Planning for College: Uncover Hidden Costs

The average cost of a college education increases every year, and is expected to continue doing so in coming years. However, the benefits of obtaining a college education far exceed the costs. An October 26, 2006 U.S. Census Bureau report states that in 2004, people with only a high school diploma had average annual earnings of $28,645, while adults with a bachelor’s degree raked in an average of $51,554. With the prospect of significantly higher lifetime earnings made possible by a college degree, it is easy to see why so many Americans are willing to make the investment despite the soaring cost of college. As students enter college and take the first step toward a promising financial future, they are also faced with budgeting for the hidden fees and costs that will inevitably arise. When it comes to funding a college education, whether it is through a grant, student loan, or income, paying tuition is just the beginning. Budgeting for these hidden costs will help you avoid financially straining surprises along the way:

-Textbooks and other necessary supplies. The price of textbooks can be summed up in one word: expensive. It is not uncommon for students to spend $400 and up for the books they need for one semester, so failing to plan for such costs is a major mistake. Adding to the cost, some classes require materials in addition to textbooks, such as a portable memory drive, a specific calculator, art supplies and the like. These costs are of course in addition to the basics you will need to have on hand at all times—notebook paper, pens and pencils, notebooks and binders.

-Deposits and start up fees for services. If you are moving into a new apartment or house, there will likely be deposits and other initial fees to begin utility services such as electricity, water, cable and telephone, all in addition to the deposit for leasing the residence. Speak with utility providers in advance to determine exactly what fees you will owe and when. If needed, inquire about payment options; some utility companies are willing to divide start up fees over a couple of months to make deposits more affordable.

-Your own upkeep. So you have allowed funds for food in your budget, great! But there are other costs associated with college living that many new students neglect to consider, such as laundry. If you will be using a common laundry facility, all those quarters can really add up! Also consider the cost for items such as toothpaste, shampoo, soap, razors, and any other items that you will purchase on a regular basis.

-Entertainment. Let’s face it—for most students, being in college is not just about academics. As long as your other bases are covered, allow some room in your budget for pleasure. Concerts, movies and other social temptations will inevitably arise, and allowing for them in your budget is a good way to avoid spending money that is designated for something else, like food.

In college or not, being confronted with unexpected expenses is a part of life. The benefits of having an emergency fund to which you contribute on a regular basis cannot be overemphasized. Smart financial decisions, such as developing a thorough budget that accounts for hidden costs and saving for unexpected expenses, will put you on track to enjoy the enduring financial benefits that arise from a college education.

About the Author: Edmund Rogers, a graduate student in English, is the editor for iStudentLoan.com, a student loan and student loan consolidation provider which also supplies a free online resource for learning about and applying for a student loan. For more information, please visit http://www.iStudentLoan.com

Controlling Spending in College – Are the Little Things making you Broke?

The first step to gaining better control of your spending is knowing where your money goes. Understanding your spending habits involves more than proudly reminding yourself that you have covered the necessities such as food and fuel this week. What about the quick stop for chips and soda at the convenience store? The four visits to the neighborhood coffee shop? Assessing what you spend means really scrutinizing where each dollar goes—then determining where you can reduce expenditures so that your funds from work, parents or a student loan will last longer.

Small, seemingly inexpensive purchases are a major financial pitfall for many college students. Spending $6, after all, does not usually have immediate consequences, and is such an insignificant dollar amount that most students do not think twice before spending it. But what if that $6 is spent on a specialty cup of coffee, and what if that innocent cup of coffee is purchased six days a week? It is easy to see how small purchases can quickly add up, leaving students broke, hungry and wondering, where did all my money go?

By tracking all of your expenditures over a two week or one month period, you will get a clearer picture of where your money is going. The idea is to understand your spending habits such that you can become more conscientious about how you apportion your money, not to eliminate everything that is not a necessity. Perhaps your daily cup of coffee is a meaningful and relaxing part of your day. Even the savings from buying a smaller size can add up, or why not invest in a coffee maker and brew coffee at home for long term reduction in spending?

