College | Budgeting In the Fun Stuff

Start Saving During College or Else

December 29, 2011, at 6:00 am

We are staying with the college-themed guest posts this week. The following is a guest post by Jon the Saver, a Christian personal finance blogger and founder of Free Money Wisdom. He is passionate about helping average Americans reach their financial goals and live a life free of debt. In his down time he loves a mean game of Scrabble. Be sure to subscribe to stay connected with Free Money Wisdom!

Here’s the deal everyone, do you want to retire early? I’m guessing you just answered with a profoundly loud “YES.” Well why not start in college? Yes, college is a great time of parties, football games, social gatherings and memory making. However, your financial life is at stake and you really need to think about saving your money during college for your future. No, it’s not sexy. No, it’s not fun. But do you really want to be working when you are 65, 70, or even 75? I’ve seen one too many grandpas working at Home Depot, I’m not going to be one of them and I’m sure you don’t want to be either.

So, if you’re a student in college, what can you do? Before you get too excited, you should start with the small stuff. Yes you heard me right, the “small stuff.” This is not a situation where the “go big or go home” motto applies.

Cut back on Extra Spending and Invest in an IRA

C’mon, I know you can cut back somewhere, we all can! I remember how I was just terrible about spending too much money on eating out and not cooking at home. Shame on me! If I was smart, I would have cooked at home and invested the extra savings in a Roth-IRA. So, what can you do to start saving for your future retirement? How about those late night drinking binges? Why not avoid the alcohol and not only improve your personal health but your financial life also! It’s the small things that matter in college. It’s not rocket science, just start saving now before it’s too late.

Work at Least one Job

It’s funny because this seems like a no-brainer to me. Work hard, get paid, and invest a portion of that money toward your retirement savings. As I’ve gotten older, I guess the vast majority of people don’t follow this simple pearl of wisdom! Look, do you want to be in debt or broke at graduation? I’m sure you don’t so save yourself some headaches by getting a job or even two jobs to start investing for your future. No, it’s not glamorous, heck, you may even miss some football game. But at the end of the day you will be sitting pretty when it comes to an early retirement.

Start an Emergency Fund

Even though this is not related to retirement savings, an emergency fund could shave off a couple of your gainfully employed years. Let me explain. With this flat lined economy, there is a good chance you may not get a job right out of school. The average college student will take out a credit card and start spending like it was cash and get them into some debt trouble. If you’re smart, you would have saved money during college for an emergency fund. Instead of taking on debt you could spend the cash that you have. Then, after landing your dream job you could start making bank and be back on schedule for your retirement savings. No interest and no payments to a big bank.

Stop Whining and Start Saving

Do you want to watch American Idol or retire early? If you really want to watch American idol, well, have fun working in your 70′s… For the rest of you, start saving now! I hope this has been some inspiration to get you going with your retirement savings. If it was the swift kick in the butt that was needed, it was my pleasure. Remember, retirement savings are up to you and only you. Don’t rely on Social Security. You can kiss that good buy because it’s already bankrupt. You need to rely on Roth-IRA and 401k savings. Start during college or else. THE END.

Crystal’s Comments: I wasn’t able to save anything during college, but I was able to stay debt free, which meant that I was able to save as soon as I made my last school payment.

3 Post-College Suggestions

December 27, 2011, at 6:00 am

Hello! My name is Jonathan and I am the founder of CentsToShare.com. I have recently entered the workforce, but am essentially debt free and working toward a life of self-employment through blogging and other related areas. I enjoy saving money, being self-reliant and learning new things.

College and post-college years can be some of the most difficult times of your life when it comes to finances. Having just graduated back in the spring of 2010, I can tell you this from personal experience. Going to college was a decision that I actually made completely on my own, with no prodding from my parents, so I had to do all the legwork of getting accepted and finding scholarships. Needless to say, it was quite difficult.

I honestly believe that the years surrounding college and the time right after are some of the most important, defining years of anyone’s life. You can always make changes down the road, but if you make good financial decisions right from the get go, you will be that much better off in the long run.

1. Take Charge Of Student Loan Debt

Staying out of debt in college is extremely difficult, with tuition prices continually on the rise and I’ll tell you, I did not succeed in this area. This doesn’t mean that I had to let this completely ruin my life though!

All through college, I held a job, working around 20 hours a week, sometimes as many as 40 hours a week. This allowed me to save up a bunch of money, even while living in an apartment. With the money I saved, I was able to pay off a $1300 loan the day that they held the exit counseling for that particular loan. Needless to say, they were quite surprised when I handed them a check! Holding a job, and saving money, is the most important thing you can do while still in college. It doesn’t matter the job, just as long as you are putting something away.

