If you’re a new college student you may not yet have money problems or issues—but most college students soon do. It doesn’t matter whether you’re a “traditional” college student enrolled in college just after high school or a “nontraditional” student returning to school.

Younger students are likely to confront money issues for several reasons:

• If you are living away from home for the first time, you may have less experience setting and sticking to a budget and handling money in general.
• Because you need more time for studying and other aspects of college life, you may have less time to work and make money.
• Even if you receive financial support from your family, your funds are not unlimited, and you’ll need to learn to live within a budget.

You will have many new expenses including tuition and fees, room and board or housing and food bills, books and supplies, and so on. Nontraditional students who have worked or started a family before attending college may have already learned to manage their money well but usually still confront some financial issues:

• Because you need more time for studying and college, you likely have less time to work and make money.
• You will have many new expenses including tuition and fees, books and supplies, and so on.
• You are more likely to have to juggle a budget that may include a family, mortgage, and other established expenses.

Almost everyone eventually has money issues at college, and they can impact your academic success. Money problems are stressful and can keep you from concentrating on your studies. Spending too much may lead you to work more hours than you might otherwise, giving you less time to study. Or you might take fewer classes and thus spend more years in college than needed. Worse yet, money problems cause many students to drop out of college entirely. But it doesn’t have to be this hard. Like other skills, financial skills can be learned, and they have lifelong value.

This section will help you:

• set financial goals
• consider jobs and making money
• learn how to spend less and manage a budget
• avoid credit card debt
• determine how best to finance your college expenses

Setting your Financial goals and Budget

It’s expensive to go to college. College tuition has risen for decades at virtually all schools, and very few students are fortunate enough to not have to be concerned with this reality. Still, there are things you can do to help control costs and manage your finances while in college. Begin by thinking about your financial goals.

What Are Your Financial Goals?

Whatever it is you plan to do in your future, whether work or other activities, your financial goals in the present should be realistic to enable you to fulfill your plan.

Taking control of your personal finances begins with thinking about your goals and deciding what really matters to you. Here are some things to think about:

• Is it important for you to graduate from college with minimal debt?
• What are your priorities for summers and other “free time”? Working to earn money? Taking nonpaying internships or volunteering to gain experience in your field? Enjoying social activities and time with friends?
• How important is it to you to live in a nice place, or drive a nice car, or wear nice clothes, or eat in nice restaurants? How important in comparison to your educational goals?

There are no easy answers to such questions. Most people would like enough money to have and do what they want, low enough expenses that they don’t have to work too much to stay on budget, and enough financial freedom to choose activities without being swayed by financial concerns. Few college students live in that world, however. Since you will have to make choices, it’s important first to think about what really matters to you—and what you’re willing to sacrifice for a while in order to reach your goals.

Make More or Spend Less?

That often becomes an issue for college students. You begin by setting up a realistic budget and sticking to it. A budget is simply the best way to balance the money that comes in with the money that goes out. For most college students, the only way to increase the “money coming in” side of the budget is to work. Even with financial support from your family, financial aid from the college, your savings from past jobs, and the like, you will still need to work if all your resources do not equal the “money going out” side of the budget. The major theme of this chapter is avoiding debt except when absolutely necessary to finance your education. Why is that so important? Simply because money problems and debt cause more people to drop out of college than any other single factor. This chapter includes discussion of how students can earn money while in college and the benefits of working. But working too much can have a negative impact by taking up time you might need for studying. It’s crucial, therefore, whenever you think about your own financial situation and the need to work, to also think about how much you need to work—and consider whether you would be happier spending less if that meant you could work less and enjoy your college life and studies more. As we’ll see later, students often spend more than they actually need to and are often happier once they learn to spend less.

The College Budget

More people get into financial trouble because they’re spending too much than because they’re making (or receiving) too little.

