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Although tuition may seem like the biggest expense for a college-bound student, there are many more costs involved when planning for their future. These other expenses include room, food, transportation, books, technology, health, and more. And, even though these costs were included in the student’s initial estimate for expenses, many end up being more than what was budgeted.
A steady drain of money or a sudden financial emergency can create a range of stressful situations for students. The time between realizing there is a financial problem and finding a solution is often unpredictable. Sometimes, the root of financial problems appears gradually and then, all of a sudden, the individual realizes that they are experiencing financial problems. In other cases, a sudden job loss, expensive medical problem or unexpected reduction in financial aid can be a huge shock.
The goal here isn’t to save money or to become financially literate. It’s to become aware of financial problems and to find ways to deal with them before they begin to affect school, work, or health.
Start by Finding Out Where Your Money Is Actually Going
First, take stock of your current spending habits and money flow. While it may be easy to focus on ways to bring in more money (see the previous section for ideas), the best place to start is to look at your current money coming in and where it’s going.
Create a budget of where your money is going. Looking at the last one or two months of transactions in your bank account for all of your spending money is a good idea. Then organize your spending into categories, such as: Rent, Food (Groceries), Transportation, Subscriptions, School Expenses, Entertainment, and Debt Repayment.
The numbers may be different from what you expect.
Small purchases, however, can quickly add up to a large chunk of change and are often responsible for the financial woes of those who track their spending. For example, those who subscribe to services, such as streaming services or clubs and organizations, may not realize the many costs of their memberships. Repeated purchases of food or even of rideshares can also quickly dwindle a student’s funds.
Once you know what you are spending, divide the expenses into three groups: essential, adjustable, and unnecessary.
Rent and tuition for school are essential to pay each month. Food and other school supplies can be adjusted each month for how much money you have. These are for example the necessary expenses for each month. Other expenses are not as necessary to pay for, such as entertainment expenses and other expenses to save up for.
This gives you a much clearer picture of what can realistically change.
Build a Budget That Works During an Actual Semester
A budget that looks good on paper is not always useful.
A student’s money comes in and goes out in varying sums of money during the course of a semester. The money that they earn from a part-time job comes in every week. However, the scholarships and financial aid money come in a larger sum of money throughout the semester. In addition to tuition, there are also the costs of textbooks, lab fees, and school supplies such as pens, pencils, and notebooks. Also, there are costs such as traveling back and forth from school, and even dining out.
Rather than try to manage your money on a month-by-month basis, plan out your finances for the entire semester.
First, determine how much money you will have for the duration of your term. Then, calculate your total fixed costs, including rent, tuition, health insurance, utilities, transportation, minimum payments on debts and so on.
If, for instance, there are $3,000 of income available from June 1 through the end of January 2016, the fixed costs of, for example, tuition, rent, minimum debt repayment and basic spending can first be deducted.
Leave some room for unexpected costs.
A budget that counts out every dollar and doesn’t leave any room for error will inevitably fail when an unexpected repair, medical bill or even an expensive week occurs.
Talk to Your School Before a Small Problem Becomes a Large One
Most financial aid offices only deal with setting up aid for students who have been awarded a scholarship or have been accepted for federal aid. However, most colleges have many resources to assist students during times of financial stress. The financial aid office can tell you what types of assistance are available to help students during times of financial stress.
Emergency funds, short term loans, food, housing, tuition payment plans, campus employment and school specific emergency aid funds for short-term cash flow problems.
Ask what is available.
You don’t have to wait until things get to the point where you can’t pay for tuition or rent.
In addition, your financial aid administrator can review your circumstances if your family’s financial situation has changed significantly since you completed your application for financial aid.
Be Strategic About Student Debt
Most people will borrow for their education, and thus, will have to manage with the debt for years to come.
Start by understanding exactly what you owe.
It will help to list out and know the following for each of your student loans: whether they are a federal loan or a private loan, their current interest rate, their current status and repayment terms, and whether interest is currently accruing on the loan while you are enrolled in school.
Note that many of the loan repayment options and protections are only available for federal loans, so students with private loans may want to carefully review the terms and conditions of their loans before making any major decisions.
Graduate and professional students often have large balances of debt. For example, a medical student may rack up a large amount of debt before earning a full professional salary. These borrowers may look to refinance medical student loans, often with the goal of having a lower monthly payment and being able to get back on their financial feet.
In determining whether or not to refinance your loans, it is best to look at the numbers and see how much it will really cost you in the long run, rather than just looking at the interest rate and how much it will save you each month.
Compare the total repayment cost, monthly payment, loan term, protections, and flexibility before switching any loans.
Reduce Largest Expenses First
Cutting small expenses to reduce student debt is a good approach but won’t get you as far as reducing the biggest expenses.
Housing is a good example.
One approach is to reduce the costs of the biggest expenses first. This can mean reducing the costs of housing, for example, by moving in with roommates, or by finding a house that is farther from campus. It can also mean negotiating with respect to utilities, or becoming a resident assistant. These approaches can save hundreds of dollars a month.
Transportation is another major category.
For transportation costs, look for students who live near campus and can use public transportation, walk, bike, or utilize a university transportation program. These students can save on the high costs of car ownership (insurance, fuel, parking, registration, and repairs) even if they have to pay a monthly payment for a car.
Reduce large recurring expenses before anything else, and housing is the best place to start. Reducing the cost of your room or flat can reduce your largest monthly expense of all.
Eat Cheap. Just don’t Eat Dull.
Then prioritize changes to your spending that will have the greatest impact.
Financial Trouble Is Easier to Fix Early
Money problems tend to become more difficult when they are ignored.
A single missed payment can result in a host of negative consequences, including late fees and fines, further charges on credit cards resulting in interest being charged on the principal, and even problems paying for tuition or other university services (i.e. late payment for university bills resulting in inability to register for subsequent semester).
The earlier you recognize a problem, the more options you usually have.
Track where your money is going, cut back on big expenses when possible, get a handle on your debt, find out what sort of help your university can offer you, and then try to increase your income while being careful to not increase your debt. Also try to have an emergency fund of some sort.
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