Advice for College Students (and Freshmen especially) is often heeded after the fact when bad habits are formed and the damage is done. If you're reading this now and you're headed off to college or have a loved one headed to college, bookmark it, forward it, share your comments, but do something...because forming good habits now can last a lifetime.

1) Avoid Credit Card Debt:

The single biggest financial evil for college students is credit card debt. Aggressively marketed cards and inexperienced credit card recipients don't mix. Consider what the impact of these cards is on students. Also consider why these cards are being aggressively marketed on your school grounds. According to this Businessweek article, colleges benefit tremendously from these cozy deals with credit card companies and their disclosure/transparency leaves something to be desired. You'll note that some of the next few tips are indirectly related to credit cards as well, but the root cause of each tip really revolves around human behavior.

Bottom Line: Regardless of what you hear from financial outlets, you don't need to start establishing credit at 18 years old. I waited until my senior year when I needed a credit card to rent a car and I'm doing OK. I bought a house a year out of school. I've seen plenty of pitches for "establishing credit early", etc., and I think it's overdone. If anything, get one card and pay it monthly. Never pay a late fee or interest. If you do have a card and are concerned about your credit, unfortunately, there's only one uber-system used to govern your creditworthiness: your FICO score: FICO credit score sale - 20% off Suze Orman Kit

2) Don't try to keep up with the Joneses:

There is tremendous pressure on young adults to assimilate, to fit in, to be cool. Some feel that this entails wearing the trendiest clothing, eating out with friends, never missing a social event and such. I'm dating myself, but when I was in college, the "big shirts" from Abercrombie & Fitch were all the rage. The $50 shirts became a commodity of sorts. Guys with no jobs and credit cards were snapping these things up left and right like baseball cards. I actually got a job there to buy clothes at a significant discount. But I never had a credit card until senior year. So, I budgeted and bought a couple shirts that I didn't need but wanted, but I did it within reason. Everything in moderation.

Spring break trips are a rite of passage for students. It's also another example of unrestrained spending that occurs outside a budget. Go once. Go for your senior year. Don't feel like you need to go 4 years in a row on trips you can't afford. Everything in moderation. The examples abound, but the message is clear. Don't try to keep up because you can't. Just try to have some fun, but exercise discipline as well.

Exception: If you get an opportunity to travel abroad, I'd recommend trying to pull it off, even if it means some pain to make up the funds expended. My program didn't have a relevant opportunity, given the rather dull/demanding course load (heck, the professors intentionally assigned group projects over spring break to prevent you from partaking in a trip to Cancun!), but everyone I know that traveled abroad relishes the experience. It's something you won't be able to do later in life (in most professions), when you have little/no responsibility and you're not tied down. If I had the chance, it would have been great. That may be the exception to the "extravagant spending rule". 1 trip. Everything in moderation.

3) Know how to balance a checkbook and stick to a routine:


As simple as this might sound, you'd be surprised at how many people don't keep a balanced checkbook and how many good tips you're missing out on. Here are a few of my favorite practices and tips:

• Always have a bit of a buffer in the checkbook for a missed entry or unforeseen emergency - at least a few hundred dollars.
• Pick 2-3 times per month to pay all your bills so you never miss a payment on recurring monthly payments. Go through the entire queue of open bills and clear them out each time. There will be occasions where you forget to even look at your checkbook for several days and you'll be glad you hit the old bills on the last round.
• Every time your mail comes in, immediately insert your bills in the flap of your checkbook. You shouldn't have to search around for bills. A lost bill can cost you $40 or more in late fees, especially if it's for one of those nasty credit cards.
• Pay as many bills as you can electronically. It's quicker, simpler, and saves you plenty on postage. Chances are, most of the bills you find yourself paying will be recurring bills (electricity, phone, etc.), so it's worth the time in setting up the payments in your banking site.

4) Work in the summers to provide for spending year round

I used to take a full time job in the summer, make several thousand dollars, and then I'd have plenty of cash for food, clothes, books, etc. throughout the year. I was able to work a 40+ hour week, but still enjoy my summer, weekends and some time off on either end of the semester. I did everything from backbreaking tree work to measuring properties and reporting structural changes for an insurance company.

Note: By senior year, you should plan on receiving little or no income and sacrificing the short term gain of a part time job for a career-related internship or co-op. That might be the one summer you don't quite make what you used to, but you have to set yourself up for interviews and job offers that set the stage for the rest of your career.

5) Don't squander excess cash

I placed this one directly after #4. Resist the urge to blow through your summer earnings or some other unforeseen windfall within the first couple months. You should set a budget at the beginning of the year and only spend the prorated portion of your stash to make it through the year. The same goes for your monthly budget. Let's say mom/dad give you $800 per month to cover your rent, utility bills, food, clothes and other necessities. It might be tempting to take a few hundred right off the bat and go buy the latest gadget or clothing line, but you need to make it to the end of the month.

6) Take on a part time job that won't interfere with your studies

I've seen mixed advice on working both in high school and in college.

• There's one camp that says students should be able to focus solely on academics and a job should never interfere with their success. Any time spent working could be better spent studying, right?


• There's another camp that says you should develop these habits early: work ethic, routine, professional interactions, leadership, etc. Kids really just spend the same time studying no matter what and with their remaining time, if they're not working, they're goofing off or up to no good.

