College is a good time to begin good personal finance habits, including best practices for paying for school, building credit, creating a spending plan and avoiding financial predators
High school may have prepared you for college academically, but you may be less ready to handle your money, especially if you need student loans.
More than two-thirds of college students at all levels said in a survey that they feel stressed about their personal finances, according The Study on Collegiate Financial Wellness, a 2017 report by The Ohio State University.
Learning some financial best practices and turning them into habits now can help ease money worries. Here are six personal-finance lessons to take to campus.
MAX OUT FREE FINANCIAL AID
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Get the most free aid possible before borrowing money. Every year, submit a Free Application for Federal Student Aid, or FAFSA, to qualify for federal, state and institutional grants, scholarships and work-study.
Search for additional scholarships with tools like the U.S. Department of Labor’s Scholarships Finder.
TRACK YOUR LOANS
If you do borrow, maximize federal student loans before private options. Federal loans offer more repayment options and, in some cases, forgiveness.
Each year, write down the amount you borrow; doing this can make the debt feel more real, personal finance experts say. And having that information accessible will help organize repayment planning and your postgrad budget, says Vince Shorb, CEO of the National Financial Educators Council.
Shorb suggests creating a file that includes lender information, loan amounts, interest rates, dates when payments will begin and payment amounts. To estimate what you’ll pay each month, use a student loan calculator .
STICK TO A SPENDING PLAN
Think of a college spending plan as a short-term strategy for your money. It’s more flexible than a traditional budget and factors in money available only after tuition, fees, room and board are funded.
Your spending plan could look like this: Say you have $1,000 for a 15-week semester and you know you’ll be making one trip home at Thanksgiving that costs $200. That leaves $800, or $53 per week for extras.
A spending plan shows how overspending one week will leave you with a cash shortage the next week. Even a $50 shortfall can feel stressful, says J. Michael Collins, faculty director for the Center for Financial Security at University of Wisconsin, Madison.
“You’re doing this plan to create ways to reduce the stress you have on yourself, so you’re not behind and trying to catch up,” Collins says.
CONSIDER PAYING STUDENT LOAN INTEREST NOW
Student loan payments typically begin when your grace period ends, six months after leaving school. But for all except subsidized federal loans, interest builds daily and is added to the total amount you owe when payment begins.
If your spending plan allows, you can lessen your total debt by making monthly interest payments while you’re in school. Or send a lump sum interest payment before the grace period ends.
BUILD CREDIT FOR THE FUTURE
Creditworthiness is key to getting approved when you rent an apartment or apply to get a credit card, auto loan or home loan. The sooner you start building credit, the longer your history will be.
There’s a risk with credit cards if you don’t repay the debt, but you shouldn’t be afraid to get one, says Bryan Hoynacke, assistant director of financial wellness in the student wellness center at Ohio State.
“If you don’t have a credit card, you don’t learn how to use it with lower financial stakes,” Hoynacke says. As long as you pay your bills on time, using a card will help your credit.
To get a credit card, you need to be 21 or have a co-signer or an income. Another option is to become an authorized user on someone else’s card, like a parent. But before you get any card, read the fine print, including specifics about its annual percentage rate.
“If there’s a big zero percent APR sign pulsing in front of you, you are going to want to figure out how long that zero percent lasts,” says Sean Stein Smith, CPA and an assistant professor at Lehman College in Bronx, New York. Find the interest rate that will be applied to any outstanding balance after the no-interest introductory period.
STEER CLEAR OF FINANCIAL PREDATORS
Financial predators come in all shapes, so avoiding them often comes down to trusting your gut: If a transaction seems shady, don’t do it.
Some red flags are easy to spot, such as too-good-to-be-true deals or pressure to send money fast. Other scammers are harder to avoid, such as credit card thieves. Defend your money by automating fraud alerts from your bank and credit card company to let you know about unusual purchases.
Anna Helhoski is a writer at NerdWallet. Email: email@example.com. Twitter: @AnnaHelhoski.
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