Student Finances: A Modern Day Tragedy
My apologies for those of you I sucked in by invigorating memories of dried noodles and chicken-like scents – this post will not encourage Ramen noodle eating (but it certainly wouldn’t hurt from a financial perspective). Seriously folks, for those graduating for the first time, the trends you set while being a student will carry over for many years to come. When in school I noticed some key blunders that many of my peers and I made that later led to some financial hardships.
The average student graduates with $20,000 in debt from tuition and room and board. Isn’t that a deep enough hole to dig out of? Here are 8 common financial blunders that students make that only add to the tab by building bigger debts or limiting future earnings potential.
Student Money Mistake #1: Building Huge Sums of Student Debt
Consider that student debt was higher than credit card debt for the first time ever in 2010 and is likely to pass $1 trillion this year (5 times what it was just 10 years ago).
Also, consider that according to the Society of Human Resource Management 60 percent of employers do a credit check as a means of screening candidates.
There are plenty of ways to avoid student debt.
Student Money Mistake #2: Carrying a Balance on your Credit Card
Under no circumstances should you finance your college lifestyle at a 10%+ effective annual rate (EAR). Living within your means especially applies for students. Unless daddy (or mommy) is sending your bailout checks at your beckon call, then creating a well balanced budget, financed by a job or your personal savings, is strongly encouraged. It is possible to have fun and not finance your future at the same time.
Student Money Mistake #3: Dressing to Impress
When in school, I was always baffled by the $40, 50, and 60 thousand dollar vehicles that many students were sporting around. My guess is that many of them were leases financed by credit card debt. This is just one example of frivolous spending by students designed to impress others. Sure, it might impress your hot date at first glance, but that’s about the only thing it can accomplish, besides putting you in the poor house.
Student Money Mistake #4: Neglecting to Save
The prevalent attitude amongst my peers while in school and the majority of them after graduation is “it’s never too late to start saving”. Granted, very few students save for retirement while in school, but those that do will be building positive lifelong financial habits and harnessing the power of compound returns.
Student Money Mistake #5: Delaying Graduation
Completing a four year degree in four years is more than enough to put you in some serious long-term debt. Completing that same degree in 5, 6, or 7 years can add significant living expenses to the tab. Many on extended plans simply aren’t sure what they want to do with their lives. The thing is, you’re going to find many 30, 40, and 50 year-olds who still don’t know what they want to do. A degree mostly shows that you are a person who can apply yourself. Most people don’t end up working in the field of their degree, and there’s nothing wrong with that.
Student Money Mistake #6: Not Applying yourself in Every Course
In my application for my most recent job, my coursework and GPA were looked at very extensively. GPA might not be the most important thing to every employer, but when you have zero experience to back it up, it’s the only thing that reflects your work ethic. Unless you’re in a high demand field, GPA should matter.
Student Money Mistake #7: Not Challenging Yourself with Internships
If your only work experience at graduation is Subway, you might be in trouble. There are TONS of great internship experiences out there and I really regret not challenging myself every summer to try a different one. They don’t need to be 100% relevant to the field you want to get into, but they should provide some sort of transferable skills and challenge you in a way that builds confidence in you (and your future employer in you).
Student Money Mistake #8: Working for Minimum Wage
A little research and thinking outside the box resulted in an office job that paid $12 per hour with the State of Michigan. This thankfully afforded me the opportunity to make the same amount of money and work half the hours (allowing me to focus more on my studies and extracurricular activities). The benefit of extending your job search can pay huge dividends. There are opportunities out there, they sometimes just require a little digging.
Student Finance Discussion:
- What are (or were) your financial habits while in school? Is there anything you regret doing or not doing?
- Do you have any tips for current or future students?