Financial Issues For College Age Students (part 2)

Now you know about the issues that college students face: increasing student loan debt, inflation, lower salaries and increasing health care costs, there are some excellent things students can do to prepare themselves in advance to meet these changes.

Many of these are exact items that I wish I had done myself before I had graduated or gone to school. So here, you can literally learn from my life experiences.

5 Tips For Prosperity as a College Student:

1. Research your intended major in college and the expected job you would like to get out of college. If that job doesn’t allow you to live and get out of debt within 10 years of graduation by making the payoff of that debt the highest priority, I would seriously consider alternatives like State Colleges or reducing your overall debt load by living at home and commuting to a local college if that is an option. Often times, room and board is about 40-50% of the cost of school.

2. For example, if you graduate at age 22 and cannot payoff your loans in 10 years, then your college plan may not be a good idea. (This assumes you would take every spare penny and pay down the debt. It may or may not be what you will or should do. This is merely as a benchmark for making the decision.)

Consider modifying your plan by either paying down your loans while in school by working part-time. Or there might be other ways to reduce the overall loans, but I would urge you to consider some options. This is simply because you then have only 30 years to purchase a home and save for retirement. This also assumes that you are going to want to do some fun stuff at some point and the money for that needs to come from somewhere.

3. Find a job that offers a 401k match and a good health plan where the employer pays a large portion. These should be top perks that you look for. The reason is that health care will continue to skyrocket for the foreseeable future and retirement costs will as well. Once you get a job where there is a match, put at least away to get the full match from the company. You will likely need every penny of this money when it comes to retirement.

4. Watch your cash flow. Try to keep your fixed expenses to no more than 75% of your take home pay. No matter what the situation is, you should make saving 10% of your weekly paycheck into a safe, high-yield savings account a priority. If you manage this, you will still have an extra 15% buffer each month. You might also save this. Consider the savings to be a monthly bill to yourself that is not negotiable. When a real emergency happens (not a sale at best buy), you’ll be glad to have that money.

5. Avoid large purchases that create loans or debt when you first get out of school. If you want to do something fun, only use that extra 15%. The only exception to this is a basic wardrobe that you need for work and a reliable vehicle. The key is to make sure it is something that it is important and necessary in order for you to work and make money. Other items are a luxury at this point. Once you have a savings account of 6 months of expenses, you can begin to save extra money so that you can buy luxury items.