Making Money Last
By Don Rauf, Co-Editor, Student Health 101
College can be a drain on finances, but students who put their mind to it find many ways to save.
“I had a hard time making my savings last and avoiding the call to mom and dad asking for money.” —Meghan Fintland
"To control spending, students have to gain an understanding of wants versus needs. —David Borkowski, financial counselor, Iowa State
“The same amount of money students pay every month for a minimum payment on their credit card could potentially make them a millionaire by the time they reach 65.” —David Borkowski, financial counselor, Iowa State
As a German history major at Dartmouth College in Hanover, New Hampshire, Megan Roth knew by the end of her freshman year that she wanted to spend the spring of her sophomore year in Berlin. The 20- year-old also knew that she would have to save $1,500 to $1,800 to make it work. So for the next year, Roth saved intensively.
Luckily, Roth’s parents trained her well in the world of personal finance. She used a debit card and tracked every purchase and cash withdrawal. She kept every receipt and recorded all expenses and income on a budget sheet in her computer. She always made sure she had enough to cover her basic bills like her cell phone, and she used online banking to follow her cash flow.
“You have to know how to manage your finances at college,” says Roth. “It can be overwhelming if you don’t know how to balance your checkbook and things like that. My parents definitely stressed to me the importance of not spending all of your money.”
One way that Roth kept her spending under control was to take advantage of all the free entertainment and activities on campus: swimming in the river, rock-climbing, kayaking, waterballoon fights, and on-campus movies and concerts. Roth also enjoyed taking extracurricular pottery-making and jewelry-making courses.
By taking advantage of free or affordable college events, using a student ID for student discounts, and limiting her splurges to an occasional dinner out, Roth easily met her goal to pay for her Berlin trip.
Free to Spend
While Roth came to college with smart money sense, many students don’t have experience handling their own finances. With limited incomes and a freedom to spend, the cash can disappear fairly fast. A Student Health 101 poll of more than 1,000 readers revealed that 60% feel strapped for cash “often” or “very often.”
David Borkowski, director of the financial counseling clinic at Iowa State University in Ames, reports that he annually has more than 600 face-to-face meetings with students regarding their financial matters, and he also responds to about five to ten e-mails a day on the subject. He often tells students that budgets are the answer. While two-thirds of Student Health 101 readers polled say they already use a budget, many don’t know how to get started. Borkowski recommends that they start by tracking spending for at least a month. He believes setting financial goals, such as saving for a car or a new computer, can motivate students to get more involved with their personal money management and not just buy impulsively.
When he was attending Duke University in North Carolina, Aaron Patzer, CEO and founder of Mint.com, a site designed to help college students manage their money, was motivated to budget to reach his goal of taking a spring break in the Caribbean. He says that he was able to sock away a large amount by cutting his discretionary expenses. “I lived in a dorm without air conditioning, and those dorms cost $1,500 less per semester,” says Patzer. “When I could, I moved into an apartment with a kitchen and cooked almost all my meals. That saved me a few grand compared to a meal plan.”
To control spending, students have to gain an understanding of wants versus needs, according to Borkowski. When writing a budget, make sure your needs are covered first to pay for food, rent, car insurance, cell phone bill, loan payments, etc. Then always put a portion into savings for emergencies and future plans, and use the remainder for the things you want. (Only about a third of students say they save regularly, according to a Student Health 101 poll.)
"If you are considering buying something, ask yourself 'Do I need it or is it just a want?' Don’t buy it right at that moment," he says. "Leave the store and think about it and see if you
Avoid the Credit Card Trap
While credit cards can make it easy to make purchases, that can also be their biggest drawback, and students can wind up spending more than they can really afford (Twenty-two percent of students polled said they fall into that category.) But it can be hard to resist the lure of plastic when financial institutions flood mailboxes with so many tempting offers.
“When I started as a freshman at Northern Arizona University [in Flagstaff], I was inundated with credit card offers,” says Meghan Fintland. “In addition, I didn’t have a job, and I was too far from home to take advantage of the benefits of a stocked kitchen and free laundry. I also had a shopping habit and the beginning of what would be a very expensive social life filled with spring break trips, beer bashes, and weekend getaways with friends. Needless to say, I had a hard time making my savings last and avoiding the call to mom and dad asking for money.”
Borkowski advises students to use a debit card and cash instead of a credit card because it’s much harder this way to spend more than you have. If students don’t pay their credit card bill off in full each month, interest charges can really add up.
"I have found that if a young person understands that the same amount of money they pay every month for a minimum payment on their credit card could potentially make them a millionaire by the time they reach 65, they might think twice about using that credit card," he says.
Plus, if students have too much credit card debt or miss credit card payments, they can ruin their credit scores and have a very difficult time repairing it over their lifetime.
"A bad credit score can mean not being able to buy a car or home. It also can mean higher interest rates and future credit costing you more," Borkowski says. "I think the credit card issue is about scaring students some, but still letting them know that when they are used properly, credit cards can be a good financial tool."
Working to Fill the Piggybank
After a fun spring in Berlin where a weak U.S. dollar made the cost of living even more expensive, Roth is feeling the financial pinch now in the fall of her junior year. In addition to keeping up with her usual frugal ways, she is holding down three part-time jobs: tutoring, serving as a resident advisor, and working in the Dartmouth public affairs office. “I don’t have the savings cushion I once had, so I’m trying to build that back again,” says Roth. But by skipping the Starbucks “frappamochacinnos,” buying used textbooks, and working as much as she can, Roth sees a greener future ahead, where her savings will continue to grow.
DON RAUF IS CO-EDITOR OF STUDENT HEALTH 101.
Student Video: Andrea Hochkeppel, Northwestern University
"Hi my name is Andrea Hochkeppel and I am a junior at Northwestern University. And these are just a few tips on how to stretch your dollar while in college. Number one take advantage of your local grocery store eating out or shopping at drug stores is often convenient but it forces you to spend that extra dollar. Number two research where to buy your text books. Try online or ask friends who have already taking the class or get a library card at your local library and check them out for free. Number three watch out forthe Latté trap. It’s easy to find yourself buying a ice coffee once or twice a week but don’t forget while you are saving money make sure to treat yourself once in a while too."
Student Video: Allison Pyle, University of Florida
"Hi my name is Allison Pyle and I am a senior at the University of Florida. Probably the best tip that I could give you on how to save money while in college is to not buy your text books at the university book store. You can buy the same books, same editions online at Amazon.com or Half.com for a fraction of the price you would pay in the university bookstore. And the best part is once you get these books and use them for your classes you can re sell them on the same websites you bought them from and make most of the money back you spent on the text books in the first place. I probably saved hundreds of dollars doing this all throughout college and now you can too."
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