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Money 101: How to avoid going broke in college

Watch out: If you’re not careful with money during your college years, you could find yourself living under your parents’ roof again before you know it. 10 Tips columnist Laura T. Coffey offers advice to help freshmen graduate to a new level of financial responsibility.

You’ve done it! You’ve moved out! You’re finally living on your own!

Watch out, though: If you’re not careful with money during your college years, you could find yourself living under your parents’ roof again before you know it.

It’s shockingly easy to flub up personal finances at this crucial stage of life, when you don’t have a lot of money coming in and distractions are legion. In addition to juggling a hefty load of schoolwork and fun with your friends, there are suddenly so many new things to worry about in the financial department: a dorm room or apartment, transportation, textbooks, student loans, travel expenses.

How’s an 18-year-old supposed to adapt to this whole new level of financial responsibility? The following tips can help you settle into your changed circumstances and thrive.

1. Budget, budget, budget. How can you tell whether you’re really going to have enough money for that ski trip over winter break, or that spring break trip to Daytona Beach with your friends? It will pretty much be impossible until you make sense of where your money is going on a regular basis. Track your spending in writing for one month. Remember to factor in fixed costs such as rent along with other expenses such as entertainment, clothes, haircuts, subscriptions and sports equipment. You’ll quickly be able to tell the difference between necessities and luxuries, and you’ll be able to spot areas where you can cut back on spending in order to accommodate special splurges.

2. Recognize the toxic nature of credit-card debt. The second you start college, you’ll likely be accosted with numerous credit-card offers. As tempting as all that plastic can be, recognize it as the potential trap that it is. It’s all too easy to overextend your budget by relying on credit cards. Also, if you pay a credit-card bill late even once, your interest rate will skyrocket and you’ll be hit with punishing finance charges and late fees. Be determined to pay these bills off in full each month — and if you’re already grappling with credit-card debt, always make your payment on time and pay more than the minimum due.

3. Know where else to turn during hours of need. Here’s a tip from American Express and the Smart Cookies, a group of women who had been drowning in debt in their 20s and 30s until they joined forces and turned their situations around. If you encounter a real money emergency, your credit card isn’t your only place to turn for a bailout. You also can try contacting your college or university’s financial aid office and inquiring about a short-term emergency loan, which likely will carry zero percent interest. It can’t hurt to ask!

4. Even though you’re just starting out, your credit score really matters. Your three-digit credit score can end up helping or hurting you more in life than your grade on that organic chemistry exam, believe it or not. Your goal should be to have a score in the 700-plus range. (Higher than 720 is good; higher than 740 is even better.) Your credit score will determine your interest rates on absolutely everything later in life, from mortgages to auto loans, and it can even affect your ability to qualify for insurance, employment or rental housing. So, bearing in mind how important it is, do these things:

  • Pay all of your bills on time. Reflect on every single bill that appears in your name — even if you’re sharing that bill with roommates. If it’s in your name, it’s got to be paid promptly. Period.
  • You actually have to use credit in order to raise your credit scores. That means you’re going to need to obtain a credit card and use it regularly. Liz Pulliam Weston, personal finance columnist for MSN Money, offered this cautionary advice in this area: “‘Using credit’ is not the same as ‘carrying a balance on your credit cards.’ Carrying a balance is expensive, bad for your finances and completely unnecessary.”
  • Do what you need to do to score at least one major credit card — meaning, a Visa, American Express, MasterCard or Discover card. As mentioned in Tip No. 2, use that card with extreme care and concentrate on paying off your balance in full each month. If you initially have trouble qualifying for a credit card, apply for a secured card that requires you to deposit money as a failsafe against what you borrow. After a year to a year-and- a-half of responsible behavior with that card, have it converted to a regular credit card.

5. Set up electronic reminders so you pay your bills on time. You’re going to have a lot going on throughout the school year, and it will be very easy to forget to pay your bills on time. Use the calendar on your e-mail program or cell phone to remind you when to make payments. Also, remember to give yourself a buffer when it comes to bill-paying. For instance, what’s the most you ever spent on your cell-phone bill? Build that highest number into your monthly budget. Also try hard to build in set amounts for emergencies and for money you can spend any way you want.

6. Seek out student discounts for absolutely everything. Pull out that student card pretty much everywhere you go and ask whether a discount applies, even in situations where it might seem out of the question. You just never know what kinds of deals may be available to you — or may be invented for you on the spot by a nice store or restaurant manager who remembers how tight money can be during college. Ask for student discounts when eating out, catching a movie or concert, buying a computer, flying, renting a car or staying in a hotel or hostel.

7. Share, swap and barter. Your college years mark a time in your life when you’ll probably become a huge fan of Craigslist and The Freecycle Network. Why pay money for anything — from futons to clothes to soccer gear — when you can score it free of charge or for pennies on the dollar? Through sites like these and through networks on your school campus, you also should be able to swap items with other students without spending a dime. You could put up signs around campus about what you need (and are willing to swap), or you could even host a “swap soiree.” Simply mentioning in your Facebook status that you need to borrow or trade something could work wonders and could lead to your needs being met within minutes.

8. Be careful when renting. As referenced in Tip No. 4 above, recognize that the person whose name appears on the lease and utilities is liable for the bills. If you have roommates, ask your landlord to put more than one name on the lease so the responsibility can be shared. Also, don’t blow a lot of money decorating your very temporary pad. Find furnishings through garage sales, classified ads (including Craigslist) and used furniture stores. One last thought in this arena: Be extremely careful about leaving documents with your Social Security number, bank account numbers and other personal information out in the open, and use strong passwords when conducting financial business online. Crazy stuff can happen in a dorm setting or a home where several roommates and guests are milling about, and you could become a victim of identity theft.

9. Pay attention to your phone plan. Ask your cellular provider about discounted talk and text plans that are tailored specifically for college students. Make sure your plan will work well in concert with the phone plans of the people you call and text most often. If you’re living in an apartment with roommates, you can save money by skipping the landline altogether and opting to use a cell phone only. (Plus that will mean one less joint bill that could result in hassles, headaches and fights.)

10. Avoid paying top dollar for textbooks. Write down ISBN numbers and prices for both new and used books at your campus bookstore, and then use that information to shop around online. Check prices at,, eBay,, and A comparison shopping site such as also can be helpful. Be open to giving less costly eBooks a try.  For more details about how to buy textbooks on the cheap, read this past “10 Tips” column on the subject.

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