Bills, budgets, spending temptations, lines of credit --
across the country, newly minted co-eds are facing these adult
money issues on their own for the very first time. To help kids
ace Money 101 -- and avoid graduating with a killer financial
hangover (or bankrupting The Bank of Mom and Dad, for that
matter) -- here's what they need to know.
Staying clothed, fed, protected, and entertained ain't cheap.
Sometimes it's hard to do all of those things at once and in the
manner to which you've grown accustomed at home.
You're first going to have to get acquainted with what life on
campus is really going to cost (this will likely be a
work-in-progress for the first couple of months). Then run the
essential numbers. The math is simple: What you have coming in
minus what you spend equals either Spring Break at Padre with your
pals or with Gram and Gramps cleaning out their garage.
To avoid great unpleasantness later -- and weeks of subsisting
on ramen and tap water -- you need to draw up a spending map (aka
Stop making that face. It's either learn to budget or beef up
your burger-flipping skills.
Sweat the big stuff first
Life is precious -- and it's way too short to spend searching for
that Val-Pak coupon for 20% off a $2.95 burger. (That's a whopping
$0.60 savings, by the way.) To save some serious coin, one simple
axiom will serve you well throughout your life: Sweat the big
Big stuff equals big savings. Think about it: Which would you
rather pocket, 20% off a $50 purchase or 20% off a $500 one?
For college students one of the biggest-ticket expenses (behind
tuition, room and board, and beer) is textbooks. The average
college student spends $1,000 a year on textbooks. Depending on
your major, that figure is just a starting point.
You can significantly slash that single expense by 65% to 85% by
renting your textbooks. Think Netflix for textbooks. Instead of
buying your books new (or even used), you can rent them for the
term you need through companies like Chegg.com (which I recently
worked with to spread the word about college savings strategies)
Consider the cost savings of renting three of the most popular
college textbooks for a semester:
Mastering Biology (Edition 8)
Intermediate Accounting (Edition 13)
Chemistry (Edition 2)
Source: Chegg.com; Bookrenter.com as of Aug. 24.
Over the course of your college experience, this single
money-saving strategy could shave your expenses by a whopping
$2,000. There's more where that came from if you know where to
4 ways to get a handle on spending
The worst budget is the one that sucks all the fun out of your
life. Denial and deprivation will only lead to spending benders. So
start with the sweet stuff:
pick a few guilty pleasures to include in your formal
. That way you can enjoy these guilt-free indulgences (keep them
reasonable, please) knowing that you're not doing long-term damage
to your finances.
With that out of the way, it's time to track the flow of your
dough. Here are four ways to do that:
Using software/online tools/worksheets:
Tracking the flow of your dough is easy these days. I use Mint.com,
which has all sorts of fancy doohickey apps and alerts and whatnot
that you can use with your fancy-shmancy phone.
One-stop money-tracking shops like Mint aggregate your accounts,
provide detailed rundowns of your balance sheet, keep tabs on
spending and saving 24-7, track trends, nags you when you're
perilously close to overspending in the categories you set up, and
even ride you to pay your bills on time if you let them. (Let
For those fond of vintage budgeting method, here are some
(I swear, I can practically smell the mimeograph ink).
With envelopes of cash:
Divide the money you have to spend during the month (or the week,
just so you don't have a lot of cash on you at one time) into
categories. So maybe you have $50 in the food envelope, $20
earmarked for entertainment, $30 for school supplies, or whatever
are your biggest spending categories. When your "food" envelope is
empty before the week is over, well, it's time to start eating in
the cafeteria again. This is a tangible way to track your spending
and to keep yourself honest. Here's
how to implement the cash/envelope strategy
The chunk-it-up-into-percentages approach:
This straightforward approach to gudgeting --
outlined in more detail here
-- comes from author Richard Jenkins, who suggests that 60% of your
income should go to "committed expenses" (housing, food, car
payments, utilities, etc.), 10% used for "fun money," another 10%
for irregular expenses (your short-term savings), 10% for
retirement savings, and 10% for long-term saving and/or debt
reduction. Consider this a starting point for your own budget, and
modify the 10% chunks for your lifestyle.
The lazy way:
. In fact, I'm so lazy I'm not even going to retype it here. Just
click the link, it's easier that way.
An aside for parents:
Make budgeting a family affair: Sit down with your college student
and hash out a monthly budget together. Even if you're footing most
of the tab, show them exactly what you're shelling out every month
so they understand that this is hardly a free ride for anyone in
Discuss what's reasonable to spend on entertainment, clothing,
food, and iPhone apps. Talk about the difference between needs and
wants. And while junior's out of earshot, set some rules of how
you'll handle that inevitable "I need money" phone call.
graduated college (Rock Chalk Jayhawk!) with only minor financial
bruising thanks to in-state tuition and the lack of plastic in
her wallet. The Motley Fool has a disclosure policy.
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