I also had a second, much larger loan after graduating, that totaled just shy of $15,000. It would have been much harder to pay this off while in college, but fortunately I got a great job right out of graduation and was able to pay it off soon after. How you ask? By following step number 2.

2. Live Like You Are Still In College

For anyone just coming out of college and getting a job, one of the best decisions you can make is to live like you are still in college for several more years. Why on earth would you want to do this with so much new income!? Following this path will let you live on the same budget that you had in college, while using the rest of your earnings to pay off debt or put into savings! Now, you obviously know that you were able to live on a mere $200 a week, since you were able to do it in college. Perhaps even less, I don’t know your situation. Doing this for a few more years will put into a position to have that $200, plus whatever other amount you make, while not having any debt. Bingo!

This is exactly how I was able to pay off my $15,000 dollar loan. I decided to live like I was still in college, and am still doing that to a point. I was able to pay $1,000 a month on that loan when they only wanted $165 and then applied a chunk payment out of savings toward the end, to pay the loan off in just about 1 year. For a loan that’s supposed to last 30 years, I would say it turned out pretty well.

3. Save Like All Get Out!

Once you have your debt paid off, or maybe even before you pay it off, the best thing to do is to start saving for specific, large ticket items that you may want to purchase. While I was in college, I mentioned that I put money into savings. What I didn’t say is that I was able to save around $10,000 for the purchase of a house once I knew where my job would be. I hate the idea of renting, so I wanted to get a house ASAP.

Once my wife and I got married after graduating, we waited until my job transferred and bought a house about 9 months after the wedding. This was a mere 1 year after graduating! Also, I should note that we didn’t go for a big fancy 3,000 square foot home in the middle of nice neighborhood that cost $250,000. This was way out of our price range. We bought a house that was listed for $89,000 after talking them down to $84,000 and paying $12,000 down. Our entire mortgage was $72,000 and is sitting at about $69,000 right now…after only 8 months of payments. Keep in mind we also paid for a wedding at the same time, and paid cash for everything. Talk about some tight living!

As far as cars go, there is absolutely no harm in waiting to purchase a car and using savings to do it. This is exactly what I’m doing. I have been working full time for nearly 2 years, and I am still driving the car I drove in high school! In the mean time, I’m saving up the money to pay for a truck. It will take several years, but it will totally be worth not having the debt.

Planned Lifestyle Inflation

I mentioned above that I am still living like I am in college, but I have loosened myself a little bit, as the only debt I have is a mortgage. I have plans underway to have this paid off in less than 5 years, and after that I will be able to live an amazing debt and mortgage-free life…all before I turn 28 years old! Living the good life is entirely possible, but you have got to make sacrifices during the most important years of your financial life.

Had I not gotten a job during college, I couldn’t have paid off my first loan or purchased a home right out of college. If I had made minimum payments on my second loan, and purchased a brand new car out of college, I would be sitting with two loan payments, a car payment and a house payment! Now I just have a house payment that is going away in a few short years. Pretty snazzy, huh? For more information on how I have and am paying off my debts, check out the related posts at my website. I look forward to hearing from each and everyone one of you.

Crystal’s Comments: I love the idea of continue living like you are broke since it helps pay off debt and build up an emergency fund so quickly when you are first starting out…that is just a great start!

The Student Loan Death Trap

September 8, 2011, at 6:00 am

Guest Post by MoneyforCollegeProject, which is a website devoted to teaching you about college financial aid, student loan debt, and the best methods for graduating from college with an understanding of personal finance.

Go to college whatever the cost!

Sounds like good advice, doesn’t it? Obviously the benefit of your college degree will pay off huge dividends for you in the long-term, right?

Not exactly.

Attending college without a regard for the cost of your investment is a big mistake. This is the mindset that student loan lenders want you to have, and this is how they have made so much money in the past couple of decades.

As of June 2011, student loan debt has overtaken credit card debt in total volume. This means that while people are cutting back on their consumer expenses and spending less on their credit cards, student loans are still flying off the shelves!

Graduating college debt free is an admirable goal. If you keep that as your goal, your focus will be on reducing costs, rather than taking out student loans without a care for the total cost. With that goal in mind, here are some legitimate ways to find free money to fund your college education.