Here’s a good place to start:

• Having money or not having money doesn’t define who you are. Your real friends will think no less of you if you make your own lunch and eat it between classes or take the bus to campus rather than drive a new car. You are valued more by others for who you are as a person, not for what things you have.
• You don’t have to spend as much as your friends to be one of the group. Some people always have more money than others and spend more. Resist any feeling that your friends who are big spenders are the norm. Don’t feel you have to go along with whatever expensive activities they propose just so you fit in.
• A positive attitude leads to success. Learn to relax and not get stressed out about money. If you need to make changes in how you spend money, view this as an exciting accomplishment, not a depressing fact. Feel good about staying on a budget and being smart about how you spend your money.
• Be realistic about what you can accomplish. Most students have financial problems, and they don’t just go away by waving a magic wand of good intentions. If your budget reveals you don’t have enough money even while working and carefully controlling your spending, you may still need a student loan or larger changes in your lifestyle to get by. That’s OK—there are ways to deal with that. But if you unrealistically set your sights so high about spending less and saving a lot, you may become depressed or discouraged if you don’t meet your goals. Before you can make an effective budget, you need to look at what you’re spending money on now and consider what’s essential and what’s optional.

Essential costs are the big things:

• Room and board or rent/mortgage, utilities, and groceries
• College tuition, fees, textbooks, supplies
• Transportation
• Insurance (health insurance, car insurance, etc.)
• Dependent care if needed
• Essential personal items (some clothing, hygiene items, etc.)

These things are sometimes called fixed costs, but that term can be misleading. If you have the option to move to a less expensive apartment that is smaller or a few blocks farther away, you can partly control that cost, so it’s not really “fixed.” Still, for most people, the real savings come from spending less on optional things. Most people spend by habit, not really thinking about where their money goes or how quickly their spending adds up. If you knew you were spending more than a thousand dollars a year on coffee you buy every day between classes, would that make you think twice? Or another thousand on fast food lunches rather than taking a couple minutes in the morning to make your lunch? When people actually start paying attention to where their money goes, most are shocked to see how the totals grow. If you can save a few thousand dollars a year by cutting back on just the little things, how far would that go to making you feel much better about your finances?

Following are some general principles for learning to spend less.

• Be aware of what you’re spending. Carry a small notebook and write down everything—everything— you spend for a month. You’ll see your habits and be able to make a better budget to take control.
• Look for alternatives. If you buy a lot of bottled water, for example, you may feel healthier than people who drink soft drinks or coffee, but you may be spending hundreds of dollars a year on something that is virtually free! Carry your own refillable water bottle and save the money.
• Plan ahead to avoid impulse spending. If you have a healthy snack in your backpack, it’s much easier to not put a dollar in a vending machine when you’re hungry on the way to class. Make a list before going grocery shopping and stick to it. Shopping without a list usually results in buying all sorts of unneeded (and expensive) things that catch your eye in the store.
• Be smart. Shop around, compare prices, and buy in bulk. Stopping to think a minute before spending is often all it takes.

Managing a Budget

Budgeting involves analyzing your income and expenses so you can see where your money is going and making adjustments when needed to avoid debt. At first budgeting can seem complex or time consuming, but once you’ve gone through the basics, you’ll find it easy and a very valuable tool for controlling your personal finances. Why create and manage a budget? Going to college changes your financial situation. There are many new expenses, and you likely don’t know yet how your spending needs and habits will work out over the long term. Without a budget, it’s just human nature to spend more than you have coming in, as evidenced by the fact that most North Americans today are in debt. Debt is a major reason many students drop out of college. So it’s worth it to go to the trouble to create and manage a budget.

Managing a budget involves three steps:

1. Listing all your sources of income on a monthly basis.
2. Calculating all your expenditures on a monthly basis.
3. Making adjustments in your budget (and lifestyle if needed) to ensure the money isn’t going out faster than it’s coming in.

Balancing Your Budget

Now comes the moment of truth: compare your total monthly incoming with your total monthly outgoing.

