College Freshman’s Guide to Personal Finance

Freshmen year at college is an exciting time, with countless distractions and new responsibilities. Surviving freshman year at college financially requires a certain amount of planning, discipline, and effort on the student’s part.

Help from parents, financial aid, and scholarships can make budgeting for freshman year significantly easier, but not everyone has access to that type of support, and everyone needs solid financial skills.

The basic rule of thumb for any financial situation is best described by Bill Earle:

If your outgo exceeds your income, then your upkeep will be your downfall.

Simply put, this means spending more than you have led to financial disaster. To avoid being broke by February, creating a budget and sticking with it is the best means of financial survival.

While still high school

Before a student reaches college, they can help themselves survive that first year by maintaining the best grades possible, developing good study habits, and seeking out financial resources.

By maintaining an excellent grade point average, students are more likely to qualify for scholarships, which can help defray or eliminate tuition costs altogether.

Many freshmen are shocked at the cost of college life, after living at home for high school.

Developing good study habits while in high school not only improves the chances of academic success, but it also helps students learn the self-discipline necessary to manage their finances. It is also worth the effort to see if college credit is offered for some high school classes, reducing the number of college courses that must be taken (and paid for) to earn a degree.

Create a budget

There are many resources to help students develop a budget.

The basic idea is to first identify how much money you have or expect to earn. There are many on-campus jobs available to students, and the local community relies heavily on students for their staffing needs. As seniors graduate and move away, new jobs open up, allowing freshmen to supplement their income.

After determining how much income is available, expenses must be identified. Expenses for college students fall into four categories: necessary expenses, maintenance expenses, a savings buffer for emergencies, and money for fun.

Necessary expenses

Necessary expenses include tuition, books, room and board, supplies, and medical insurance.

Most colleges offer surprisingly affordable insurance to students, and it is well worth the investment.

Many programs have lab fees along with tuition, and those expenses need to be prepared for. Also, students will need plenty of paper, notebooks, and other classroom supplies.

Specific tips for cutting costs while in college include:

  • Forget the car, you won’t need it
  • Buy used textbooks online or from used bookstores and sell them at semester’s end
  • Shop thrift stores for clothing and household items Live on campus
  • Invest in the college meal plan
  • Buy or bring a computer that you can afford
  • Avoid credit cards and unnecessary loans
  • Start out at a less expensive community college
  • Find a job that offers educational assistance programs

Maintenance expenses

Maintenance expenses include phone service, laundry, hair cuts, clothing, and transportation. Students who are unaccustomed to buying these items for themselves may be surprised at how fast they add up!

Setting aside a reasonable amount of money for maintenance supplies is a good way to stay within your budget.

Savings buffer

The student’s savings nest egg should equal 10% of their income. This money creates a financial buffer against unexpected expenses, illness or accident, or the need to travel home suddenly.

After subtracting all of these expenses from your income, the money you have left can be used for fun and entertainment.

Fun money!

As tempting as it may be to join the crowd in attending concerts, partying, or spending spring break at Daytona Beach, those activities can hurt you financially when they exceed your budget. At the same time, there is no need to hole up in the dorm and miss out on all the fun.

By sticking with a reasonable budget, students can find ways to enjoy themselves in between classes and work.

College freshmen who create and live within a realistic budget cut costs when and where they can, and discipline themselves to live within their means will graduate financially able to move into the workforce without a heavy burden of debt and armed with valuable financial planning skills.