How to avoid student loans

Your first step will be to submit a Free Application for Federal Student Aid (FAFSA). This is the “one-stop-shop” to apply for all types of federal student aid. This includes the Pell Grant, FSEOG, and many other federal grant programs. These grants will be administered through your college financial aid office, so it pays to become best friends with them!

You should also pay attention to any state supported scholarships. Many states offer academic scholarships to entice students to stay in-state for college. Many of these scholarships are sponsored by the state lottery programs and can pay as much as your entire college tuition (see the Hope Scholarship in Georgia for instance).

Your next step will be to look for local scholarships to apply for. I highly recommend going local rather than nationwide. The probability of your winning a local scholarship over a large, national scholarship is significantly higher. You also have the benefit of knowing that you are being supported by your local community as you pursue your educational goals.

Another excellent way to pay for your college education is to get a job while in college. This could be a twofold boost because, depending on the job you find, you will earn money, as well as add to your work experience and resume. Many small businesses started during college years have gone on to be super successful (Facebook anyone??). With the ease of entry to online income generating programs, there really is no excuse not to make some money online while in college. Start a blog, do some freelance writing, sell stuff on Ebay, or buy and sell on Craigslist. The options are endless!

The last source you might try is to look for athletic, academic, and military scholarships within the school you wish to attend. Most schools have full scholarships programs where they will pay you to attend. If you are an athlete, an academic whiz, or interested in the military, you should check out the programs offered at the school you are considering.

Student Loans: The Last Resort

Once you have exhausted all of the free sources of financial aid, and you have started earning some extra money to pay for your education, you may need to resort to student loans.

Student loans, in moderation, really can be a good tool to help you pay for your education.

You should start out by pursuing Direct Stafford loans through the federal government. These are loans you qualify for through your FAFSA. If you qualify for the Subsidized Stafford loan, you will receive the loan interest free while enrolled in school. This means that technically, you could pay it off before you graduate and it would be an interest free loan.

You might also get an Unsubsidized Stafford loan, which would begin accruing interest as soon as the loan is disbursed, even though required payments are deferred until 6 months after you graduate.

Federal loans are the absolute best type of student loans. No question.

As an undergraduate student, the only other type of loan you can apply for is a private student loan. I would stay away from these if at all possible. They usually carry variable interest rates, have less than stellar repayment options, accrue interest once disbursed, and often require minimum payments while in school.

Parents also have the option of taking out private student loans, or they can take out a Parent PLUS loan through the federal government. This is a guaranteed student loan taken out on behalf of the student. The interest begins to accrue as soon as it is disbursed.

What to do?

Receiving a college degree is hard enough if your only worry is going to class and passing your exams.

However, often times paying for your college degree is just as difficult and stressful as earning your degree whether it is an online degree or an in-class program.

I tell students every day that their best resource is their college financial aid office. This office is always busy, but they are the only ones on campus who have the means to help you pay for your college education.

You should pursue and exhaust all of your free money sources first. Then you should try to earn as much money as possible to help pay for your education. Finally, you should look to student loans as a last resort.

If you manage your loans while in school, and keep them to a minimum, you will be well prepared to begin repaying them as soon as you graduate!

This will let you focus on the more important financial decisions in your life such as getting your first job, and figuring out what to do with your college degree!

Crystal’s Comments: I hated the idea of having many student loans, so I worked multiple part-time jobs and grabbed as many scholarships as I could. I ended up owing my parents $8000 by the time I graduated. Not too bad…

What do you think of student loans?

Save Money with Off Campus Housing

September 2, 2011, at 6:00 am

This is a guest post by Corey @ 20’s Finances. His personal finance blog strives to offer financial tips for those new to managing their personal finances.

At this time of year, college students everywhere are returning to universities from summer vacation and getting ready for school to start. If you are one of these lucky students, you may find yourself wondering how you are going to pay for the upcoming year. One important question to ask is whether it would be cheaper to live off campus. While you may have already moved into the dorm and committed to living on campus, it may not be too late to start looking for next semester or even next year. I want to look at some of the ways living off campus can help save you lots of money.

On Campus Housing: The Good…

As one who worked as a staff member in Residential Life at my alma mater, I know a few things that students don’t often realize. The best thing about living on campus at any university is the proximity. It is, after all, on campus. You can’t beat rolling out of bed five minutes before a class and still making it on time.

The Bad…

If you have lived on campus long enough, you know that it isn’t all it’s cracked up to be. In fact, many college students move off campus as soon as their university allows them to do so. Some of the motivating factors for doing so include: small dorm room, desire to have their own kitchen, getting away from the seemingly paper-thin walls in the dorm, etc.

