NEW YORK (MainStreet) -- Heading off for your freshman year at college? Before you plunge into the whirl of an exciting new life, make some money-management vows to avoid a mess that could dampen the fun. Here are some tips:
Use debit not credit. For routine expenses, and even the big ones like flights home for the holidays, debit cards are a great option. There are few fees, if any, and each purchase is drawn against money in your checking account. If there’s no money, the purchase is denied (check your overdraft coverage, though; see below). With a debit card, you won’t face interest charges, late fees and other expenses that can be incurred with a credit card.
Be wary of overdraft protection, which allows purchases even if your account is empty. Fees for this service can be very high. It does make sense to have a credit card for back-up – in case a hurricane strands you on the trip home, or your car loses a muffler. For this purpose, get a credit card with no annual fee.
Use the Internet. Most banks offer free online access to accounts, making it easy to keep track of cash in your checking account. In fact, you can probably have the bank automatically alert you by email or text message if the balance falls below a set level. Free services like Mint.com can help you track multiple accounts in one place, and show how much you are spending in each category.
Budget. Budgeting seems like a boring task for people with jobs, mortgages and children, but it’s a good practice even if your parents are handling the big college expenses. With a simple budget, a list of expenses you can expect each month, you can avoid cash emergencies, and you won’t be gnawed by guilt every time you buy a slice of pizza.
Don’t be an early adopter. It’s tempting to have the hottest phone, most powerful computer and coolest tablet, but you pay a big premium for cutting-edge features. If you don’t really need those functions, keep your old devices a little longer, or buy new ones without top-of-the-line glitz.
Borrow smart. These days, most students graduate with some debt. It’s hard to avoid that, because college is so expensive. Student loans are often called “good debt,” because they lead to better jobs and a more interesting life.
Still, interest charges should be avoided if possible, and many students look for part-time jobs to minimize debt. That may make sense to avoid high-interest debt, like credit card charges for living expenses. But if you are eligible for low-rate student loans like Stafford loans that charge only 3.4%, borrowing may be better than working, especially if working would hurt your grades or take the fun out of college.
Think value, not price. Try to assess the long-term value of every expenditure, as well as the price. A dirt-cheap used car may be a good option, but not if it guzzles gas and will be in the shop half the time.
Often, it’s the little expenditures that deliver the least value, even though the cost is low. A $1 bag of potato chips from a vending machine produces no long-term value, and the immediate need could be satisfied more cheaply with a snack bought at the supermarket and kept in your backpack. When drinking fountains are free, any money spent on bottled water is wasted.
A dollar here, a dollar there.... it adds up. If you save $15 or $20 a week on needless expenses, you could have some pretty decent Saturday nights instead.
Are you an older American looking to go back to school? Financing is important but it's just one of many things you need to know about How to Go Back to School When You're Not in Your 20s!