So, Labor Day is behind us, which means that the FALL is here. Football, cooler temps, pumpkins and more are in our future.
School is back in session in Birmingham — which for some parents is something to celebrate, and others something to mourn. Or a little of both!
And for the college-aged students among us, new worlds are opening up, new possibilities. But there are decisions that we make during college that can REALLY pay off, if we are smart.
In fact, I wish I had been smarter about a few of these back when I was college-aged.
This is for the college-aged among us … but also, well … none of us are exempt from being smarter when it comes to our money.
Oh, and a quick reminder: Estimated taxes for the third quarter are due on Monday, September 17th (normally the 15th, but that’s on the weekend). If this applies to you, you know who you are. We’d love to help you, though, if you need a quick word of advice. Shoot me an email through the button at the top of the page.
Three Key Money-Management Tips For College Students In Birmingham
“Life is the sum of all your choices.” – Albert Camus
It’s natural to be nervous about starting school. Many students quite understandably worry they’re biting off more than they can chew.
But the main problem that many in this generation are finding is that much of the worry about the college experience itself — classes, social life, housing, etc. — are dwarfed after the fact by big money mistakes that haunt college students for years.
Here’s hoping that these money-management tips for college students are taken to heart by those presently in that season of life.
Who is actually paying for college?
Many have their undergraduate education paid for by parents, scholarships, and/or loans in their name (or their parents’). If your parents are paying for your education, be careful not to fail any courses! If you fail a class required for your degree, you will have to take that class again, paying for it twice. It’s not worth it, particularly since it’s usually difficult to outright fail a class.
Paying for college yourself supposedly gives you ownership of your academic decisions while in school, but if you’re in a situation where you don’t have to worry about affording your own tuition, then consider yourself lucky.
There are oceans of articles now about ensuring you aren’t taking out monster loans for a degree with no real value.
Just google “anthropology major” and “student debt” and you’ll see what I mean. Carefully consider that college is much more than simply training wheels for the “real world”. The decisions you make about your course of study do, in fact, have ramifications for the first few years out of school and can set a course.
The good news, of course, is that when you ask many adults in Birmingham whether their career has been determined by their degree, they will tell you “no”; you aren’t absolutely limited by those choices. However, it DOES play strongly into your initial post-college years, and these years DO have a big impact on your eventual career path.
But remember that nothing in life is final. So don’t go into $200K of debt for something about which you may later change your mind.
Open a Roth IRA.
These retirement accounts were brought into existence about 20 years ago in 1997. And if students before that point had had a way that they could put money away for retirement in a tax-advantaged account while they were in such a low tax bracket, they might have taken advantage of the opportunity.
Then again, they might not have. It’s hard to imagine retirement before you’ve officially begun a career, but it’s harder to argue with long-term investing in the stock market — even in these times of economic uncertainty. Many have interests that lay elsewhere aside from investing, so they don’t necessarily think about having a secure financial future. I’m not going to go on and on about the power of compound interest here, but suffice to say — it’s incredible when you start in college.
Avoid credit cards.
The credit card companies are (still) vultures on college campuses. And having a credit card without a job is asking for trouble.
One particularly sneaky aspect of college-geared credit cards is the introductory offer. Even with the CARD Act passed a couple years ago, the fine print on these deals are heavily weighted AGAINST the college student, and (of course) in favor of the banks.
Further, here are some other quick pieces of advice for the soon-to-be financially-savvy student:
* Use credit cards sparingly
* Pay all credit card balances in full
* Get the best deal on a checking account
* Start saving
* Keep track of your spending
* Set a limit on entertainment
* Shop at second-hand stores
* Keep an eye out for free money
* Get a part-time job with tips
* Walk or ride a bike — don’t drive
* Avoid the tax on stupidity
* Look for student discounts
* Don’t eat out all the time
Had I known what I know now about compounding interest and the tendency for the stock market to increase over time, not just theoretically but from experience, I’d be in an even better financial position right now.
And it’s not about having more money, it’s about having more options for doing the things we like to do.
And that kind of thinking is best served while young.
Until next week,
Randall M. Hancock CPA, PC