How to avoid the most commonly committed financial blunders.
(Photo by Scott Cook) Most college students step onto campus without any real knowledge behind correctly managing money. It’s no wonder that during these years, coeds get into debt trouble that can often take a decade or two to rectify. Here is a list of the five biggest financial blunders that are most commonly committed according to financial expert and Professor of Finance J. Clay Singleton.
1. Mistake: Using the wrong credit card
Students who are new to being responsible for managing credit often overlook the terms and conditions—and especially the fees—associated with credit cards. Credit cards will help you buy something on sale when you don’t have the cash but the interest charges and fees can quickly add up to cost more than the sale savings.
Solution: If you get behind on your credit, stop using the card until the balance is completely paid. If you run into trouble a second time, cut up the card, close the account, and get a debit card instead. Wise credit card use is essential to establishing credit.
2. Mistake: Not checking your credit score
Although the practice is controversial, many prospective employers will run a credit report on all prospective employees.
Solution: You can—and should—check your score to be sure it is accurate. If not, you must call and correct the error. Be prepared to provide documentation. Keep receipts for major payments and funnel payments through your bank account so you will have a record of prompt payment. Protecting your credit is essential.
3. Mistake: Failing to recognize that credit card companies are eager for your business.
You may find a card that charges no interest for the first six months. Thereafter the rate goes up, often to a higher rate than their competition.
Solution: Just before the six months is up, call the company and tell them you are cancelling the card because the new rate is too high. Often they will reduce the rate to keep your account. If they refuse, you can cancel or stop using the card. This strategy works with other credit accounts, too.
4. Mistake: Underestimating your job hunting expenses
One reason to go to college is to get a good job after graduation. Actually, you need a job before you graduate. To get a job you have to find one—it will not find you. There is a career center on campus that will help you with your résumé and even line up interviews with prospective employers. Even so, it is up to you to convert job interviews into job offers. To get the offer you want you might need to travel at your own expense. You will certainly need business attire and probably more than one outfit. Your college campus will be pretty casual and some jobs are too but don’t count on being able to show up at an interview in the same clothes you wear to class. As a general rule, the bigger the city, the more formal the dress. Most businesses dress as business casual but it is always better to dress appropriately.
Solution: Set aside some funds to cover your interview expenses and plan ahead so when the right job comes along, you will be ready.
5. Mistake: Working too much during the school year
Most students need a part time job to help meet expenses. Remember your first priority is to do well in school. While working two or three part-time jobs is tempting, don’t spread yourself too thin. Part-time jobs have a way of evolving into full-time jobs but normally these are not the kind of jobs you want after you graduate.
Solution: Strive for balance in your work-school-social life. If you find your school work suffering, cut back until you can manage both work and studies. This is simple, common sense advice but it is so easy to fall into the trap of letting money drive you.