Tag Archives: career

Developing a Budget in College

After reading my financial aid posts, someone asked, well, how exactly do I budget while in college?

Determine Fixed and Variable Costs
For some students, it’s easier to keep a small notepad or journal to write down how they spend their money. The student may write down their expenses such as a cup of coffee, a meal, or a night out with his or her friends. This notepad is a great to carry around with you with your laptop or purse.

However, before the next academic year starts, sit down and develop a list of all of your fixed and variable costs. A fixed cost may include your tuition, rent or room and board, car payments, car insurance, parking fees, and health insurance that may not change month to month. Variable costs mean costs that vary every month. These may include entertainment, gasoline, food, utilities, hygiene, clothes, car maintenance, books, phone, and any dues.

Remember to be honest with yourself. If you buy a cup of coffee every day, or a pack of gum every week, it’s important to list them.

Determine Sources of Income
Income may include anything from a part-time job to allowances from home, grants, scholarships, or loans. When developing a budget, it’s important to develop an increment of time. For example, you may get paid monthly. Divide up your sources of income monthly to make it easier to budget. If you receive financial aid at the beginning of the semester, pay off your tuition/rent/room and board for that semester, and divide the rest of the money up into months.

Drafting a Budget
Draft a budget to see if it balances. Now ask yourself, do my expenses exceed my income? If your expenses exceed your income, it’s time to cut back or get a job. If you have money left over, think about investing or saving it in your emergency fund.

Remember to monitor your budget every month and to adjust the budget accordingly. Some budgets are not going to be the same month to month. For example, you may have to budget for a holiday or birthday one month, but in another month.

Also remember that your first budget may not be perfect. It’s important to use trial and error and get to a point where the budget works for you.

It’s important when developing a budget to include savings. It’s important to save at least 10% of your income.

Emergency Fund
As always, it’s important to have an emergency fund because you never know what’s going to happen. Your car may break down, or you need to take an emergency trip to a doctor’s appointment. These “emergencies” should NOT be put on a credit card. They should be apart of your budget.

Priorities
It’s always important to evaluate your priorities. Think about what’s important to you. Is it more important to have money saved up to start paying your student loans? Is it important to you to have money while you search for a job?

You can waste a lot of money in college and develop some serious credit card debt if you’re not careful.

Ask yourself, do I really want to be paying my student loans into my late 30s, my 40s or my 50s?

Think about how you spend your money. Do you buy coffee every day? Some places charge $4 for a drink. That will cost you about $120 a month if you buy it every day. Movies are also expensive. The average movie ticket is close to $10 now. When creating a budget, these should be rewards, not something that occurs on a regular basis. If they occur on a regular basis, how can they make you feel good? They become a standard.

Stay Motivated

It’s not easy to stick to a budget. It’s important to budget “fun.” It doesn’t have to be anything extravagant, but maybe a concert a month or a nice, sit down dinner a month. It’s your way of rewarding yourself for sticking to your budget. It’s just as important to have fun as it is to safe money.

Financial Aid, Part 4: Saving Your Money in College

Every situation is unique and different, but I want to discuss possible options for students to save money.

Ways to Save Money
Basic Savings Account
A lot of banks now offer ways for students to open a “student savings account.” The goal of a “student savings account” is to allow students with limited funds to open a savings account. They usually have low minimums and as a deterrent, it has penalties for withdrawing too much money.

Money Market Account
Usually have higher interest rates but require more of a student than a basic savings account.

Certificate of Deposit (CD)
This requires that you leave your money in the bank for a pre-determine period of time. In exchange for “lending” your money to the bank, you receive a promissory note that indicates the rate of interest you will earn on your deposit. However, if you need to take out a deposit on your CD, you may be required to pay penalties.

Money Market Fund
If students are interested in the opportunity to invest and explore the world of the stock market, this is a good option.

Spending Money Wisely

Textbooks
There are ways to save money in college. For example, buying used books may be a good way to save money. Some colleges even allow you to check out textbooks through the library (I wouldn’t always count on that though, if you desperately need that book before the final exam, it may be gone!). Maybe you can borrow the textbook for a friend, or search for the textbook on sites like amazon.

