"Plan

A strong financial plan in college involves creating a realistic budget, building credit responsibly, and starting to save and invest for the future. Establishing these habits early can prevent debt and provide a solid foundation for financial success after graduation. 

Create a budget

A budget is your roadmap for managing income and expenses. Creating one is the most critical first step toward financial awareness. 

  • Determine your income. Add up all your sources of money, including scholarships, grants, loans, work-study earnings, and contributions from family.
  • Identify and categorize expenses. Track your spending for a month to understand where your money goes. Divide your expenses into fixed (tuition, rent, insurance) and variable (groceries, entertainment, transportation) categories.
  • Balance and adjust. Subtract your total expenses from your total income. If you have a negative balance, find ways to cut back on variable expenses. If you have extra money, allocate it toward savings or debt.
  • Use a budgeting method. Consider the 50/30/20 rule as a guideline:
    • 50% for needs (tuition, rent, groceries)
    • 30% for wants (dining out, entertainment)
    • 20% for savings or debt repayment 

Start saving and investing

Saving and investing early allows you to take advantage of compound interest, where your money earns returns on top of its existing earnings. 

  • Build an emergency fund. Set aside cash in a high-yield savings account for unexpected expenses like a medical bill or computer repair. A good initial goal is to save $500 to $1,000.
  • Save with automation. Set up automatic transfers from your checking account to your savings or investment accounts each payday to build consistency.
  • Invest with low-cost options. Once you have an emergency fund, consider investing.
    • Robo-advisors: Services like Wealthfront or Betterment use algorithms to manage a diversified portfolio for you, which is ideal for beginners.
    • Low-cost index funds or ETFs: These funds hold a broad collection of stocks and provide diversification at a low cost. The S&P 500 index fund is a common choice.
    • Roth IRA: Open a Roth IRA to invest after-tax dollars. Your contributions grow tax-free, and qualified withdrawals in retirement are also tax-free. 

Build and maintain good credit

A strong credit history is crucial for renting an apartment, securing loans for a car, or even getting certain jobs after graduation. 

  • Become an authorized user. Ask a parent with excellent credit to add you to their credit card account. Their positive payment history will be added to your credit report.
  • Use a student or secured credit card. Student credit cards have less stringent requirements, while a secured card requires a cash deposit that becomes your credit limit. Make small purchases and pay the full balance every month to avoid interest.
  • Keep your credit utilization low. Use less than 30% of your total available credit to show lenders you are not overextended.
  • Pay all bills on time. Payment history is the most important factor in your credit score. This includes student loans, credit cards, and utilities. 

Strategize for student loans

Understanding and managing your student loans is key to avoiding financial hardship later on.

  • Limit your borrowing. Only take out the minimum amount of student loans you need. You can always return loan funds you don't use.
  • Pay the interest. For unsubsidized federal loans, paying the interest while in school can prevent it from being added to your principal balance.
  • Enroll in autopay. Many federal and private lenders offer a small interest rate discount if you sign up for automatic payments, which also prevents missed payments.
  • Research repayment options. Become familiar with federal income-driven repayment plans, which can lower your monthly payments based on your income and family size. 

Cut expenses and earn more

A few smart habits can significantly impact your financial well-being.

  • Take advantage of student discounts. Use your student ID or ".edu" email address to get discounts on everything from software and streaming services to restaurants.
  • Buy used textbooks. Don't pay full price for books from the campus bookstore. Look for used copies or rental options online.
  • Cook at home. Instead of eating out, buy groceries and cook your own meals.
  • Find a part-time job. Earning extra income can help you cover expenses and contribute more to your savings.
  • Pursue scholarships and grants. Actively search for and apply for additional scholarships and grants to reduce your overall borrowing.