Freshman Finances : Goals and Plans

This post is part of the freshman finances series, a series of articles that are related to student finances. Read all parts of the series here.

Where are you headed? This is the first and the most important question you have ask yourself when starting a road trip. Isn’t it? College is just like a road trip. Only better and more adventurous. There’s good news and bad news. Bad news first : just like a road trip, you can easily get lost in college as well, if you are not really sure where you are and what you are doing. Now the good news : It is much more fun than a road trip and there is more than one “right” destination. You just need a few directional tips. Once you start your journey you can choose the exact roads as you drive or even construct additional roads if needed.

Action items for this part of the series

Promise yourself to never make it difficult for your future self

Collect as much information about your income and possible expenses

Where do you want to go?

While you don’t need to know your exact final destination, knowing the general direction you want to head is helpful. Let’s start with your dreams – Why do you want to go to college? If you don’t have an answer to that right now, that’s ok. Do you want feel financially comfortable throughout your life? Do you want to own a house at some point? May be a dream car? Do you want to do some good to a cause that is close to your heart or simply want to be rich?  If you answered “yes” to any of the above questions, then you already have a direction. You want to be debt free by the time you graduate or better yet have a little something saved. If you cannot avoid student loans entirely, aim for minimizing the loans. Take only the absolute minimum you require to pay for tuition and books. Please do yourself a favor and distinguish between your wants and needs. No consumer loans whatsoever. Please avoid that hole.

What road do you want to take?

There is an easy road and a bumpy road. The best part is the easy road can take you to your desired destination. It involves:

1. Jotting down your income and expenses, adding some money for fun and developing a spending plan (next part of the series)
2. Automating that spending plan.

To calculate you income and expenses, you only need 2 pieces of information (which can be refined in later months). You will need to know:

1. How much money you have. Are you willing to work part time and if so, do you have anything lined up? Do you have any scholarships? How much are you expecting to receive per semester/quarter via loans? Are you getting any money from your parents? Write this all down.
2. What are the expenses that you know of already? How much is your tuition? How many classes are you taking? Do you have a rough estimate of how much your books will cost? Are you going to be living in the dorms or off campus? How much will the rent & utilities be? How much is the meal plan? Do you know anyone in the college? Can you ask them roughly how much the living expenses will be? What about transportation and parking?

If you don’t know the answer to these, don’t worry. The whole point of this exercise to remind you to ask these questions. The more information you have the better you can plan this awesome journey. We will talk about these in detail in the budgeting portion of this series.

Before we move on to budgeting – download this Student finance information collection sheet and use these questions to collect some basic information.

[Note: I have not included information on student loans/scholarships as these questions focus on finances when you are almost ready to start school. Also I have included questions to help with your finances, not other things like you major]

Follow some simple rules to avoid disastrous detours

1. Never use scholarship or student loans for luxuries. (Yes. a spring break trip is a luxury)
2. Never use credit cards for something you have not budgeted for and have already saved money for.
3. Never, never cosign anything.
4. Nothing is free. Everything has a price.
5. But there is a cheaper and (often) better alternative almost always. Use the power of being a student and you will end up paying less for better alternatives.
6. Above everything, money is not free. You are “paying” for it with your time. If you are not earning it now by paying for it with your time, you WILL be paying for it with much more time later. Especially when it is too valuable to you. When you want to spend it with your girl friend/wife/friends/family/kids.

Just start driving and enjoy the journey!

If you start right, the journey is half completed already. You will make a few mistakes, but as you have started right you will always be closer to the right route and can come back easily without getting lost or having a serious setback. College is full of experiences, good and bad, but every experience will teach you something. Lets start driving and start learning! Shall we?

Tagged as: freshman finances