Financial Pitfalls to Avoid as a College Student
This article will teach you about some of the financial pitfalls you should avoid as a college student.
By Ian Whitmore — March 27, 2023
College is one of the most exciting times in your life! You'll learn many new things, meet many new people, and take on many new and challenging responsibilities. One of these responsibilities is managing your finances. Unfortunately, it is common for college students to misjudge the importance of this particular responsibility and end up surprised or stressed by the later consequences. As a college student, it's important to know about and avoid financial pitfalls that could derail your financial goals or lead to debt that can be hard to dig out of later. Here are a few of the pitfalls that you should seek to avoid as a college student:
Overspending
If you are new to managing your finances, it can be very easy to unintentionally spend far more money than anticipated. After all, you don't have anyone telling you what to do! If you want to order delivery from the local pizza place, no one will stop you. That new computer you saw online is only a few clicks, and your credit card number away from arriving at your door. Although there are certainly some things that you will need to buy as a college student, consider your purchases carefully.
A good strategy I used during college, particularly with larger purchases, was putting off a potential purchase for a week and then asking myself if I was still interested in making the purchase. In many cases, I had forgotten about the purchase altogether after a week had passed! However, you may not have as long to decide when it comes to things like eating out or concert tickets. Write some "fun money" into your budget for such expenses. It is easier to manage your money effectively if you reserve a certain amount for nights out with friends or the takeout you crave occasionally. However, it is important not to go over your fun money budget, so choose your spending carefully.
Relying too heavily on loans
As a college student, you will likely become familiar with loans. Although you should try to cover as many college expenses as possible through grants, scholarships, financial aid programs, and your own money, you may need to take out student loans to fill in some gaps in your income. Some college students use loans to finance their lifestyles, whether going out with friends, traveling, or buying the latest gadgets. While it might be tempting to use loans for fun purchases, it is very important to remember that loans come with interest and fees that must be paid back and can add up quickly.
To avoid this financial pitfall, limit your borrowing to the essentials, like tuition and textbooks. If you need to borrow money for living expenses, consider alternatives like part-time work or finding a roommate to split costs. Apply for scholarships and grants both before and during college. Look into your school's financial aid programs to see if you qualify. Loans can seem like an easy solution at the time, but they have the potential to be a headache for years to come if not carefully used and managed properly.
"Keeping up" with friends and peers
During your time in college, you will likely meet people from various economic backgrounds. Some people will likely lead simple, frugal lives with minimal frills and few extra possessions. They might walk to class, buy clothes from the thrift store, and use an old laptop a sibling passed them. On the other hand, some college students lead more extravagant lifestyles. They drive to class in new cars, buy vast wardrobes of the latest fashions, and go out to eat multiple times per week. Trying to keep up with the second type of college student can be tempting. After all, who doesn't want to look successful and put together?
However, remember that you do not know the circumstances in their lives that allow them to live so comfortably. Perhaps their family is well off, or maybe they are taking out massive student loans that will take years or decades to pay back. Some students may have worked for a while and returned to college later in life after putting themselves in a more solid financial situation. In any case, don't succumb to the social pressure you may feel from other students. It's very important to remember that your worth as a person is not tied to the things you own. Focus on your financial goals and priorities, and don't be afraid to say no to expensive outings or purchases that would put you in a tight financial situation. Remember, your long-term financial health is more important than your temporary social status during college.
Failing to Save for Emergencies
Although many aspects of college life are new and different, many students still feel relatively safe during college. After all, if your car breaks down, you can usually walk to class. When the toilet stops working, you can call the dorm maintenance team, who will fix it for free. Even if you don't foresee any life-altering emergencies during college, it is a good habit to start setting aside some monthly money for your emergency fund. Also, it's important to remember that no one can predict the future, and you might end up having an expensive emergency that you would never have thought. Saving for emergencies will help you build good financial habits and allow you to feel comfortable taking on more responsibilities as you go through college and into post-graduate life.
Credit Card Debt
Finally, spending responsibly with any credit cards you may have is important. Credit cards can offer some great benefits, but they are particularly dangerous for college students because you can easily use them to purchase all kinds of things, from food to international flights. If you have a credit card, carefully monitor your balance and pay it off every month if possible. Some credit cards offer low introductory interest rates, but once the initial period is over, you may pay far more interest than anticipated. Try to use credit cards only for predetermined categories of purchases. For example, maybe you pay for your streaming service and groceries with a credit card. By doing this, you can avoid making impulse purchases with your card, and it will be easier to budget for the credit card bill each month. Credit card debt will likely hurt your credit score and can be very expensive and difficult to deal with over the long term, so don't use credit cards to keep up with peers or buy things you can't afford.
Conclusion
Hopefully, this article has helped you learn about some of the financial pitfalls you should avoid as a college student. By carefully managing your finances and avoiding potential pitfalls, you will stay on track financially and set yourself up for success during and after college!
Ian Whitmore
Ian Whitmore was born and raised in Austin, TX and spent his childhood and teen years immersed in the rich cultural scene of Austin and the beautiful landscapes of the surrounding Hill Country. He graduated from Wyoming Catholic College in 2020 with a B.A. in Liberal Arts.
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