The newly acquired status of a ‘collegiate’ can give vulnerable young minds an instant high.
For the first time in their lives, the dependence on parents for financial support takes a back seat. And what comes to the fore are some confident under-grads (and some overconfident too!) taking important financial decisions without giving much thought.
Most often than not, they end up committing not just small mistakes, but big blunders that could have been easily avoided had they acted a little bit diligently and with slightly better knowledge about the functioning of financial institutions in the US.
Here are the top 5 specific financial mistakes committed by students and how to avoid or correct them.
Mistake #1 Lack of Budgeting or Lack of Common Sense!
Budget is not a four letter word.Many undergrads just don’t have a financial clue when they enter college! With no financial planning and budgeting, they try to weather a hurricane. Expenditure and income imbalance leads to chaos, and ultimately results in deep in debt undergrads. With peer pressure at its peak, the students generally don’t think twice to spend mind-boggling amounts on leisure activities. Though, leisure is not bad per se, but leisure without financial planning is definitely bad.
Solutions
- Prepare a Monthly Budget Worksheet on the very first day of your college. It’s a simple worksheet prepared on a plain paper. Divide the page into 2 columns – Income and Expenses. List expected sources of income and expenditure under the relevant headings. And keep filling them throughout the month as and when you earn money or make some expenses. At the end of the month, (Total of Income Column – Total of Expenditure Column) will give you Monthly Net Income (or Monthly Net Loss if expenditure is more than income).
- Regularly monitor your bills throughout the month (and not just add up the expense at the end of the month) and compare them with your budget to keep everything under check.
- Keep your monthly debt obligation below 10% of your Monthly Net Income (after taxes). For example, if your net income is $1000 a month, your monthly loan payments shouldn’t be more than $100.
Mistake #2 Not Investing
Investing as a student is one the best actions you can take to secure your financial future. Getting starting trading stocks with a free online broker like Zecco. $0 trades with a few thousand dollar min. account balance. You can’t beat that price.
Start investing early!
