Are you heading off to your first year of college? Congratulations! College is the first time many get to enjoy independence and explore their dreams. So what do you need to do to make sure the next four years are some of the best of your life? One thing you can do is get your money priorities in order now so you’ll graduate ahead of the game.
Get started in your new community
Whether or not you’re moving away to go to school, it’s time to establish yourself in your college community as an adult. Find a bank or credit union that you feel comfortable with and open an account. Start with a checking and savings account — and always make sure you have sufficient funds to cover your purchases. If you tend to overdraw your account, you might consider opting in to overdraft coverage, though consumer advocates generally don’t recommend it because it can become an expensive option. Overdraft transfers automatically absorb the negative balance into another account, such as a credit card, a line of credit, or a savings account – and can cost you $10 for each overdrafted item. You can also opt-in to the overdraft penalty, and the bank will cover your overdrafts at $35 a pop. With new laws, banks cannot charge you an overdraft fee if you overdraw your account and haven’t opted-in to either kind of overdraft coverage — they’ll simply deny your purchase. However, if your purchase was made by check or automatic payment (rather than a debit card), then the transaction will be allowed to go through and thus will incur the $35 fee. If you do opt-in for overdraft coverage, do not to overdraw your account on purpose, knowing you have this net. A few other things to keep in mind for each type of overdraft protection: A savings account doesn’t require credit, however, you need to have enough money to cover the insufficient funds, and a credit card and line of credit will likely give you enough credit to cover insufficient funds, but can cost you interest. In the end, however, you’re better off establishing good habits now by keeping a rein on your spending and an eye on your balance so you don’t overdraw.
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Secure Your Identity
Now that you have a bank account and the paperwork to go along with it, you’ll want to make sure that your information stays airtight. Chances are you’ll have a roommate, so the best thing you can do is opt out of receiving paper statements. You can also opt out of receiving credit card offers in the mail for five years by calling 1-888-5-OPT-OUT (1-888-567-8688). Remember, if you decide you want a credit card, you can apply for one from the bank or credit union of your choice, so you don’t need offers to be mailed to you. By shopping for them in person you are more likely to find a card that is tailor-made for your needs anyway. Don’t risk roommate mail theft when you don’t have to.
Since you are doing everything online, make sure your computer is as secure as possible. Install an antivirus or spyware protection on your computer, make sure your computer and phone are password locked, and don’t use passwords that are too obvious (such as your birth date). Finally, don’t write your passwords down. At best, if you are really afraid you’ll forget them, then store that information (along with any other vital paperwork) at your parents’ home in a lockbox or in a safety deposit box at the bank. There are too many people wandering in and out of dorms to keep this stuff lying around.
Finally, stay on top of your financial statements. Check your credit report for free from AnnualCreditReport.com at least once a year (you’re allowed up to three free reports per year) to be sure that no one is opening credit in your name. You can also check your credit score for free using Credit.com’s Credit Report Card once a month. Check your account statements each month to verify that the charges made are yours. If you do suspect fraud, call your financial institution and they’ll help you take care of it.
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Start a Spending Plan
Now that your information is secure, it’s time for the fun part — starting a budget! Think budgeting is boring? No way! Creating a budget is the best way to figure out what you have and what you can spend. Start off with what you earn and what you need. How do the numbers add up? If you’re not making enough to cover the costs, then shrink your budget down to the vital necessities and only add in what you need the most. Have money left over? Create some goals to save for. Maybe it’s a new jacket that you’ve had your eye on for months, a trip during Spring break, or backpacking through Europe. Just remember to deduct what you’ve spent each day so you know where you stand. If you do this regularly it will only take five minutes or less a day.
If the word budget makes your ears bleed….call it your spending plan. Remember: you’re not restricting yourself, but making sure that you can get the things you really want. Skimping on a few tempting purchases now to reach bigger goals later will be more satisfying.
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Make the Most of Your Part-Time Income
Part-time jobs don’t typically pay a lot, but if you’re creative you can find ways to earn more money. Think of the skills you have and if they can be turned into a side business. Good with computers? Forget working at the school labs, start your own computer repair business. You can do the same with tutoring, nannying, and even personal shopping. Creating your own business puts you in control of how you spend your time, how much money you want to earn, and it will teach you valuable marketing and entrepreneurial skills that you can use for the rest of your life. Just remember that you’ll have to pay taxes at the end of the year, so be prepared to save up for that. Added bonus? Anything you buy to operate your business is tax deductible.
What if you need more stable income? Try working a traditional part-time job and doing this on the side. You can start out with just an hour or two a week so that it doesn’t interfere with your job and classes too much and see if it grows. If it’s still not for you, make the most of your part time income by asking for more shifts, or work your way up to a promotion.
Save Early, Pay Early
Let’s go back to that spending plan. We talked about what you can do with extra money if you have it, but there is more that you can do besides saving for goals for the next year. One thing you could do is to start putting a little bit of money aside each month into a savings account for after graduation. It doesn’t take much to earn a lot. Don’t believe me? Read this article on compound interest. What else can you do to prepare for the future? Apply some savings each month to your student loans. Starting now and continuing the practice can put a solid dent in the debt you have when you graduate. This may not seem like the most fun way to spend your hard-earned money but your future self will thank you.
College isn’t just a time to take more classes, it’s your first stab at adulthood. The better prepared you are now, the better your college years — and your 20s — will be.
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Image: David Beyer, via Flickr