Welcome to College! 5 Steps to Avoiding the Pit of Financial Despair

Financial tips for new college students

You worked through 13 years of school. You put in the extra hours in sports or band or drama or whatever you were into.

You researched a million schools, sent out a million applications. You filled out the FAFSA. You were accepted! You took out a student loan.

You made it. You’re here.

Now you can focus on building relationships and acing tests and forget about money for a while, right?

Um, no.

There may be people in your life – even parents and teachers – telling you to just relax, stick to your schoolwork and float down College River on the magic of student loans.

Sorry, that’s terrible advice. When older adults tell you that it’s because they don’t want you to be unnecessarily stressed. The problem is, when you ignore money matters it actually creates MORE stress.

Don’t find yourself falling into the dreaded Pit of Financial Despair! Take these five steps to keep on track with money:

Step #1: Get a job.

How you handle money now is as much as part of the investment in your future as your studies. You can ignore it, but remember that even when you’re not spending money, you really are. Dorm and meal plans may be prepaid, but you’re spending that credit down just in daily living.

Even if it’s just 5-10 hours per week, build the habit of working to maintain your life now. It will be easier to build on that habit later than to suddenly have to start “real life” when you graduate.

Step #2: Open checking and savings accounts that meet your needs.

You might already have accounts with your bank or credit union back home. Great! Still, consider the value of having local assistance setting up the right kind of account for your needs as a college student.

Look, you’re going to be kinda poor for a while. You don’t need an account that yields higher interest because you won’t have enough in it to maintain the minimum balance and justify the fees. College towns like Muncie get it. A local advisor here can help you get into what’s best for you.

Step #3: Get a credit card.

Huh? You’re thinking, “That seems like a baaaaaad idea …”

The idea here isn’t to get into more debt. You definitely don’t need that right now. The reason you want a credit card is so you can start to build up a credit history. Put something small, like your HBO Now subscription on it every month and immediately pay it off with your debit card. This will up your credit score and save you a ton of money on interest when it’s time to borrow money for a car or house.

Step #4: Create a budget that includes paying off student loan debt.

Ask a room of 100 professionals whether they had a budget in college and maybe five or six will raise their hands. Ask them whether they wished they’d had one and watch the rest reach for the ceiling.

You’re going to be different! Set a budget for non-meal plan food, clothing, car insurance, gas, fun stuff, and everything else you can think of including early student loan payments. Future You will love Present You for starting before interest has begun to accrue. Even $10/mo. is great. Building the habit of debt management early will have huge benefits down the road.

Step #5: Put some cash in an envelope.

An easy way to put a limit on how much you spend in a month or a two-week pay period (because you did Step #1, right?) is to make the limit tangible. When the cash you can feel in your hands is gone, you’re done. Period.

If you can’t stand the idea of using cash (“What is this, like, the year 1800?”), consider using a prepaid cash card. You load it up just like an envelope and when it’s gone, it’s gone. Less effective than the tangible feeling of dwindling cash, but it keeps you accountable.

Or you could do none of these things …

… and stress out when you’re always bumming off of friends, getting dinged with fees, paying stupid high interest on a car loan, feeling like you got hit by a bus when your student loan grace period ends and generally just having no idea whether you can really afford anything.

Wanna know more about how to stay on track and worry-free? PrimeTrust Federal Credit Union is here to help.

Check out our resources for the next generation of higher-ed students and professionals, Go CU! on Facebook (@primetrustgocu) and Twitter (@letsgocu). Or go old school and call us: 765-289-2148.

Photo by Sean MacEntee / CC BY 2.0

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