College is a wonderland of expenses. The spending can last from the very moment that green-and-white acceptance packet arrives to years after when you walk across the stage with your undergraduate degree.
As a student, it can be tough to put into perspective. This is supposed to be the best time of our lives. However, in the ocean that is life, managing your money correctly now could be the difference between making waves or drowning before you get started. In other words, we're still in the preface, but it's going to affect the rest of the book.
It's easy to see how academically, professionally, moralistically, politically and personally, the four years we spend in college can be a funnel for future experiences. But it's also important to realize that these four short years can be financially suffocating if you don't budget correctly.
Luckily, you read The State News. This summer, we got to the bottom of student account spending and saving with expert Joyce Banish, the vice president of marketing at the MSU Federal Credit Union.
The one card rule
Banish explained the importance of starting and maintaining an account but made it clear that getting too carried away can be fatal for your future.
Banish says: "The first thing is that they need a financial account; they need a checking account. Most students really need a Visa account for emergencies and things that come up. But it's been my advice that they don't carry a lot of accounts. A lot of credit and retail cards is too much. Just get one good low interest rate card and carry that, with watching fees and so forth for cash advances. Get an all-around general purpose card. It will be easier to manage than to remember deadlines on a retail card here or a gas card there. So if they have one card and they manage it well, they will be establishing credit that will help for the rest of their lives. If they get too many cards and don't manage them well, they'll actually be hurting their credit rating."
Your credit GPA
If you do decide to go for that all-purpose credit card, it's important to understand the severity of having bad credit. Too many students get caught up in the swipe-and-spend system of "the card" and never fully grasp the critical nature of credit … until it's too late.
Banish says: "In the recent years, it's become more and more important because of this credit scoring. Where, the better the credit score, the lower the loan rate you're charged. This could be for a car, which everyone will need. It will be a loan rate on a mortgage, which everyone will eventually need. So it's really important to keep that credit record clean, to have one and to pay it back. And that means making all the payments on time."
Spreading spending out
After you become responsible with your savings, having a goal for taking the pressure off your all-purpose account should be a part of your management system. Banish breaks it down.
Banish says: "The most important thing a student needs access to is cash, so they'll need an ATM card as well. Because you want to be selective about what you put on your credit card, you don't want to use day-to-day items on your credit card. So if you go out to dinner or you make a purchase and it's all within the realm of your purchase, a check card is the answer. Instead of using credit, it comes directly off of your checking account. That's a nice alternative. The other thing is to start a savings account, so you're prepared for some emergencies. If you have a job, try to put some of that money away for expenses and unforeseen things that come up. If you're planning on spring break, don't wait till the last minute so that you're forced to use a credit card. A better idea is to plan ahead and get some savings for your spring break and then sort of budget."
Having a plan
The best way to make it out of college on top, or at least with minimal expenditures, is to be well organized. Sacrifice doesn't have to be so restricting if you can see a way around it. And the only way to see ahead is to have a well-versed, realistic plan of action.
Banish says: "The whole thing is getting to school and having a plan: how you're gonna spend your money, how much money you have to spend, where you're going to save it and that kind of thing. I think a lot of students come in and they see everybody do 'everything' and they think they have to do 'everything.' Not everybody is doing that. Everyone is making decisions on what they want to do, can't do and what they can afford to do. People have to think about it. The most important thing to think about is how to spend your money every month: how that money is going to come in and set some sort of a timeline of when the money goes out. Know when tuition is due for the next semester, when books are due, when rent is due if you have rent. Just know sort of how you're going to pay that money back. And I know that's hard because a lot of people are living paycheck to paycheck when they're at school, and it gets difficult."
Be minimalistic
The one thing you don't want to do is end up with bad credit. One of the biggest problems facing Americans right now is how to deal with an increasing amount of pressure from owing money and paying more when they don't have to. Being caught up in this system starts off like a snowball but ends up much like an avalanche. A lot of problems start with college spending and the solution is often simple.
Banish says: "The thing is to not put too much on the charge. If they do have a credit card and they use it often … always pay the minimum. Always pay the minimum. When you can, pay more than the minimum or ideally pay it in full. That way, you don't pay any interest. But always pay the minimum."
Panic button
If things get out of control too quickly, there are a few steps you can take to getting back on track. The first and most important route to take is to make a phone call.
Banish says: "If there is a problem, the best thing a person can do for themselves is to call the issuing institution. I know our credit union is going to work with people who have a problem. We're going to find a way to help you. We're not going to absolve the bill, but we are going to find ways to help you pay it back so that your credit stays worthy.
The first thing is to contact the financial institution; they can't do anything to help if they don't know about the problem, then, to sit down and repay the bills — how are you going to repay these bills. Always pay the most important bills first and decide on the small headaches later. If the rates were high and you have a low balance credit card, transfer it over. Then, I would arrange my loans in terms of interest rate. Make the minimum payments on the lower ones, but pay off those higher interest rate loans first so that you're paying less interest."
Paying back loans
This is a tough one — an often unavoidable pitfall of college spending. If you have to borrow money for your education, you have to borrow money for your education. And what comes up must come down. Banish came up with a few tips for paying that money back.
Banish says: "It certainly has to be in their budget, and with students graduating with bigger and bigger loan balances, the key is trying not to rack those loans up. You know, in the summertime, sometimes rather than going to summer school, it's a better idea to get as good a job as you can and save that money so you don't have the loan expenses and borrowing that some students have.
"Granted, I'm older, but my first house cost less than a lot of student loans that a lot of people are graduating with. It's a heavy burden for many students, and they have to keep that in mind. They can't get out of paying those loans.
"There are different plans. Sometimes on these student loans, you pay the first 36 months correctly and on time, and the rest of the loan interest is waived. If that is a program that someone is borrowing under, it would be really criminal not to make those 36 payments on time because that interest is so much money. So being on time with loans, that is the most important thing anyone can do."