The Ugly…

Perhaps the worst part of living on campus is the outrageous fees associated with living on campus. Many universities are making a profit from the fees for room and board. While they will try to make costs comparable to the going-rate for renting, universities understand the convenience factor that we already mentioned. They understand some of the additional hassles of trying to find a place to rent or commuting to the university and they take this into consideration when calculating the costs of housing.

Money saved from moving off-campus

When I was in college, I was looking for anyway to save money. I decided to move off campus because a couple friends and I were able to find an apartment that would save us lots of money. Even with paying for rent through the summer, we were able to save over half of what we would have paid to the university for on campus housing. Moving off campus may be the thing for you. If you want to save a lot of money, try finding a place off campus and share a room with a good friend. Not only will this save you on rent, but will make for a great experience to look back on.

Time to switch? Things to Consider

If you are thinking about moving off campus, you might as well start looking now. You can often find great places to rent by talking with upperclassmen, finding out where they are renting and if there are going to be any vacancies. Seniors may be willing to transfer their lease to you or arrange with the landlord for you to take their apartment when they leave. Before you sign the lease, remember to consider the minor fees that will come along with moving off campus:

Utilities: Many fail to budget in the cost for utilities. Some apartments have this included in the price, so be sure to ask. It it’s not included, be sure to take this into consideration.
Cost of Commuting: How far from campus is the apartment/house? How will you commute? How much will it be to travel to campus?

If you decide to find a place off campus and you make sure to cover all of your bases, I am sure you will not regret it. Just think about what you could do with the money saved by moving off campus. You could put that money towards a memorable spring break trip or do the responsible thing and put it away for a rainy day.

Crystal’s Comments: I loved my tiny little dorm room on campus my first year but moved to an off campus apartment the last 3 years to save a ton. It wasn’t as much fun, but $288 a month is better than like $3600 for 6 months…

What do you think about on campus vs off campus housing?

Living Cheaply in College

March 2, 2011, at 6:00 am

Thousandaire wrote a post last week, Living Gas Tank to Gas Tank, that just hit the rewind button in my brain and I started thinking about living cheaply in college.

Like a lot of college kids, I was living as cheaply as possible. I shared a 2 bedroom apartment with 3 other ladies for $288 a month. I cringed if I ever had to turn on my car. I also spent the last 3 years living on $2-$3 a day for food.

Comparing that life less than 10 years ago to the one I’m living now is like comparing a Chevy Aveo to a stretch limo. Seriously.

Here was a normal daily menu for me in 2003 when living cheaply:

Breakfast – Banana or an off-brand granola bar
Lunch – Peanut Butter and Strawberry Jam Sandwich (I still love these, lol)
Dinner – Bean burrito from Taco Bell, another sandwich, a bowl of cereal, OR I sponged off others that freely shared (thank you to everyone who ever fed me!)
Snacks – Nothing or sponging again

Here is a normal daily menu for me now in 2011 when not living as cheaply (now that I’m on Weight Watchers…last year’s menu was way bigger and had less fruit, lol):

Breakfast – Banana AND a bowl of cereal
Lunch – a Smart Ones or Lean Cuisine meal or leftovers
Dinner – Grilled lean meat (steak or chicken usually), some form of potato or starch, and a huge helping of a green vegetable (we are big on green beans right now)
Snacks – Fruit, baked chips, and/or a granola bar

Yep, I went from less than $3 a day to at least $5-$8 a day in less than 10 years. And I very rarely regret it. It is nice to have enough money to spend on better food without giving up our savings goals. I truly am thankful for where I am today but living cheaply is the only reason we’ve been able to get this far this fast.

Do you remember living cheaply or even cheaper? What are you thankful for today? If you are having a cruddy day, sorry for bringing all this up…

Budgeting for Graduate School

November 22, 2010, at 6:00 am

The following is a guest post from Tim, a personal finance writer at FaithandFinance.org - a Christian financial help blog that provides financial insights for individuals, businesses, and churches. Outside of finance, Tim enjoys spending time with his wife, playing the saxophone, reading economics books, and a good game of RISK.

College can be a great way to advance in your career and to become more valuable, especially if you have a graduate degree like an MBA. Unfortunately, these programs can cost anywhere from $20,000 – $75,000 + for a two year program.

Making the decision to pursue a graduate degree should involve planning that considers your current school debt, your current income, and your projected income after the degree is completed.

