Letter to the Editor, April 17
Throughout college careers, students study many important subjects – English, Mathematics, History, Business, Communication, Science, Engineering, etc. However, one thing many college students don’t study is how to effectively manage their money and plan for their financial future. When teaching Personal Finance, I encourage students to learn this critical skill especially if they borrow money to attend school. The latest statistics reveal college students in Alaska graduate with over $26,000 in student loan debt (USA Today, April 2017). While students might not have any other option to pay for their education, they should not completely leverage their future by going deeper and deeper into debt. Whether a new student or a soon-to-be college graduate, there’s no better time to get personal finances in order. As students prepare for next fall or begin careers, consider these ideas:
1. Have an emergency fund. At some point in your life (probably sooner than later), you will have an unexpected and unplanned event. That event is going to cost money. This year, I had a student whose house got flooded because of frozen pipes. Since many of us drive older model vehicles, expect some emergency repairs. This “rainy day fund” is needed to make sure this emergency does not turn into a catastrophe. For college students without a mortgage payment, $500-1000 is an adequate fund for the time being.
2. Learn to live on less than you make and save the rest for next year. These days, most people don’t balance their checking account (or might not even know how to). Few will actually budget and plan out their monthly expenses. You can’t spend more than you make. John Maxwell once said, “Budgeting is telling your money where to go instead of wondering where it went.” While you might not like the idea of budgeting, by actually planning your expenses for the month you can typically expect to “find” some money. Some might prefer paper and pencil, an Excel spreadsheet or some new smartphone apps (everydollar.com or youneedabudget.com). Whatever your preferred method, plan out your expenses each month.
3. Stop borrowing away your future. With $26,000 in student loan debt, you could be strapped with paying $270 a month for 10 years (bankrate.com) after graduation. That could delay buying a home, saving for a new car or planning out that summer wedding. If you currently take out student loans to pay for your education, do all you can to limit that amount each year with attempts to pay for school out of pocket. It is possible to get through college without student loans: Work a second job or overtime hours this summer, find a part-time or student job next fall (careers.alaska.edu), reduce your expenses, apply for scholarships (studentscholarshipsearch.com). Do whatever it takes.
4. Save with a goal in mind. That goal should be paying for next year’s tuition or a amassing a security deposit for your apartment after graduation. While you might want to splurge on a new mountain bike, a four wheeler or buy a better car, wait until your college degree begins paying you for all your hard work. Take a few minutes this weekend to make a list of your most pressing needs in the next six months. Determine how much each will cost and set a plan for getting there.
5. Stay on track by taking courses this summer. These days, it’s challenging to finish a degree in 4 years. UAF’s Factsheet indicates the 6-year graduation rate for bachelor degree students is 39%. The longer it takes to graduate, the more money it costs – not only in college expenses, but in the future salary you give up by staying in school longer (alaska.edu/stayontrack/). Stay on track, catch up on your credits and graduate sooner by taking an eLearning or Summer Session course. Taking a summer course can be financially helpful too as eLearning and Summer Session courses are offered at in-state tuition rates for everyone. And online courses can be completed from anywhere you go.
Start a financial action plan now for summer and fall semesters.
Tim Stickel teaches online Personal Finance (BA F254X) for the School of Management, works for UAF eLearning and Distance Ed, is a trained Financial Coach and Facilitator for Financial Peace University and Dave Ramsey Solutions, and advocates his principles.