My Financial Decisions as an Undergrad
Prom dresses have started to appear in the windows of downtown department stores, signaling that in the next few months, another crop of seniors will be heading off to college. By now, the ones on their game have kept the grades up, participated in extra-curricular activities, researched the value of a college education and the best-value colleges, applied for scholarships, and found a good deal on housing.
Still, a whole new world of financial responsibility awaits them. I thought I'd share some of the best (and worst) financial decisions I made as an undergrad.
Find a good place to put your money.
One of the first things I did was join a local credit union, instead of one the big banks that setup tables on campus and offered free checking accounts, t-shirts, and laundry bags that read “off to a clean start.” By joining a credit union, I avoided overdraft fees. (One of the big banks handed out a card to new customers that said “sh*t happens.” It was a get-out-of-jail-free card for your first overdraft fee.)
Marketed toward college students, these banks prey on low-income (or no-income) accounts to gain profits from overdraft fees. I didn't want to bank with anyone who took it as a given that I would overdraft. Instead, my credit union helped me to establish a solid financial future and gave me the tools to start. (I've also heard great things about online banks.)
Money is in the bank. Great. Now what?
I didn't get a credit card, and it was one of the best decisions I ever made. Again, on registration day, there were lots of people behind tables saying that they were there to help me. But they're there to make money and that's it.
Not signing up for a card meant two things:
- I didn't incur any debt on top of my school loans. Unless I had cash, I didn't buy the new iPod or the concert tickets or pick up the check for the pizzas.
- I paid all my bills on time. Once I moved off campus for a better deal on housing, I had electricity, utilities, and Internet to pay.
My roommates were terrible at mailing off the bills, so I took on the job myself and avoided the late fees. (As far as how to collect their share after the bills are paid? Try online tools.)
Minimize school-related costs.
I didn't buy used textbooks, and I regretted it. I'm a book hoarder and told myself that new textbooks would last as reference guides until my wrinkly years, when I might rekindle my curiosity about post-developmental structures in formerly colonized sub-Saharan Africa.
By the end of the semester, I wanted so badly to rid myself of the books that I sold them all back to the bookstore for a fraction of the purchase price, and probably would have gotten the same sell-back price had I purchased them used.
Hauling books back and forth also was tough because I didn't own a car, and I recommend college kids do the same. Insurance, parking, gas, and upkeep of a car are expenses and stress that college kids just don't need. Use public transportation or find a friend with a car. Plus, cars usually take us to places to spend money. The mall empties your wallet whereas campus events are usually free. Take advantage of them. (Often campus committees pay for outside bands, even big names. I still remember hanging out with Regina Spektor on the campus lawn after her free concert.)
Take responsibility for yourself.
My roommate didn't know how to make pasta. He bought his food from the campus cafeteria, ate more bowls of Cocoa Dyno-Bites than any human should, and once washed all his laundry, forgot to dry it, and left it rotting under his bed for weeks. Mommy's not there anymore, Josh.
Yes, he is an extreme example, but a lot of kids head off to school and wind up blowing off class, partying too hard, and letting their health suffer. While college life has its share of temptations, I'd give a high school grad the following advice:
- Stay active. We've all heard about the “freshman 15,” but it's not a forgone conclusion. Every college will have a gym, and most come with free fitness classes. Keep your body moving and your brain will thank you. (Plus, if you don't have a car, you'll be walking around campus to get from classroom to classroom. I always gave myself the extra 10 minutes to take the long route, or the one up the hill.)
- Go to class. My friend Cory calculated that if you were paying full tuition, it cost 10 cents a minute just to breathe on campus. I've heard of students calculating their per-class cost, seeing that ditching class throws away hundreds of dollars. I don't recommend weighing yourself down with those kind of numbers. Everyone misses class sometimes, but you're there to learn, not only the information offered in class, but also a discipline that will follow you the rest of your life.
- Avoid hangovers. Beer is expensive, and so are cigarettes and illicit drugs. Plus, they can seriously get in the way of your schoolwork. This isn't to say you have to be a teetotaler, Friday night can still be a Friday night, but Friday night shouldn't be, you know, Monday night, too. Set limits.
- Put good stuff in your body. Often, on-campus food is expensive and low quality. I didn't pay for the meal plan, even though they told me it was a requirement for freshman and would save thousands. Learning to eat well on a small budget is one of the most important lessons I learned in college. Basic cooking skills go a long way.
In other words, there will be late-night pizza orders and Red Bull-sponsored parties, but don't forget to eat a salad, go for a run, and show up to class on Monday morning.
Work your way through school.
I got jobs that gave me time to do my homework. I worked in the gym handing out towels and basketballs, which allowed to me to read. I worked as a late night “security guard” in the music building that gave me Wi-Fi and zero responsibilities other than to stay awake. I worked at a small tea house on campus which quieted down during class times, again, giving me a chance to devour a few more chapters.
And these jobs gave me some income. I always tried to make more money than I spent. When my income would drop, my spending would follow. Another idea is to become a mini-entrepreneur. Computer repair or even well-placed baked goods can go over really well on college campuses.
Undergrad was my first chance to be independent. If you're off to college soon, realize that you'll come up short sometimes. You'll make missteps. You'll be the wiser for it. So subscribe to the GRS feed, ask questions, and check out money books written for college kids. It's common for new college grads to move back home, but if that's not your life plan, start learning to navigate your financial life now.
[Note: I thought I'd clarify the statement I made about credit unions and overdraft fees. An adviser with the credit union sat down with me and very clearly explained my options. I opted to skip overdraft protection and the ability to overdraft at all, instead I'd just have my card rejected if I ever tried to withdraw more than what was in my account. I'm sure this is available with bigger banks, as well, it's just that the adviser sitting down with me made all the difference. At the time, for me, it was the best choice. After college, I opened an account with a large bank, and it wasn't a great experience.]