Money Rules for Back to School

Now that you’re settling in for the new term, it’s a great time to review your cash flow and make a plan to get through the semester on a full tank. Here are some tips for a smooth ride!

Review your financial aid package

Make sure you understand the difference between grants, which you don’t have to pay back, and loans, which you DO have to pay back—even if you don’t complete your degree. Make sure you are borrowing only what you need to cover tuition, fees and essential living expenses.

Figure out your income for the semester

Add up your summer earnings and any grant, scholarship and/or student loan funds you may receive as a refund after your required tuition and fee bill has been paid. If you will be working during the semester, multiply your estimated take-home pay for each month by the number of months in the semester (e.g., September through December = 4) and add that amount to your previous total—that’s what you have to live on for the semester. It may seem like a lot of money, but it will go quickly if you’re not careful with your spending. Here’s a tip: To make your summer earnings last for the entire school year, divide them by two and set one half aside.

Develop a spending plan

The very idea of budgeting probably makes your eyes glaze over, but it is one of the most important exercises you can undertake to put yourself on a solid financial footing. Creating a simple monthly plan will let you see where your money goes—monthly bills such as rent, car insurance, internet or cell phone—and how much you may have left over for miscellaneous expenses such as food and entertainment.

Use a budget worksheet to make the process easier, and be sure to check it often during the semester and make adjustments as needed. If you’re not sure how you have been spending your money, go through your bank statements, bills and other receipts for the last three to four months and tally up the totals in each category (restaurants, entertainment, coffee, bills, etc.). You’ll be amazed at some of things you’re spending money on and how quickly small amounts add up!

Plug the leaks

As you review your expenses, identify those things that you really could have done without. Ask yourself questions such as:

  • What do I spend money on that I don’t really need?
  • Are there ways to reduce my fixed expenses, such as rent or cell phone charges?
  • Can I reduce the amount I spend on groceries without sacrificing good nutrition?

This will help you understand your priorities and clarify needs versus wants.

Set aside funds for emergencies

You never know when life is going to get in the way, so it’s important to have some funds on tap for an emergency. Unexpected expenses such as home or car repair can easily crop up, and the last thing you want to do is rely on credit cards or additional loans to bail you out. While most financial planners recommend an amount equal to three to six months of your living expenses, this may not be realistic for most college students. The key is to start small. If you’re receiving a financial aid refund, for example, plan to set aside a few hundred dollars and make a pledge not to spend it.

Be careful with credit!

If you have a credit card (or several), only charge what you know you can pay off each month. If you are commuting to school and charging your gas, for example, make sure you include the estimated cost in your budget so you have enough each month to pay off the total bill and avoid interest charges. Whenever possible, avoid making large purchases—such as a new computer or TV—with credit. Instead, set aside money until you have enough to pay cash.

Remember, it’s about finding the right balance between what you want and what you can reasonably afford. Every small sacrifice will help develop good money habits and pay off big time in the long run!

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