Transportation
If you’re close enough to campus, could you walk? Or how about riding your bike? Are their options for public transportation? In some areas, if you have a valid college ID, you can ride the bus for free.

Consider carpooling for class, and look for gas promotions (I personally love gasbuddy.com!)

Food/Meal Plans

How about food? It’s important to eat healthy in college. Meal Plans are great if your school offers them.

Try to not use your credit card for food purchases and if you can, clip coupons. Remember, just because an item is on sale at the grocery store, doesn’t mean that you need to buy it. Try to stick to a list of items that you need at the grocery store and only buy those items.

I found this neat website that you can eat cheap for $3.00 or less! Or this other website specializes in cheap cooking.
Farmer’s markets or other types of produce stores are usually a good way to save money, and the produce is fresher.

Get Organized

  • Always keep track of  your spending. Save your receipts and keep either your checkbook with you or a small notebook to write down totals.
  • Bouncing checks is costly, and may result in criminal charges.
  • Always remember to check your receipts to make sure that you weren’t overcharged.
  • Paying your bills on time also avoids any fees that may damage your bank account.
  • Plan your weeks ahead of time to avoid being bored and “spending” money on entertainment.
  • Plan your grocery trips ahead of time by creating a list of items that you’ll need. This will help you avoid a drive for an item or two. It’ll also help you plan out your meals better.

Leisure Time
Try spending your leisure time volunteering than out at the mall or other places you may spend money.

Always check to see if a place has a student discount. A lot of places such as museums, zoos, restaurants and movie theatres give discounts, even if it isn’t listed.

Shop Around
Always remember to shop around. If you’re shopping for a new computer or laptop, search the internet and store flyers for good deals.

Internet
If you have the option to, skip internet at home, if you’re close enough to your school or to a library that offers it to you for free.
Also, you can use free software like Skype to make computer to computer phone calls.

There are many ways to save money while you’re in college…

Live like a college student while you’re in college, but don’t force yourself to live like a college student the rest of your life.

Financial Aid, Part 3: Paying Your Loans Back

Whether you’ve graduated, left school, or dropped your classes you’ll have to start paying your loans back. It’s also important that you know you have to at least get a “C” or a 2.0 grade point average to meet the requirements to receive financial aid. If you do not get at least a C average, or if you drop your classes, in some cases, you may even have to pay back some of your grant money and the loan money.

At any time, you can check the status of your financial aid, including outstanding balances and disbursements here. Be prepared to share your personal information.

It’s important to note that you must pay back your student loans every month, on time in their entirely.

Exit Counseling
As you begin to receive information about repayment, your loan provider will notify you of the date that your loan repayment begins. As with any other loan and bill, it is important to make your full payment on time, according to your payment schedule. There could be serious consequences for anyone who does not. It’s important to remember that student loans are REAL loans, such as a mortgage or car loan.

Repaying Back Your Loan(s)
You may have a choice of how you want to pay back your loans. You can decide how much you’ll pay and how long it may take for your to repay your loans. There are different types of repayment plans: Standard, Extended, Graduated, Income Based Repayment (IBR), Income Contingent Repayment (ICR) and Income-Sensitive Repayment. Click here for more information.

There are some options for the repayment plans. I’ve listed some for you:

Level Payment Plan
Total amount of your loan plus interest divided until it equals 120 equal payments. You’ll pay the same amount every year for about 10 years until the loan is paid off.

Graduated Payment Plan
Monthly payments start out low when your assumed income is lower. Repayments gradually rise over the 10 year period as assumed income “increases.” The lower beginning payments mean that you’ll have to pay more interest over the life of the loan.

Extended Payment Plan
This is usually for people who have borrowed a lot of money and need to stretch their repayment plan over 10 years. You’ll end up paying more in interest over the life of the loan.

Income Contingent Plan
If your income is low, you may qualify for lower payment plans made over 25 years.

Trouble Making Payments
If you’re having trouble making your payments, it’s important that you contact your lender immediately. For more information on postponing repayment, click here.