How balanced is your budget at this point? Remember that you estimated some of your expenditures. You can’t know for sure until you actually track your expenses for at least a month and have real numbers to work with. What if your spending total is higher than your income total? The first step is to make your budget work on paper. Go back through your expenditure list and see where you can cut. Remember, college students shouldn’t try to live like working professionals. Maybe you are used to a nice haircut every month or two—but maybe you can go to a cheaper place or cut it yourself. There are dozens of ways to spend less, as suggested earlier.

The essential first step is to make your budget balance on paper. Then your job is to live within the budget. It’s normal to have to make adjustments at first. Just be sure to keep the overall budget balanced as you make adjustments. For example, if you find you must spend more for textbooks, you may decide you can spend less on eating out—and subtract the amount from that category that you add to the textbook category. Get in the habit of thinking this way instead of reaching for a credit card when you don’t have enough in your budget for something you want or need. Don’t be surprised if it takes several months to make the budget process work. Be flexible, but stay committed to the process and don’t give up because it feels like to too much work to keep track of your money. Without a budget, you may have difficulty reaching your larger goal: taking control of your life while in college.

What If Your Budget Doesn’t Work?

Your budget may be unbalanced by a small amount that you can correct by reducing spending, or it may have a serious imbalance. If your best efforts fail to cut your expenditures to match your income, you may have a more serious problem, unless you plan in advance to manage this with student loans or other funds. First, think about how this situation occurred. When you decided to go to college, how did you plan to finance it? Were you off in your calculations of what it would cost, or did you just hope for the best? Are you still committed to finding a way to continue in college?

If you are motivated to reach your college goal, good! Now look closely at your budget to determine what’s needed. If you can’t solve the budget shortfall by cutting back on “optional” expenses, then you need more dramatic changes. Are you paying a high rent because your apartment is spacious or near campus? Can you move a little farther away and get by temporarily in a smaller place, if the difference in rent makes a big difference in your overall finances? If you’re spending a lot on your car, can you sell it and get by with public transportation for a year or two? Play with the numbers for such items in your budget and see how you can cut expenses to stay in college without getting deeply in debt.

If you worry you won’t be as happy if you change your lifestyle, remember that money problems are a key source of stress for many college students and that stress affects your happiness as well as how well you do in college. It’s worth the effort to work on your budget and prevent this stress. If all else fails, see financial aid at the college. Don’t wait until you’re in real financial trouble before talking to someone who may be able to offer help.

What If You Get in Financial Trouble?

People often don’t admit to themselves that they have a problem until it becomes unmanageable. We human beings are very good at rationalizing and making excuses to ourselves! Here are some warning signs of sliding into financial trouble: For two or three months in a row, your budget is unbalanced because you’re spending more than you are bringing in. You’ve begun using your savings for routine expenses you should be able to handle with your regular budget. You’ve missed a deadline for a bill or are taking credit card cash advances or overdrawing your checking account. You have a big balance on your credit card and have paid only the required minimum payment for the last two months. You have nothing in the bank in case of an emergency need. You don’t even know how much total debt you have. You’re trying to cut expenses by eliminating something important, such as dropping health insurance or not buying required textbooks.

If you are experiencing any of these warning signs, first acknowledge the problem. It’s not going to solve itself—you need to take active steps before it gets worse and affects your college career. Second, if you just cannot budget your balance, admit that you need help. There’s no shame in that. Start with your college counsellor or the financial aid office; if they can’t help you directly, they can refer you to someone who can. Take your budget and other financial records with you so that they can see what’s really involved. Remember that they’re there to help—their goal is to ensure you succeed in college.

Saving for the Future

If you’re having problems just getting by on your budget, it may seem pointless to even think about saving for the future. Still, if you can possibly put aside some money every month into a savings plan, it’s worth the effort: An emergency or unexpected situation may occur suddenly. Having the savings to cope with it is much less stressful than having to find a loan or run up your credit cards. Saving is a good habit to develop.

