Advice to an Incoming College Freshman
Congratulations on making it to college! All that hard work in high school has finally paid off and you now have the privilege of being launched on your college career and your first chance to live on your own and make decisions as an independent adult. We won’t spend time here cautioning you against the dangers of unprotected sex or binge drinking, we’re quite confident your parents have already covered that ground more than adequately. We would, however, like to caution you against a few other dangers that you’ll likely be facing for the first time, while also offering a few simple rules that can help you get the most from your college experience.
We’re sure that your high school English teacher exposed you to the vast pleasures of Hamlet, and you’ll thus easily recall the admonition that Polonius offers his son Laertes, upon his departure for college: “neither a borrower nor a lender be, for loan oft loses both itself and friend, and borrowing dulls the edge of husbandry.” The reality is that many of your friends and fellow students will not manage their money well in their first years of college and they will turn to those who do for help. We hope you are one of the latter, but Polonius, generally presented as a fool in the play, nonetheless packs real wisdom into his advice to Laertes: those who cannot manage their spending are unlikely to easily manage their personal debts. Don’t let your good habits become someone else’s crutch.
Related to the foregoing, you should be prepared for the first time you rent an apartment with roommates – which is more likely next year than this, we know – and the financial challenges this brings. In addition to shared rent, you’ll now find yourself sharing the cost of electricity, water, and cable. Not to mention, sundries like paper towels, toilet paper, and cleaning supplies. This can be a great learning opportunity and preparation for your post-graduation world, when you’ll have to manage your life within the constraints of a budget. At the very outset, you and your roommates should meet and agree on a process for handling shared expenses. Who will pay the bills and track the expenses? When and how often will each roommate’s share of the expenses be reported and collected? Does everyone in the apartment have a checking account? What will you do if someone cannot pay his/her share? These may sound like messy or uncomfortable or unnecessary conversations, but, believe us, you’ll be glad you discussed all of this up front before the semester is over.
Which brings up your own personal budget. Unless you’re planning to work part-time during the school year, we assume you’ll have a fixed amount to spend for the semester. You should take this amount and divide it by 15 (assuming your school has 15 week semesters) and then plan to track your daily spending to ensure that you don’t exceed your weekly target. One easy way to do this is with a smartphone app like Mint.com which can automatically track everything you spend via your debit or credit card, including ATM withdrawals, and compare it to the budget you’ve set for yourself. Since you are a college student, we will grace you with another literary reference, this one from a character in Charles Dickens’s novel David Copperfield named Wilkins Micawber. Micawber was famous (or notorious, depending on your perspective) for his infinite optimism that “something will turn up.” Having spent time in debtors prison, however, he also famously observed:
“Annual income twenty pounds, annual expenditure nineteen pounds and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”
Many a student must resort to the Bank of Mom and Dad before the semester is over as a consequence of poor planning, but we’re confident that you yourself would rather be a shining example of responsible independence.
Finally, and perhaps most importantly, you must know that credit card companies are not your friends. Everywhere you go on campus, you will be inundated with credit card offers. Like drug dealers, credit card companies like to hook college students early with offers of cards that don’t require you to demonstrate a steady income or prior credit history. With no effort at all, you can find yourself the proud holder of two or three credit cards. And while the credit limits may be modest, usually in the range of $500 – $1,000, the rates are anything but, typically running as high as 24%. If you run up a $1,000 balance on your credit card and then take your whole college career to pay it off (which is not unusual), you’ll end up paying $565 in interest above and beyond the cost of whatever you originally bought. And if your college experience follows “the five year plan,” which is so common these days, your total interest cost would be $726. Finally, if you end up with more than one credit card, you might well end up paying literally thousands of dollars in interest. Think of all the things you could do with that much money if you weren’t paying it out in interest. All that’s required is to stay within your budget and don’t put anything on your credit card that isn’t part of the budget that can be paid off at the end of the month.
So, we’ll end with a few simple policies that we believe will make your college experience much more enjoyable:
1.) Calculate what your allowance for the semester is on a weekly basis and either give yourself that much cash at the beginning of each week, or track your spending daily using a smartphone app like Mint.com
2.) Talk to your roommates on day-one about who will pay the bills and when that person will calculate and collect everyone’s share each month.
3.) Consider skipping all credit card offers (of which there will be many) but, at the very least, don’t use credit cards for anything that isn’t part of your weekly budget. Spend-tracking apps like Mint.com can track your credit card spending on a daily basis, just as they do your checking or debit card spending.
Adopt these simple policies and you can then fully enjoy the amazing experience of college, free of the burden of money worries that can so spoil a good time.
The Yeske Buie Team