Default
If you default, that means you failed to make payments to your student loans according to the terms of what you signed at the time you took out your loan.  As a result, your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government can all take action against you to recover the money that you owe. As listed on the Department of Education’s website, some consequences include:

  • National credit bureaus can be notified of your default, which will harm your credit rating, making it hard to buy a car or a house.
  • You would be ineligible for additional federal student aid if you decided to return to school.
  • Loan payments can be deducted from your paycheck.
  • State and federal income tax refunds can be withheld and applied toward the amount you owe.
  • You will have to pay late fees and collection costs on top of what you already owe.
  • You can be sued.

If you default, here are some actions you can take.

Discharge/Cancellation of Loans
Under rare circumstances, it is possible to have a student loan debt discharged. For more information, click here.

It’s important to note that you cannot cancel a federal student loan because of financial difficulties unless you qualify for a bankruptcy discharge.

Again, Live like a college student while you’re in college, but don’t force yourself to live like a college student the rest of your life.

Financial Aid, Part 2: Planning & Budgeting

Now that I’ve discussed what financial aid is, it’s important to go into detail about how financial aid can be your friend, or your enemy.

Although it is different at every school, many schools offer the federal financial aid package which includes grants, loans and work-study programs, depending upon your eligibility. Although it is hard to determine how much money you’ll receive each semester before hand, estimate tools are still a great way to plan ahead. The FAFSA website offers a great tool, FAFSA4caster . This will provide an early estimate of your eligibility for federal financial aid.

Remember that the individual school determines the total cost to determine college, not you. It is possible for a college to leave you with what is called an “unmet need” which is the money left over after the school determines your financial need.

Budgeting financial aid money is extremely important. If financial aid is not budgeted properly, it may result in being in massive amounts of debt due to spending it improperly.

In an ideal world, parents should sit down and talk to their children about college in the child’s early years of high school. This way the parents can discuss their expectations for the child, including how much money they will be able to contribute. This may give the parents an idea of where the child’s been thinking about going to school or talk about any extracurricular activities.

Why am I writing this?
Please do not spend your financial aid on anything but your education. Sometimes people use the loan to make a down-payment on a car, or on frivolous things… and they don’t have the money left to pay for their tuition or any other educational related expenses, including housing.

It’s your responsibility to budget your financial aid. If you run out of money during the semester, it’s difficult to find ways to get it.

Budgeting
It’s important to budget before you go to college.

Think about your sources of money. Will you be applying for financial aid? Have you applied to any scholarships? Is someone helping you pay your tuition? Are you going to be working a part-time job while in college?

Student loans and financial aid loans do not disappear. Especially in today’s economy, a student cannot expect to get a job right after graduating college or to be making enough money to pay off the debt. Remember what they say about the word “assume”… Bottom line: it’s important to budget properly and not to accumulate debt.

It’s important for you to think about how you plan on paying back any loans after you graduate. Will you start saving while in school?

Emergency Plans
Always remember that we can’t control what happens in our lives. It’s important to have some emergency funds saved up in case something happens. May you’ll have to pay to fix your car, or deal with a family emergency.

If you drop out of school, the Department of Education requires that you pay back your loans, and a portion of any grants that you’ve received. There are many reasons on why students drop out of school, so it’s important to consider the possibility of this emergency happening to you. Ask yourself, what would you do to pay back the federal financial aid?

Credit Cards
College is difficult. Credit cards are often used in college for living expenses, and anything else financial aid may not cover. College can be very stressful, but it’s still important to budget properly. If not, the debt accumulated will lead to a life of more stress and more problems.

I know that I’m guilty of “I’ll put it on my credit card and pay the bill later. I’ll get the money soon.” This is very dangerous! Life has a way of surprising you, and who knows, you may not be able to pay that next credit card bill. My word of advice to you is, if you can’t pay cash for it, it’s not worth purchasing it. If it’s a large purchase, give yourself 24-48 hours to think about it and try not to purchase impulsively.

If you have a credit card, use it with caution. Debt can be racked up quickly and so can the interest. Don’t think that it can be paid off when you graduate… by then you could be thousands and thousands of dollars in debt.

Sometimes saving is hard while in college, but it’s important not only to save, but to cut your costs.

Live like a college student while you’re in college, but don’t force yourself to live like a college student the rest of your life.