Minimizing debts of a student

You’re in college and you only live once.  However, when it comes to money many college students, even those bright enough to get into Yale, get it wrong.  Sure, you can buy a $5 latte at Starbucks, or you can order a pie or pizza every night of the week.  After all, your parents are paying for it.  

Or are they?  If you are spending money hand over fist, then think of this article as an intervention as you are on the road to financial ruin.

You probably thought that choosing between college acceptance letters was the toughest decision you’d ever have to make.  Well, that decision has nothing on the dozens of decisions you make every day with your money. Do you buy that overpriced coffee?  Do you really need another hoodie? For those old enough to go out the bars, do you really need one more beer?

When you stop to think about it you will realize that getting this decisions wrong is tantamount to a financial death by a thousand paper cuts.  The reason is that with each decision to spend $10 here or $20 there you are spending what you could be saving.  

To make matters worse many of these purchases are on items which are purely discretionary.  Sure, you might go onto a brilliant career after graduation but what good is it if you don’t have any money in the bank?

Still not convinced? Here are some of the reasons why you are already on the road to financial ruin.

• Credit Card Debt
  Credit card companies love college students.  You’ve probably seen their booths on campus touting low-interest rates and giving away some gift or another just for filling out the application.

  While the strategy of recruiting college students makes business sense for the credit card companies, the decision to take on credit can be disastrous for the average college student. Sure, you might have had credit cards before, but these were on your parent’s account.

  When the magic piece of plastic comes in the mail to your dorm, you have just received another indication that you are an adult, you are responsible.  At least you are supposed to be.

  However, many college students don’t see credit cards for what they really are – a device to go into debt.  This is where the trouble starts as the next thing you know you are struggling to make the minimum payments and your credit limit is maxed out.

  Don’t get a credit card and if you do, then keep it in a lock box to only use in case of a real emergency such as an unexpected medical expense or the need to buy a last-minute plane ticket home for a family emergency. 

• Not Using a Budget
  You might only live once but the financial mistakes made in your college years can stay with you forever.  This is even more important now that many employers will check your credit score before making that all-important job offer. 

  As such, you want to use your first time living away from home as an opportunity to develop sound habits when it comes to money.  This includes setting up a personal budget that includes a provision for starting to save now.Maybe it is only $10 per week, but getting into the habit of saving money will you are still in college will pay off big time when you reach retirement.  Learn the joys of compounded interest and let your money work for you. For example, putting $1,000 into an interest-bearing account and then adding only $100 per month could net you more than $100,000 over 50-years.

  Another way to save is to look at your expenses – even for necessities like car insurance.  Do you always need the most expensive option or is there a lower-cost way to ensure you have the coverage you need without going broke?

• Student Loans
  While just about everyone agrees that a college education has become too expensive, very few are doing anything about it.  In fact, the banks have realized they could make back ten-times they money they lost on the housing market in the early-2000’s by making student loans.

  These loans represent Hobson’s choice for millions of college students.  Without them, you won’t be able to get the education needed to unlock a brilliant future, with them you are entering into a lifetime of debt.

  Don’t fall into this trap.  If you need to take on debt to complete your studies, then the money only for your education.  In addition, look at how much you are paying per course hour. Maybe you can take summer courses or night courses for a fraction of the cost.

  Lastly, get internships and make a good impression with future employers who have student loan payoff programs as these options will help you to get out of debt and get on with your life.