This post was written by Lindsay Williams, a Junior studying Political Science at Indiana University and an intern for Halcomb, Singler LLP.
One of the best strategies for preventing bankruptcy centers on the ability to evaluate, structure, and implement a sound financial plan. There is no doubt that the younger you learns such a skill, the more likely you are succeed in the future at avoiding falling prey to the dangers of debt and financial woes. Such financial experience is often gained for the first time after graduating from high school and entering the collegiate world and inheriting all of the money issues that go along with higher education. There are student loans, private loans, FAFSA requirements, credit card offers, cash advances, and textbook fees; all of which must be dealt with on a limited or non-existent income. So, what is the best strategy for a college student to use when determining exactly how to manage these new “adult” fiscal decisions?
The first necessary step is to look at the debt you are undertaking, any loans or credits, compared to the funds that will be supplied from savings, grants, employment, or even family members. Then, it is time to create a personal budget. Designate certain income for certain types of uses. For example, utilize the loan money for only educational purposes including tuition and textbooks while the money you make from family or a job can supply the groceries, utility bills, or any extras that may come up. If you are living with roommates you will need to talk to them ahead of time to figure out exactly what expenses you will be required to contribute. In addition, talk to your parents about what they will be willing to supply and what you will be solely responsible for. By giving yourself an allowance, you are able to track your spending and choose between what you want and what you really need. Budget this way a month at a time, but also try and review your spending to ensure it is on track at the end of each week and make any required adjustments to meet your financial goal. Once you sufficiently track your money it will be easier to recognize what indulgences and impulse buys you engage in and hopefully this will encourage a restraint in your spending behavior.
Of course entering into college encourages the social aspect of life which often times becomes a crucial source of money strain. Even though your friends may be able to go out every night, buy new clothes for every occasion, or eat out every night, it does not mean you have the same luxury. BUT, this does not mean you have to become some sort of awkward recluse. Being frugal does not mean you cannot be social; you just have to figure these expenses into your budget as well. Rather than relying on a credit card for all of the extra amenities, plan ahead and put aside a set amount for activities with friends. Instead of driving to class everyday and using gas money, take the extra time to use the public transportation system. Check to see if there is a discount associated with the restaurant or store you are going to when you show your student I.D. Also, look for the many FREE activities campuses offer throughout the weeknights and weekends. Not only will you meet more people, you will also get a free meal or t-shirt in the process. Furthermore, search for the best deals on textbooks by comparing the bookstore prices with online availability and also previous students. You can also sell these textbooks back either online or to the bookstore for some extra pocket money to do with what you please. One book may provide enough cash to fund a whole weekend out with your friends.
Even with a stellar budget, you may hit a small roadblock or unavoidable emergency that causes you to stress about your financial situation. In order to avoid damaging your finances in the long run and risking future bankruptcy, it is important to avoid racking up several credit card charges or taking out cash advances that you are not able to pay off in a short period of time. The more proactive approach to dealing with emergencies would be building a crisis fund that you can rely on when you hit a sticky situation. Depositing as little as five dollars a week into the fund could provide a world of relief when it comes time to use it. Also, do not be afraid to ask for help. Call home and let your family know you are in trouble and if that is not a viable option, speak with the financial aid office located on campus. Someone who is more experienced with such situations can point you in the correct direction and assist you in your financial decisions. In fact, most colleges set aside funds to assist with struggling students and resolve their difficult financial situations.
The good financial habits you learn and put into practice at a young age are sure to follow you into your future monetary endeavors as well. It is important to consider all of your options and looking at the big picture with your money rather than focusing on what you can get by with on a daily basis. Planning and researching is your best friend when it comes to spending wisely and keeping yourself financially secure. These are just a few tips to start you off right and help you build a bright future free of bankruptcy and full of opportunity.
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