer. If your parents are going to allow you to live with them during college and provide for your basic needs (which I think is a smart idea for a period of time) and you are working, you can be saving a huge amount of money. I’m sure you don’t want to live with your parents in your thirties. You also don’t want to move out broke because you spent all your money at Starbucks and an expensive car.

Don’t blow all your money because you don’t pay for rent or food. Things will change real quick. I’m not saying you can’t spend money in college to have fun. But what I tend to see is students living like rich college students and then later have to live like broke professionals.  

3. Spending money to impress others

It feels good when we have things that show our success. We think other people are impressed with our accomplishments when in reality most people don’t care. I see college students spend money on things they don’t need to impress others they don’t even like. Parks and Rec seem to have influenced the phrase, “treat yo self” which permeates college campuses. 

“Treat yo self.”

This is common among college students and their friends. They borrow money to impress their friends and later find out just how hard it is to pay back. That $6.00 Jamba Juice could end up costing a lot more if you pay for it with student loans. They drive nice cars, go on fancy vacations, eat out every day, and wear the trendiest clothes, all to impress their peers who will most likely disappear when college is over.

Not all college students are like this, but I see it all too often.  One of my favorite sayings, which are lyrics to a country song says, “big hat, no cattle.” I meet students that wear a “big hat” bought with their credit card and they don’t have a plan to pay off because they don’t have the money, instead of saving up and paying cash for it.

4. Taking too long to finish

Some degrees take longer than others, and many people drop out of school for personal reasons. But students who have been pursuing a four-year degree for the past 10 years and still have not finished are spinning their wheels.

The problem with taking too long to finish is the cost of tuition goes up 3% every year. So the longer you are in school the more expensive it becomes. Second, once you reach 183 credit hours for your undergraduate degree the government will cut all financial aid, leaving you to pay for school entirely out of your pocket. Third, the longer you are in school, the higher your lost earning potential is. You are forgoing all of the money you could have been making in a career.

To finish a four-year degree in four years, you need to take 30 credits a year. That’s 15 per semester or 12 per semester and 6 during the summer. By the way, every class you take has to go towards your degree. That is the reason students don’t graduate in four years. They don’t know what they want to do so they take classes that don’t count. Plan before you enter college instead of going to college just to go. College is an expensive place to find yourself. 

If you’re behind in college, finish in the most reasonable amount of time possible. No one wants you to be in school longer than you have to. Not the government, not your parents, not your future employer and certainly not you. 

5. Not working

College can be a heavy load. But is it so heavy that you can’t have any kind of job until you graduate? Everyone’s preferences are different and if you don’t have to work, why work? I’ve met students working full time in school that are able to graduate with great grades. I’ve also met students that have never worked but have poor grades. They say, “I don’t work during school because my grades will suffer.” But, some of the most successful students I have met are balanced with work and school. They leave college with little or no debt.

Don’t work more than you can handle. The college student pursuing an electrical engineering degree trying to get into an Ivy League school may not be able to work at all. But, most students can work part-time or have a side hustle to cover living expenses and gain experience in their field of interest. Don’t wake up the day after you graduate and say, “ok, time to start looking for a job.” They will be gone. Work part-time, start your own business, do freelance work and you will come out of college with experience, no or little debt, and a piece of paper. Do some sort of work in college even if you don’t have to.

6. Borrowing too much

After you have exhausted all means to pay for your education, you have to take out student loans. But you wouldn’t believe the number of students who borrow more than the cost of tuition and use it to buy food, go on trips, pay for a fancy car, or buy a big screen TV. That money has to be paid back. Plus interest.

You’re going to be in for a rude awakening when your student loan payment becomes due and you don’t have the money to pay off those loans. That Jimmy John’s sandwich you bought with student loans becomes a lot more of a burden when you tack interest on it. Borrow what you need to pay for your education and no more. Figure out other ways to pay for your living expenses because your future self will thank you.

Another scenario that leads to borrowing too much is picking the wrong school. You don’t need to go to the most expensive four-year school in the country. Why not start out at a community college for two years and then transfer to a school of your choice. This will save you so much money while you complete your basic education courses. It’s worth mentioning that college is not always worth it.  You may be better of starting your own business or working in a manual labor job. 

7. Maxing out credit cards

Emergencies happen. But, why rack up a big credit card balance on clothes, vacations, and food, that you are going to be paying 10% – 25% interest on? Not only will it be a big burden causing you to lose sleep, but a maxed-out credit card will hurt your credit score. This will affect your ability to borrow money. Use your credit card responsibly. Pay of the balance in full. Oh yeah, and don’t buy something if you can’t afford it.

8. Cars

It happens all the time. College students love cars and they overextend themselves by paying for a car they can’t afford and end up being upside down on it. Being upside down is when you owe more on your car than it is worth. If you were to sell it today you’d be paying someone to buy your car. Essentially paying off your car loan and getting less money for it than what you owe.

The reason for being upside down on their car happens because they are too eager to buy a used car without negotiating the price, buy a car they can’t afford or they drive a new car and it loses ⅓ of its value the second they leave the dealership. Don’t buy a car you can’t afford.

9. Not working towards homeownership

You want to buy a house one day but you know that won’t happen for along time. Purchasing a home is not like going to the phone store and signing a two-year contract for a phone. It takes years of preparation. You need a solid credit history, two years of employment, a down payment and understand all of the real estate terminologies so when you do buy a home you don’t get taken advantage of. You may not have extra money to put towards a down payment on a house, but if you do, why are you not saving now? You can’t just decide one day you want to buy a house, it takes educating yourself and preparing in college.

10. No financial goals

Financial goals can include buying a car, or a house, getting out of debt, going on a vacation, etc. At the beginning of most of my meetings, I ask what their goals are and they often have none or have never thought about it. So we spend the majority of the appointment talking about what they are working towards. If they do share with me their goals, they are vague and not specific.

When do you want to buy a car and how much? How much do you have to pay off and by when do you want it gone? Every time we discuss goals, there has to be a date and a number attached to it. 

Don’t look at college as a time you don’t have to worry about your finances because you’re not working in a career. Decide your goals and figure out how you are going to get there. The decisions you make and the habits you create at this stage in life will follow you for the rest of your life. 

11. Not knowing where their money went

Many smart individuals do a great job keeping track of their expenses that I will never meet because they have their finances under control. A lot of college students don’t feel like they have control over their spending. They say, “I don’t know where my money went. I feel like I make a decent amount of money each month, but I can’t figure out why I have no money left over at the end of the month.”

“I don’t know where my money went.”

There is usually more month left than there is money. This leads them to seek help. What you focus on expands. If you are not focused on how, where, when and why you spend your money you will have no idea where the heck it went. By simply creating a budget and going through an entire month’s worth of transactions, it will really open up your eyes as to where your money went.

12. Spending too much on eating out

College life can be difficult to eat healthy on a budget. From grocery shopping to the meal prep, ain’t nobody got time for that! So what do you do? You eat out, oh yeah, and you’re also a bit of a social eater so you love to go out to eat with your friends. The highest expense that college students don’t realize they have is eating out. Decide how much you want to spend each month and figure out how to stick with it.

Avoiding these 12 mistakes in college can be difficult. But with a little planning and discipline, you will find yourself way ahead of your peers when it comes time to graduate. You won’t be burdened with student loans, you will have savings in the bank and you will get to the point where you don’t have to worry about money a lot sooner. 

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