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Common money mistakes to avoid in college

27th October 2020 Print

When you think about graduating from college, you might imagine walking away with a diploma, a body of knowledge, some good contacts and possibly some relevant work experience. Most people don't envision carrying the consequences of a lot of financial errors into the working world. Unfortunately, college is a time when it's common for people to make some financial mistakes, partly because it's their first time out on their own. Fortunately, with some financial education, those mistakes can be avoided.

Not Anticipating Total Costs

You'll be in the best position to stay within a budget and get enough money to cover your costs if you look at what you will spend for tuition, books and living expenses over the four-year period. You can cover some of this with private student loans, but be sure that you do research so you know the maximum amount of student loans that you can borrow. Another common error is not seeking out scholarships and grants, which you don't have to repay. Creating and sticking to a budget will start you off on a lifelong path of responsible money management.

Mistakes with Credit Cards

Credit cards are not inherently bad, but having little experience with them can spell financial trouble for students, who are often deluged with offers. When you're living on a budget, you might feel like indulging in more takeout or retail therapy than you've planned for using a credit card, but the interest rates can mount up. When you graduate, you want to focus on paying down your student loans and meeting other financial goals, not struggling with credit card debt. Making room in your budget for treats and having some emergency savings can help you resist the temptation of the credit card.

Hurting Your Credit Score

Another thing you don't want to do is graduate from school with a poor credit score, and just a few missed payments on your credit card can lead to this. You might instead want to consider a secured credit card, which allows you to put money down in advance. By using it regularly and paying it off regularly, you can build a solid credit history, but since the limit is generally low, such as around $500, you can't get into too much financial trouble. When you graduate, having a strong credit score can help you when you are looking for a place to live. It can even be a factor in hiring in certain professions.

Misusing Your Loan Money

Even if you don't struggle with credit cards, you might be tempted to spend some of that loan money on something other than school. You may try to tell yourself you'll just borrow more the following year, but you will have to repay this sometime. This is another place where your budget can come in handy to keep your spending within certain parameters. In fact, if you find yourself with some extra cash, you might be able to pay it toward your interest while you are still in school.