I fall in the middle. With arguably one of the more challenging undergrad programs (Chemical Engineering, where less than half of those intending to graduate with the major made it to graduation...and no lie, it was so competitive, when an assignment included the use of a book that could only be referenced in the library, students cut the requisite pages out with a razor blade in an attempt to beat the curve), I was able to work part time in sectors like retail, tutoring, and other rather flexible roles. I only worked around 10 or so hours per week, but this income supplemented my spending habits that frankly, my parents shouldn't have been paying for: beer, food at 2AM, entertainment, etc. While getting decent grades and working part time, I was able to pledge a pretty wild fraternity, live in the house for 3 years and have a complete blast, hold down a serious relationship (eventually my wife, who I tutored in Chemistry!) and do all the other things college students love to do. It can be done: everything in moderation. I'm not advocating full time work. But to do nothing all year but party and go to class may not necessarily be setting a student up for the best time management skills and work ethic later in their career.

7) Budget, Budget, Budget

Establish reasonable ground rules for how much should be allocated to various spending categories. Rent, utilities and books are pretty easy to estimate. Things like unforeseen expenses, food, entertainment, etc. can be quite variable. But prior to even embarking on a new college year, students (and if applicable, parents) need to set clear expectations for how much should be spent per month to avoid falling into the credit card trap. Use a spreadsheet, use a notebook, or if you're really serious, use software, such as Quicken:Quicken Starter Edition- Save 17% + Free Shipping , whatever it takes. But set up a budget!


8) It's OK to be Frugal

Depending on the school you attend and the circle friends, frugality is met with varying degrees of acceptance. But who cares? Recall #2. Keeping up with the Joneses is a costly proposition and in the end, do you really want to hang with people so shallow that they judge you on the car you're driving or whether you're wearing the latest $150 jeans? They're the ones that are lame, not you...and the sooner you realize it, the sooner you can start saving money and setting yourself up for financial success later in life.

Learn how to be a frugal eater. Food is a substantial portion of college discretionary spending:

• Use coupons. Give the coupons from your Sunday paper to your student.
• Parents, buy in bulk at discount stores and send your kid back to school with tons of cheap food.
• Use the meal plan you signed up for. Admittedly, this was one tenant that I failed at. I was one of those students who got the meal plan, but didn't eat at the caf as much as I had paid for. Don't fall into the same pattern. As unappealing as the food can be sometimes, if it's paid for use it. If you don't like the food, learn to shop and cook. But don't pay for a 14 meal/week plan and use the caf 4 times per week.
  

9) Save Money on Textbooks and Sell books you'll never use again

By getting ahold of the syllabus in advance and ordering your books online, you can forgo the complete ripoff you incur at the hands of the college textbook machine. A vast network of cozy relationships between professors, publishers and colleges results in this ridiculous charade of $150 books that are seldomly used in many classes. A new edition every year with a couple new entries for pop culture or an extra page on the latest Enron type case study all but guarantees obsolescence of each year's crop of books. However, with some good timing and a system, you can routinely beat the system by buying your books online at a fraction of the cost.

Additionally, I'd recommend hanging on to the books you'll need and selling the rest. It will be pretty evident which category these fall into. A course in Transport Phenomena is tied to Fundamentals of Heat, Momentum and Mass Trasnfer later, while my elective for Medieval Music clearly had no use in future semesters. If you think you'll use the books later in your career, unless you're practicing law, you probably won't. If you're concerned about buying used books, the quality of the books you can get from the online outlets are generally fine and they rate/rank the quality. There's really no good reason not to take advantage of these savings opportunities and avoid the campus store ripoff other than lack of time and planning.

Here are a few sites; I've tried some in my MBA program with decent success:

Huge Textbook Selection, Low Prices – Phat Campus.
SAVE MONEY ON TEXTBOOKS!! Bookbyte.com – College Texts for Less

eBooks are always 50% off the print version


10) Another important topic: Communicate with your parents


It's important to understand who is paying for what, who's on the hook for what, what the expectations are and agree on a plan. Can you imagine graduating from college thinking you had scholarships and parents fronting the bill only to find out you're on the hook for $100,000?

• Are there college loans in the child's name? (You'd be surprised by how many kids approach graduation without knowing loans are in their name. They thought their parents had it all handled)


• Are the parents fronting the costs completely? Or, paying tuition-only and the expectation is that all other expenses are paid back someday?


• Is this an interest free loan?


• Parents, please don't wait years into an adult students' career after they've established a lifestyle, bought a house, etc., and then say, "I need you to start paying me back for those college bills from 5 years ago".


• In short, communicate, communicate, communicate.

Want to Make Your Kid's Decade?

For you parents reading this post, here's a really neat idea you could spring on your kids if they perform well in school and stay out of trouble. I had the kind of parents who wanted me to learn lessons in life, work hard, etc., but they rewarded me where they could, often at unexpected times and milestones. When I entered college, I fully anticipated paying back my parents a substantial portion of my college debt, inclusive of tuition and all the living expenses. Even at a state college, the total all inclusive bill was staggering in the end. Well, upon graduation, my parents gave me an enormous gift. They cut the amount I planned on paying back in half. While I still spent the first 5 years of my career paying back this much-reduced debt, it left me with the flexibility to stop paying if I encountered an emergency/layoff, the ability to pay it back rather quickly (would have taken twice as long!) and the amount was manageable, to the tune of a few hundred bucks a month. What a surprise! This equated to a 5 figure gift! I hope to be able to do this for my children as well and have already started a 529 and ESA with Vanguard.

Finally, Pay yourself back!

If you're intent on using a credit card (perhaps as a parent, you want to track what your kid's spending their money on...it could be going to some rather undesirable sources and a card leaves a clear trail), you might as well get some cash back and a bonus up front. This site is the full galaxy of ALL Cash-Back Cards so you can compare for yourselves and see which card will give you the most cash back depending on presumed spending: CreditCards.com- Cash Back Credit Cards

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