College Students – Don’t Make These Common Financial Mistakes

College can be expensive, and some college students add to the price tag when they make financial mistakes such as using student loan money for a trip. Another mistake some make is going to a pricey college for four years when they could go elsewhere for two years and transfer. Here is an exploration of these mistakes.

College students financial mistakes

Using Student Loan Money for Unintended Purposes

Many times, students have money left over from their loans after tuition, room and board, and other direct expenses are taken care of. These loans are supposed to cover educational expenses and educational expenses only. Related expenses such as essentials for a dorm room could be okay. But a vacation during spring break or splurging on renting a high-end place — most likely not. Yet, quite a few college students see that leftover money as “free money,” not realizing that years of compounding interest rates could end up doubling the price tag of that spring break trip.

The solution is usually to anticipate your expenses well and to accept only that amount of student loan money. If you don’t have the money, you won’t spend it.

Not Taking Advantage of Financial Opportunities

Going to college inexpensively has become trickier, but there are still some ways, especially if you live in certain states. For example, community college students in Tennessee, Rhode Island, Oregon and New York will be able to attend for free by 2018 (or are already able to), provided that they meet residency requirements, GPA requirements, income requirements (sometimes) and a few other regulations.

Some other states also have similar programs. For example, tuition in Minnesota is free if you study a high-demand subject. California also gives one year of community college free, and low-income students have been able to attend with their per-credit fees waived since 1986. Virginia’s community college students get a $3,000 annual grant when they transfer from a state community college to a participating four-year college. In short, ways to save can be found in many places, cities and states.

What does all this mean? It means that some college students who aim for four-year degrees should seriously consider attending community college first and then transferring to a school offering a bachelor’s program. The difference could be many tens of thousands of dollars and paying off student loans much more quickly.

College Students Using Credit Cards Irresponsibly

Some students graduate owing as much as $7,000 on their credit cards; the average student graduates with $3,000 in the negative column and has four or more cards, according to Sallie Mae. College is the first taste of freedom for many students, and even those who charge only $20 here and there, or even just $500 a few times a year, could find themselves at risk of hurting their credit scores sooner rather than later.

After they graduate, they may be looking for work while juggling obligations in the way of rent, student loans and credit cards. It takes just one missed payment for a credit score to suffer.

Responsible credit card use in college often means:

  • Having a sound reason for getting a card
  • Using a card with low credit limits and interest rates, and no annual fee
  • Paying your balance fully every month
  • Having one card
  • Charging something only when you know you can afford it
  • Being the sole user of your card (not lending it out to friends)
  • Not getting cash advances

If you think you may be prone to abusing your credit card, go ahead and close the account. On the other hand, if you have already graduated, credit repair services could help you get back on track.

College should be a time of great freedom and learning. Making good decisions can set you up for life, but it can take only one financial misstep to hurt you.

 

Sources:

www.thebalance.com/what-can-i-use-my-loan-money-for-315568

money.cnn.com/2017/05/16/pf/college/states-tuition-free-college/index.html

money.cnn.com/2017/10/16/pf/college/california-free-community-college/index.html

www.thebalance.com/smart-ways-for-college-students-to-use-credit-cards-960105

www.vccs.edu/vccsblog_post/community-college-awareness-month-virginias-community-college-students-pull-back-the-curtain-on-cost-cutting-strategies/

Holiday Expenses: Top Ways to Avoid Debt this Season

The holiday season is supposed to be about joy, but for many people it brings a great deal of stress. In addition to organizing and attending multiple holiday events, traveling and hosting visitors, you have to watch your budget. Otherwise, you end up with that January hangover when the bills come in.

Fortunately, you can enjoy all the season has to offer while minimizing stress about your holiday expenses. The key is to make a plan and stick with it. Try to follow some general tips as a family, so everyone is on the same page when it comes to spending money.

Holiday-Expenses

 

1. Estimate Non-Gift Holiday Expenses

Holidays typically mean decorations and food, but also higher expenses you might not think to put in your seasonal budget. Electricity and heating is more expensive because of outdoor lights, home decor and cooking. You may also give to charity at this time of year. Review your expenses from last year to help you estimate how much the holidays typically cost.