Here are some tips to budget in graduate school so that you can keep your school loans as low as possible.

1. Get an emergency fund. You should try to save enough for six months of expenses before you pursue a graduate degree. The last thing you want is for your school loans to come due while you’re still looking for a job. Having an emergency fund is an important first step in budgeting for graduate school.

2. If you’re married, practice living off of one income. You should try living off of your spouse’s income for six months before you start school. This will help you to cut your expenses and allow you to adjust to a lowered income. Bonus tip * Use this time to save all your income so that you can reach or exceed your emergency fund.

3. Apply for graduate assistantships or fellowships. Many schools offer assistantships that reduce the cost of attendance and even pay a stipend while you’re studying. You might have to work in the department office or grade papers, but having a few hundred dollars extra a month can offset some of your monthly expenses.

4. Get a part time job. Yes, graduate school is tough, but you can work here and there. Try to use the extra money to support monthly expenses like your rent, food, or car. Living on the income from a part time job is MUCH better than relying on school loans for food. The difference in total amount borrowed can be huge!

5. Calculate loan payments before you borrow. Understanding how much your school loans will cost you each month is crucial when budgeting for graduate school. If you borrow $50,000 you should be prepared to make payments of at least $500 per month for ten years. See why it’s important to budget before you even borrow?

Remember, you can live like a student now OR you can live like a student later. Living like a student now and doing your best to borrow as little as possible will allow you to live like you want to later. I hope you find these tips to be helpful if you’re considering graduate school (or undergraduate school for that matter).

Crystal’s Comments: Mr. BFS was lucky enough to find a mainly-online masters program for school librarians that he was able to participate in while still teaching. He only had to make the hour and a half drive to the campus every 2 months or so. He also took at least 2-3 classes every semester, so he was able to complete it in 15 months instead of 2 years. We built up an emergency fund before he started and used that amount that we were setting aside every month to pay for grad school as he went – no grants, no scholarships, just $15,000-ish in cash…oof…

What are some ways that you planned to budget for college? Do you have any suggestions we missed?

My College Savings Plan, Look out for #1

August 24, 2010, at 6:00 am

The following is a guest post from Sandy L over at First Gen American. I personally really enjoy the emotion she puts into her writing, so I highly suggest checking out her blog when you get a chance!

Today I’d like to offer an alternative point of view on how people prioritize their savings goals. You see, when I read about most people’s plans, they look something like this:

Pay off Consumer Debt
Build an Emergency Fund
Pay off Student Loans
Save for Kid’s Education
Save for Retirement
Pay off House

I mean even Dave Ramsey says you should save for your kid’s education before you pay off your house, so what gives? Although it is logical to organize your savings goals in chronological order, I hope to convince a few people to move #4 down to the bottom of the list.

My first bit of advice if you have children of any age, is to learn about FAFSA. This is the federal financial aid form. Its purpose is to calculate out a person’s eligibility to receive need based financial aid.

The FINAID site goes into all the nitty gritty details on income limits, scholarships, ownership rules, etc. The two things that everyone should be aware of before saving a dime for college is whose name to put the asset in and what the federal government considers an eligible asset or liability. I won’t touch on all of them in this post but there are 4 big ones that I think everyone should be aware of:

401K and IRA plans – are not considered eligible assets in your need based calculation. (The exceptions are the contributions that occur during the year of the FAFSA application). The good news is the federal government doesn’t expect your 70 year old arthritic self to eat cat food in order to pay for junior’s education today.
Your Primary Residence - is not considered an eligible asset...even if it’s 100% paid for. Again, Uncle Sam doesn’t want you to go homeless to pay for Jr’s education.
Your consumer Debts – are not considered eligible liabilities. So if you make $100K/year, but have thousands a month in credit card payments and car loans, the federal government doesn’t count those as eligible liabilities. Your income on the other hand does count. Uncle Sam isn’t going to reward you for being a dumb a$$.
Certain Durable Goods – like cars, computers, etc are not considered eligible assets.

So what’s my current plan for my kid’s education (ages 1 and 5)? Well, they do both have 529 plans, but they usually only get contributed to during birthday or Xmas time when family members throw them a few bucks. I do plan on eventually contributing, but not until after I max out our retirement plans and pay off our mortgage.

Oh, I guess I do one other thing. Our emergency fund is in savings bonds in our name (better than if in Jr’s name). If we’re lucky enough not to have to tap that til college time, we can cash those in tax free come tuition time.

What’s your plan? Has your mind been changed at all?

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