Working While in College

Most college students work while in school. Whether you work summers only or part time or full time all year, work can have both benefits and drawbacks. The difference may result as much from the type of job you work as from the number of hours you work.

A Job Can Help or Hurt

In addition to helping pay the bills, a job or internship while in school has other benefits:

• Experience for your résumé
• Contacts for your later job search network
• Employment references for your résumé

Here are some factors to consider as you look for a job:

• What kinds of people will you be interacting with? Other students, professors, researchers? Interacting with others in the world of college can broaden your college experience, help motivate you to study, and help you feel part of a shared experience. You may work with or meet people who in the future can refer you to employers in your field. On the other hand, working in a business far from campus, for example, may offer a steady paycheck but can separate you from the academic community and detract from a positive college experience.
• Is the job flexible enough to meet a college student’s needs? Will you be able to change your work hours during final exam week or when a special project is due? A rigid work schedule may cause difficulty at times when you really need to focus on your classes.
• What will you be able to say about your work in your future résumé? Does it involve any skills—including people skills or financial or managerial responsibilities—that your employer can someday praise you for? Will working this job help you get a different, better job next year? These factors can make a job ideal for college students, but in the real world many students will have to work less than-ideal jobs. Working at a fast food restaurant or overnight shipping company may not seem very glamorous or offer the benefits described previously, but it may be the only job available at present. Don’t despair—things can always change. Make the money you need to get by in college but don’t become complacent and stop looking for more meaningful work. Keep your eyes and ears open for other possibilities. Visit the campus student employment office frequently (or check online) for new postings. Talk to other students. At the same time, even with a dull job, do your best and keep a good attitude. Remember that your boss or supervisor may someday be a work reference who can help (or hurt) your chances of getting a job you really want.

Student Jobs

The number of hours college students work per week varies considerably, from five to ten hours a week to full time and everywhere in between. Before deciding how much you need to work, first make a detailed budget as described earlier. Your goal should be to make as much as you need, and hopefully a little more to save, but first you need to know your true need. Remember your goals in college and stay focused on your education. Cut back on your optional spending so that you don’t have to work so many hours that your studies are impacted.

Balancing the Job You Have with Your Ideal Job

A growing percentage of students are working full time when they return to school, and many continue in the same jobs. If you’re in this situation, you know that balancing work and college is one of the most difficult things you’ve ever done. You’re used to working—but not used to finding time for class and studying at the same time. You likely feel harried and frustrated at times, and you may even start to wonder if you’re cut out for college. The time may come when you start thinking about dropping classes or leaving college altogether. It may be hard to stay motivated. If you start feeling this way, focus on your big goals and don’t let the day-to-day time stresses get you down. As difficult as it may be, try to keep your priorities, and remember that while you face temporary difficulties now, a college degree is forever.

• Acknowledge that sacrifice and compromise may be needed.
• Reduce your expenses, if you can, so you can cut back on the number of hours you work. This may mean temporarily giving up some things you enjoy in order to reach your goals.
• If you cannot cut your expenses and work hours and simply do not have the time to do well in your classes, you may have to cut back on how many classes you take per term. Try everything else first, but know that it’s better to succeed a little at a time than to push too hard and risk not succeeding. If you do have to cut back, keep a positive attitude: you’re still working toward your future ideal. If you ever feel the temptation to quit, see your college counsellor to explore all your options.

Credit Cards

Credit cards are such a big issue because they are easy to get, easy to use—and for many people, easy to accumulate debt.

Credit cards do have legitimate purposes:

• In an emergency, you may need funds you cannot obtain otherwise.
• You generally need a credit card for travel, for hotels, and other needs.
• Often it’s less expensive to make significant purchases online, and to do that you usually need a credit card. (Many ATM debit cards also function like a credit card for online purchases.)
• If you are young, responsible use of a credit card is a good way to start building a credit rating—but only if you use the credit card responsibly and always make sufficient payments on time.