2. Identify Gift Recipients

It’s neighborly to give small gifts to almost everyone in your circle, from your child’s piano teacher to the kindly woman who lives across the street. Make a complete list of everyone you plan to remember this year. Even if a gift is only $10, when multiplied by 10 people, that’s $100–plus interest if you slap it on a credit card and don’t pay it off right away.

3. Start Saving Early

Ideally, put aside a few dollars every month throughout the year to build a fund for holiday expenses. But life isn’t ideal, so you may only start saving when the weather begins to get colder. As soon as you turn your mind to the season, start to put money away. If you anticipate coming up short, consider taking a seasonal job or revising your original holiday expenses. You still have time to make changes.

4. Start Buying Early

Check out sales as they happen throughout the year. If there’s a sale on food you’ll eat during Thanksgiving and your holiday meals, double up and put the excess in your pantry or freezer until December. If you see the perfect gift for someone on your list, buy it when it’s on sale, even if it’s several weeks before the big day. Just remember to cross that individual off your budget!

5. Research Pricing

Look online and compare retailers for those few special items. Often flash sales and internet-only deals can get you a break on in-demand items, although you may have to buy early before they sell out.

6. Budget for the Unexpected Holiday Expenses

Set aside a bit of cash for a last-minute invitation or unexpected guest. That way you can get a hostess gift or add a plate for dinner without breaking the budget. Better yet, if you never use the money from this seasonal emergency fund, you can put it toward another priority in January.

7. Use Credit Sensibly

When you’re trying to budget, credit cards are not the enemy as long as you use them sensibly. Your credit card may offer cash back or valuable rewards points. If you want to use credit for this reason, consider using the card and immediately transferring the amount of the charge out of your bank account and onto the card.

As with any debt, awareness is crucial. If you put money on a card, write it down and post it on a bulletin board at home so you don’t forget. The more you are conscious about what you’re putting on credit, the more control you have.

Enjoy the holidays the way they are supposed to be: with friends, family and good food. In terms of your holiday expenses, all it takes is a little planning and strength to stick to the budget over the season.

Retirement: Save a Million Dollars Right Now

Retirement

Retiring as a millionaire may be easier than you think. With the power of compounding interest, you can become a millionaire by putting aside just a few extra dollars each month.

How Much Do You Need to Save for Retirement?

Here’s how much you need to save each month and how long it will take to reach a million dollars if you invest in an S&P 500 index fund. These numbers assume the index matches its historical ten percent per year rate of return.

  • $100 per month = 45 years
  • $250 per month = 36 years
  • $500 per month = 29 years
  • $1,000 per month = 23 years
  • $2,000 per month = 17 years

The lesson learned? Anyone can become a millionaire by setting aside only a small amount of money each month over their working life. If you got a late start or want to retire early, you can still get there with smart budgeting.

Where to Save

Warren Buffet recommends S&P 500 funds because they let you own 500 of the strongest companies in the United States at a low cost. Other investors prefer to use total stock market index funds that own every stock on the stock market or to put some of their money into an international index fund to add diversification.

You may also want to consider a target-date fund which gives you a mix of U.S. stocks, international stocks and bonds and automatically lowers your risk as you get closer to retirement. No matter what you choose, how much and how early you save will be the biggest driver of your success.

How to Find the Money

It can be hard thinking about the future when money is tight, but small adjustments add up. Instead of buying things because they’re only $X per month, remember that only $X per month will make you a millionaire.

Simple steps like packing a brown bag lunch and skipping a barista-made coffee can save $10 to $20 per day. If you have credit card debt, paying it off sooner or consolidating it at a lower interest rate can turn money wasted on interest into retirement savings.

The most important thing to do is to start right now. Remember, the sooner you start, the easier it will be to become a millionaire.

 

Sources:

http://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp

https://www.forbes.com/sites/robertberger/2017/03/27/an-sp-500-index-fund-is-it-a-good-investment/

http://www.investopedia.com/terms/t/target-date_fund.asp