Financial Plan for College Students on Their Own
BY KEVIN FABER
Earning a college degree is a major undertaking. Going to college on your own is doubly challenging. You have to ta deal with classes and set aside time to study, and you must take charge of all of the financial responsibilities that come with being independent. This means budgeting money and paying bills. However, you also have to do other things like arrange financial aid and buy insurance.
Money Management 101
Knowing how to manage your money is vital when you are on your own. Start by creating a budget. Budgets shouldn’t be complicated. Make a list of all of your monthly expenses. Include estimates for food and incidental items rent, utilities and other bills. Don’t forget to allow for insurance and other expenses that aren’t due every single month. List all of your income, including any help you receive from parents or other family members. Your budget serves as a guideline that you will use to track and control spending, so that you don’t run short at the end of the month.
Set up a savings account. Saving money regularly has several benefits for students. If you save some each month, you’ll have reserve cash for cash for unexpected expenses. A savings account is also a place to keep cash you set aside for large outlays like car insurance payments. Banks allow you to set up periodic automatic deductions from a checking to a savings account to make saving easier.
Dealing with Financial Aid
Students on their own frequently need financial aid. File the Free Application for Federal Student Aid, or FAFSA, at the start of each calendar year.You can file online. Getting an early start allows time for processing. This insures your financial aid package will be ready when the academic year begins, so that you avoid paying a lot of money up front and waiting for a reimbursement check.
For independent undergraduate students, there is a catch. If you are age 24 or less, federal rules normally don’t allow you to file as an independent student. Even when you are 100 percent on your own, you are still considered a dependent. This rule does not apply to graduate students. There are exceptions. You may qualify as independent if you are married, a veteran, homeless, an orphan or an emancipated minor. Otherwise,you must ask a parent to file the FAFSA to qualify for grants and subsidized loans. Colleges grant an override of this rule only if you can show extreme circumstances. For example, you might get an override if a parent is in jail. If an undergraduate student’s parent refuse to file the FAFSA, federal student aid is limited to unsubsidized loans.
Play It Safe — Get Insurance
State law may require that you purchase auto insurance. Your college may require health insurance. However, don’t neglect to purchase a renter’s insurance policy if you live off campus. Students who live on campus are usually covered by their parent’s homeowner’s insurance, but not when they live off campus. Renters insurance isn’t expensive. It will pay for replacing your belongings in the event of a fire, theft or damage. You can easily compare free insurance quotes online in order to find the best coverage for your situation.
Avoid Spending Traps
Be careful if you choose to get a credit card. True, a credit card is convenient. You can use it to build an excellent credit rating. However, if you are late making payments, you can damage your credit score for years. The best policy is to pay off the balance at the end of each month. Whether you decide to use credit or not, don’t buy stuff you don’t need. Buy used textbooks when you can. Avoid wasting money on expensive laptops or the latest cellphone.
Financial management isn’t rocket science, and it isn’t hard to learn. Handling money well is a matter of common sense and self discipline. Stay on top of things and you’ll be just fine.
Kevin Faber has experience starting his own business from the ground up and he is passionate about helping others achieve their goals. His background is in finance/investing.