Shaun is the author of the blog Smart Family Finance, a site dedicated to exploring the challenges of family finance; from starting a marriage to starting a family, from teaching your children about finance to helping them pick a college, from single income to multiple income. The intricate world of family finance unlocked, one post at a time.
In the annals of “if I could do it all over again in college” there are plenty of money mistakes that I would avoid. The causes of my college financial difficulties were far and wide: I was lazy with money, I simply was not educated about money and I couldn’t recognize my needs from my wants. The mistakes I made led to a glut of credit card debts and student loans. Plus, my four year degree took six years to complete because I had to work full time.
However, I can’t say that all my money decisions were bad. In fact, for every mistake I’m still dealing with, I made a good money decision that I’m still benefiting from.
Don’t Get a Car in College
Having a car equals having monthly expenses, which translates into needing to work a minimal amount of time at a job while in school.
I bought a car my senior year of high school and at the time, it seemed like a good decision. I was in a large number of after-school activities, I worked and my school allowed students to leave early/come in late if you didn’t have classes during certain periods. Most important, I could get away from my house whenever I wanted.
What was fun in high school became complicated in college. For me, having a car meant a car payment, insurance, gas, repair, maintenance and available transportation to go spend even more money at stores. It also meant fixed financial obligations that were hard to meet while going to college. The situation was made worse when I realized that I needed to take on other expenses when arriving in college. For the first time, I was buying textbooks, some of my meals and hanging out with friends almost always required burning a few dollars.
My obligations to my car meant little or no flexible spending money to simply enjoy the college experience.
Don’t Get into Credit Card Debt
Since my car ate up nearly all my disposable income, that meant that I sat home whenever friends headed out for a night on the town, right? Of course not. I had a thin, rectangular plastic card sitting in my wallet. All it took was a swipe of one my credit cards at check out and I could have fun now and pay back later.
It seemed to work for a while. Monthly payments for a few thousand dollars appear very manageable when you get your statement. It took me a year of paying minimal balances before I realized that my balance was actually getting larger, not smaller. By then, the monthly interest costs were equivalent to a second car payment.
Be Careful With Bank Accounts
While I didn’t lose thousands of dollars through my bank accounts like my other mistakes, I stumbled frequently with first bank accounts. I was lazy with recording checks and bounced a few payments. More frequently, I’d be stung with a bank fee for drawing a balance too low.
My mistakes with my bank accounts were simply a matter of neglect. I didn’t have a lot of money going in or coming out. It was easy to lose track of it all. Another mistake was that I had two accounts; one for when I was in school and one for when I was at home. If there was failure in keeping tabs on one account, you can imagine what confusion two accounts brought.
Start an Emergency Savings Fund
It only took a few difficult months of large car repairs or unexpected expenses before I realized that not having a source of emergency funding was devastating. I decided that I’d start an emergency fund.
I had credit card debts, car bills and school loans. All of my regular income was eaten away by my debts. How could I possibly start emergency savings? I decided to save some of my irregular income. I was paid bi-weekly which meant I received three paychecks, instead of two, twice a year. Also, I had tax refunds thanks to college tax credits. Half of any irregular income went into a savings account that I never, ever touched.
I still have the money over a decade later, and it feels good to have a source of funding in case of emergency.
Start Saving for Retirement
Having to work to pay for a car and credit card debt brought me face to face with a personal revelation. I wanted to stop working as soon as possible. Thanks to a finance focus in college, I knew that having a retirement fund would be a step in that direction.
Many college students put off saving for retirement until they start their career. Doing so is a big mistake. Starting as early as possible is the best thing you can do for yourself. In fact, a high school graduate can easily out-save a college graduate, (even at a much lower income), simply by starting four years early.
Since I was working, I had the opportunity to invest in a 401k plan with a match. However, anyone can contribute to a retirement plan through a traditional or Roth IRA. Tax benefits on retirement plans can also alleviate some of the pain from lost income.
My mistakes taught me a lot about spending, budgeting and using debt. Those lessons have stuck with me over the years and have helped me to make more smart decisions about money than money mistakes. However, I feel fortunate to have made at least two big, smart money decisions that benefit me still to this day.