Your first goal with a credit card is to understand what you’re getting into and how you are charged. Read the fine print on your monthly statements. You should understand about rate increases and know what happens if you miss a payment, pay less than the minimum, or pay late.

Setting Limits

All credit cards come with a limit, the maximum total amount you can charge, but this is not the same as the limit you should set for how you use the card based on your budget. If you bought something that cost $400, for example, would your monthly budget let you pay it off when the bill comes? If it will take you two or three months to have that much available in your budget, are you also including the interest you’ll be paying? What if an unexpected need then arises and you need to charge more? Set your personal use limit by calculating how much your budget allows you to charge. If you are using the card just for convenience, such as to pay for meals or regular purchases, be sure you have enough in those categories in your budget left at the end of the month to make the payment. If tempted to buy a significant item with your credit card, do the calculations in advance.

Avoiding Debt

If your credit card debt is not limited by your age, that balance can surely rise.

Following are tips that will help you avoid slipping into credit card debt:

• • Pay with cash when you can. Use your budget as a guide for how much cash to carry with you. A good way is to plan how much you’ll need for a week (lunches, parking meters, snacks or drinks between classes) and start the week with that amount from an ATM. Carrying that exact amount helps you stay informed of how you’re doing on your budget and keeps you from “accidentally” spending too much on a whim.
  • When possible, use a debit card instead of a credit card. A debit card is taken just like a credit card in most places, so you can use it instead of cash, but remember that a purchase is subtracted immediately from your account. Don’t risk overdraft fees by using a debit card when you don’t have the balance to back it up.
  • Record a debit card purchase in your checkbook register as soon as possible.
  • Make it a priority to pay your balance in full every month. If you can’t pay it all, pay as much as you can—and then remember that balance will still be there, so try not to use the card at all during the next month.
  • Don’t get cash advances on your credit card. With most cards, you begin paying interest from that moment forward—so there will still be an interest charge even if you pay the bill in full at the end of the month. Cash advance interest rates are often considerably higher than purchase rates.
  • Don’t use more than one credit card. Multiple cards make it too easy to misuse them and lose track of your total debt.
  • Get and keep receipts for all credit card purchases. Don’t throw them away because you’ll see the charges on your monthly statement.
  • Write the amounts down in your spending budget. You also need the receipts in case your monthly statement has an error.

Stop carrying your credit card. If you don’t have enough willpower to avoid spontaneous purchases, be honest with yourself. Don’t carry the card at all—after all, the chances of having an emergency need for it are likely to be very small. Having to go home to get the card also gives you a chance to consider whether you really need whatever it is that you were about to buy.

Identity Security

Identity theft is a serious and growing problem. Identity theft is someone else’s use of your personal information—usually financial information—to make an illegal gain. A criminal who has your credit card number or bank account information may be able to make purchases or transfer funds from your accounts.

Someone with the right information about you, such as your social security number along with birth date and other data, can even pretend to be you and open new credit accounts that you don’t know about—until the bank or collection agency tries to recover amounts from you. Although innocent, you would spend a lot of time and effort dealing with the problem.

Follow these guidelines to prevent identity theft:

• Never put in the trash any document with personal or financial information (e.g., your social insurance number, credit card number). Shred it first.
• Carefully review bank statements, credit card bills, and the like when you receive them. If the balance seems incorrect or you do not recognize charges, contact the bank or credit card company immediately.
• Never give your social insurance number, credit card number, or other sensitive data when requested by telephone or e-mail. Many schemes are used to try to trick people to reveal this information, but legitimate companies do not make such requests.
• Do not use online banking or make online purchases with a credit card using a public computer or an unsecured Wi-Fi connection. Your data can be picked up by others lurking within the Wi-Fi signal range.