One activity many students find consumes a disproportionate amount of money is patronizing convenience stores. Frequent stops for snacks and drinks at convenience stores and drug stores can add up fast, especially considering the higher than average prices charged at such places for the convenience. When assessing your spending habits at convenience stores, ask yourself, “what am I buying?” If you frequently stop for a soda, it may make better financial sense to purchase it in bulk at a regular grocery store. While you may spend $1 at a convenience store for one drink, you may find that you can get a twelve pack for around $4 and stretch your dollar further.

Another major money trap for college students is eating out for every meal. The opportunity to socialize and again, convenience, drive many students to go to restaurants for breakfast, lunch and dinner, a habit that can quickly drain funds. If restaurants account for an overwhelming percentage of your expenditures, look for ways to reduce the percentage without depriving yourself of food or socializing. For instance, if dinner out with friends is on the agenda, you can simply eat breakfast and lunch at home to justify the greater expense of dinner. Planning for meals is key—if you do not have groceries on hand to create your own meals, you will likely end up opting for fast food and putting yourself in the same, financially strained situation time and time again.

Learning to spend wisely and in moderation may take some time and ongoing effort, especially with the instant gratification to which many of today’s college students have become accustomed. Taking an honest look at your spending habits is the first step to establishing a balance between responsibility and indulgence that will not leave you starving next week.

About the Author: Edmund Rogers, a graduate student in English, is the editor for iStudentLoan.com, a student loan and student loan consolidation provider which also supplies a free online resource for learning about and applying for a student loan. For more information, please visit http://www.iStudentLoan.com

Money Mistakes College Students Make

Managing money effectively is a lesson many people are not taught in school. Even students who take a money management class or get financial guidance from parents or advisors often discover that there is a learning curve when it comes to putting this valuable knowledge into practice. College is the first experience many people have with managing bills, rent and other expenses on their own. Since inexperience is often the culprit for bad financial decision making, poor money management affects college students from modest and affluent backgrounds alike. Whether a student’s income is from employment, parents or a student loan, financial responsibility entails delegating funds in a way that inevitably commands some degree of sacrifice and self control. Here we examine some common financial mistakes that college students can avoid to help establish financial habits that will benefit them for years to come:

*Living beyond their means. Attempting to live a lifestyle that exceeds affordability is a mistake that can get students engulfed in debt fast. To avoid this financial pitfall, carefully assess all related costs when making a major commitment, such as signing a lease on an apartment. This means determining if you can live comfortably after paying not only rent, but all monthly living expenses—utility bills, phone charges, student loan payments, car payments and any other financial obligations you may have. Ensure that your income is sufficient to cover regular financial commitments with enough left to cover costs such as food, textbooks, gas and the like.

*Letting bills slide. Getting behind on payments and bills is a mistake many college students make. It is not uncommon for students to neglect financial obligations even when they have the money, or simply spend the money on something else. It is important to distinguish between living expenses and luxuries, and take care of living expenses first. Delaying or neglecting payment on a monthly bill will only result in the arrival of another, more daunting bill in just a few weeks. If paying a $150 utility bill now seems unappealing, owing $300 plus late fees in a month will be even worse.

*Spending every cent. Contributing regularly to an interest earning savings account is a good habit for anyone. Even if you can only spare twenty dollars per month, saving is saving. Whether you build up a sizeable nest egg before graduating college or you have to use the money for an emergency, saving money is one financial decision you will not regret.

We have all heard the adage of being a “poor college student.” Though this expression may lead the optimist to assume that financial woes become suddenly non-existent after college, this could not be further from the truth. Most college graduates work in unglamorous entry level positions for a few years out of college, and making ends meet does not suddenly get easier. Developing good money management habits in college can set students on the track to a bright financial future.