Finance for Freshman 101

I always wondered why high schools teach students how to dissect a frog but don’t offer a 101 in Basic Financial Management for their graduating seniors. Telling students to lead a life of financial responsibility is one thing, but wouldn’t it be more useful to show them how?

Here are the top five items I would have wanted to have outlined in my 101 syllabus:

Budgeting

Spend a month living as you normally do. Make note of what you are spending on different items – transportation, entertainment, restaurants, food, books – and at the end of the month see how your actual spending compares to your income and the means that you can comfortably live within. At this point assess what items you can cut down on and where you may need to channel extra cash. This will inform your budget, which you should keep track of every month and preferably on a program like Excel, which makes it easy to manipulate numbers and categorize different forms of spending.

Also keep in mind that, as with a diet, an overly tight budget will last you about a week before you break it. Rather than striving to save every penny, leave yourself enough money for the things that you enjoy.
Shop Around: Before opening up a bank account compare different fees and the availability of ATMs and bank branches on your campus. Some banks also have minimum balances that you must maintain or you’ll get hit with another fee, while others will waive the fee provided that you have money, such as your paycheck, deposited directly into your account. Ideally, your checking account should be free and there should be many available branches and ATMs in your area.

Shopping around

Shopping around also applies to credit cards. Make sure to compare credit card APRs and annual fees. The average APR is about 12.99% but some have very high rates in the high twenties and a very good rate is about 9.99%. If you already have a credit card with a high APR call your credit card company and ask them to lower it – companies want to remain competitive with one other so often they will grant customers that courtesy.

Save on Books

The worst place to buy your books may actually be at the college bookstore. Before making your purchases there compare what the books you need are going for on sites like eBay and Amazon. When the end of the semester comes around and its time to sell your books the same rule applies but in reverse – college bookstores will probably pay you a lot less than what you can get from an online bookseller or eBay customer.

Cover Your Behind

If you are renting an apartment off campus and have roommates make sure that you are not the only one legally liable for the rent, utilities and (if you can afford it) cable– have your roommates listed with you both on the lease and with Con Ed and Time Warner. If your roommates are not on the lease and utility bill and they default then you will be the only one held responsible.

A Last Word On Credit Cards

To avoid the “Freshman 15” of credit card debt, only spend as much as you can pay off per month while staying in the budget that you devised for yourself a few paragraphs ago. When evaluating whether to make a purchase with a credit card, ask yourself if you have the cash to pay for it instead. If the answer is no, then pocket the plastic. This way you not only get to avoid finance charges and build good credit, but you get to tell your parents that you told them so.