By Rachael Everly, undergraduate student and freelance writer
Gone are the carefree school days when you had few responsibilities to cater to or duties to worry about, but as you step into college life, your life takes a new turn.
As a college student you strive to improve your academic performance, develop better study schedules and work patterns and more than anything manage your personal finances. How far do you think have you been able to do the latter?
Talking of a typical college student, their financial life is rather predictable, but sadly only a minority of college students is responsible enough or equipped with prior knowledge to handle money-related issues.
Budgeting is the most common loophole, along with poor understanding of how credit cards, debit cards and ATM work. Some personal finance lessons if learnt the hard way will certainly cost you a fortune if you do not educate yourself and control certain variables beforehand.
1. Do you know what you are signing up for?
You need to develop a budget and consciously direct your money where it is worth it and not spend more than you possess. Often parents give their children too much financial freedom and often place a credit card in their hand to take care of their expenses.
This is when you need to ask yourself, do I understand the payment terms and regulations, interest rates and the penalties that are linked to missing payment deadlines?
This is important so that you don’t end up being targeted by creditors. Whether it’s about getting a credit card, signing up for a new telephone or internet service or opening a new PayPal account for instance, always read the fine print and know what you are actually signing up for.
2. Poor comprehension of your credit score
Do you feel at a loss regarding your credit history and how it can possibly impact your credibility? Credit cards can be a blessing, but at the same time a menace, if not well managed.
The disastrous effects of making your credit card payments wait can last for quite a few years. If you do not have a good credit score, you will see that the interest rates levied on your loans will go skyrocketing. Make it a point to timely make your payments each month.
You should realise that it is you only who will have to repay it after graduation and your starting salary might not necessarily be sufficient to handle debt repayment
Do yourself a favour and establish a reputable credit history by opening a credit card and consistently making payments to avoid any disparagement on your credit ratings.
This might not be a matter of concern for you in the first year of college, but soon you will realise the importance of a good credit rating, as it will help qualify you for car, marriage and other loans you apply for in the future and minimise the chances of rejection.
3. Not knowing the sensitivity of student loan debt
It is not unusual for students to take up loans to finance their higher education; in fact, more and more students are falling prey to these student loans and are desperately looking for ways to avoid student debt in the first place.
Seven in 10 senior students are still under the pressure of student loans and what is more surprising is the fact that they are borrowing blindly and don’t even know that they are sinking deeper into this vicious circle.
You should realise that it is you only who will have to repay it after graduation and your starting salary might not necessarily be sufficient to handle debt repayment.
4. Saving a penny a day will ultimately save thousands of dollars
Saving is one of the most beneficial financial habits that will help you as a college student in the long run. You need to open a retirement savings account and make it a habit to contribute to it regularly to reap the benefits of saving, even if that means saving just a few dollars in the beginning.
When you know that you have to save, you will automatically learn to live within your means. The earlier you learn to do that, the more time your savings will get to multiply.
So you need to give this a thought, carve your own budget and keep a track of where your money is spent, so that you know where you can cut back on and direct it towards your savings account.
5. Lack of financial literacy
Backing yourself up with sound financial knowledge to make sound and sensible decisions is the key to minimising your financial risks. Every student needs to take at least some sort of financial literacy course, so that you are not ignorant of the common financial mistakes committed by amateurs or beginners that may linger on for an indefinite time period, undermining your financial position as a college student.
A recent study has thrown light on the wide gap in financial literacy among American students that has led to significant problems in college life and ahead, as these choices are grave and leave an indelible impression throughout life.
About the blogger
Rachael Everly is an undergraduate student who loves to write on topics related to business, finance and education.
Follow her on Twitter here.