Six financial steps to take when you get into and out of college

Starting your college life — or entering the real world after graduation — is equal parts exciting and intimidating. You might be living away from home for the first time, getting your first job and generally learning the ropes of adulting. A big part of the equation is getting a grip on how to manage your finances.

Money worries are nothing new to college students. Consider these numbers:

  • 83% of college applicants estimate they’ll spend more than $50,000 to earn a degree, according to a Princeton Review survey.
  • That same survey found that 42% of would-be college students are worried about ending up knee-deep in education debt.

Luckily, you don’t have to head into college feeling completely clueless about money. There are some important steps you can take as a student — as well as once you’ve finished school — that can help you build a solid financial foundation.

Make These 3 Money Moves In College

Whether you’re an incoming freshman or you’ve made it over the first-year hump, it’s never too early to start working on your finances. If you need a little nudge on what to do first, here’s your unofficial syllabus to passing personal finance 101.

1. Build Your Budget

A budget is one of the most important financial tools you have if you want to take control of your money in college. Nine in 10 students make a budget while they’re still in college and 36% of students consider themselves to be “die hard budgeters,” according to a 2018 Harris Poll survey.

So what is a budget? The simplest way to think of it is as a plan for spending money each month. On one side, you have your expenses; on the other, your income.

To make your budget, add up all the income you receive in a month. As a college student, your income might come from a part-time or full-time job, paid internship, work-study program, help from your parents, or a side hustle. Though less common, you might even have some income from investments or a business you own.

Next, add up everything you spend money on each month. That includes food, housing expenses, and any fees or costs associated with extracurricular activities, transportation and entertainment.

Now, subtract your expenses from your income and boom! — you’ve created your first budget. From there, you can fine-tune it by looking at how much you having coming in versus going out.

2. Study Up on Credit

Credit and personal finance aren’t things most schools teach you about, but they’re vital for getting a good start financially. When it comes to credit, it pays to learn the basics in college, like:

  • What credit reports are and what information is included in them.
  • What credit scores are, where they come from, and why they matter.
  • How to open a credit card and why you might want to do so as a college student.

If all that sounds Greek to you, here’s the Cliff Notes version. A credit report is a file that includes your personal information and information about your credit history. So, your credit report would have your name, date of birth, social security number and address listed, alongside things like any credit card accounts or loans you have in your name.

Credit reports come from the credit reporting bureaus: Equifax, Experian and TransUnion. The information in your credit report is used to generate your credit score. A credit score is a three-digit number that’s essentially like a grade on how good (or bad) you are when it comes to managing debt and your finances.

FICO credit scores are the most popular credit scoring model. Your FICO score is based on, in order of importance:

  • Payment history (35% of your score)
  • Amounts owed (30% of your score)
  • Account age (15% of your score)
  • Inquiries for new credit (10% of your score)
  • Types of credit used (10% of your score)

Lenders use your credit scores to decide whether to lend you money and how much interest to charge. But what if you’ve never had a credit card or loan in your name? If your credit file is thin, step three outlines a simple way to fix it.

Pro tip: Learn how to get your credit report for free!

3. Open Your First Credit Card

Credit cards tend to get a bad reputation among college students. In the WalletHub survey mentioned earlier, 45% of students polled said that credit card debt was more worrisome to them than student loan debt.

But a credit card can be a credit-score booster if you’re using it correctly. Keeping your balance low and paying on time each and every month can be a fast-track way to establish your credit score and build a positive credit history.

Like anything else, you just need to do a little homework first. Start by thinking about the type of card you want to open. For example, if you take frequent road trips back home or you’re considering a semester abroad, then a travel credit card that earns miles or points might be a good fit.

On the other hand, if you mostly charge things like dinners out, groceries and gas, you might want to grab one of the best cash back credit cards. You can also try credit cards for bad credit if you have no credit history or a low credit score. Meanwhile, low interest credit cards are worth considering if you know you’ll carry a balance month to month and you want to keep the interest charges as low as possible.

If you’re looking for some specific recommendations on reward card offers that are great for students, here are a few to consider:

You may also want to check out business credit cards if you’re running a side gig or business when you’re not busy with classes.

Tackle These 3 Financial To-Do’s as a College Grad

Once you get out of school, it’s time to focus on the next phase of your financial life. Here are three important tasks to check off the list.

1. Create a game plan for student loans

As of 2019, the average student has $31,172 in education debt. If you went to a pricey private college or you’ve got your sights set on grad school, your final student loan debt total could be even higher.

You could bury your head in the sand and ignore your debt, but that could land you in hot water with your loan servicers, not to mention wrecking your credit. The better option is to come up with a strategy for managing your loans.

Ideally, this is something you’re working on in the months before you graduate, but if you’re already out of school, it’s not too late. Here’s what your plan might include:

  • Review each loan you have and make note of the total amount owed, the interest rate and whether your loans are federal or private.
  • Check the default payment plan you’re enrolled in. With federal loans, for example, this is usually the standard 10-year repayment plan.
  • Go over your budget to see if you can afford your estimated loan payments, or if you need to seek an income-based repayment plan for federal loans.
  • Consider whether it’s worth it to consolidate federal loans to make them more manageable.
  • If you have private loans, determine whether refinancing them at a lower interest rate is an option.

Remember also to take advantage of other money-saving opportunities where your loans are concerned. For example, many loan servicers will offer a discounted interest rate when you sign up for auto-draft to make your monthly payment. If you have your first real job lined up, you could also check with your human resources department to see if loan reimbursement or forgiveness is included in your employee benefits.

2. Start building your emergency cushion

It’s generally regarded to be wise to have at least $1,000 in savings, and if you don’t, it’s time to make that a priority after graduation. Creating an emergency fund can help you avoid racking up credit card debt unnecessarily when life throws you an unexpected curveball.

If you’re wondering where to find the money to save, start by checking your budget numbers again. Is there anything extra leftover that you could commit to a savings account each month? If the answer is “yes,” consider that your savings seed money. And if the answer is “no,” then look again to see where you can trim your spending to make room for saving.

Need more ideas on how to get money for savings? Here are a few useful tips:

  • Open a cash back rewards credit card and have the cash back you earn each month deposited right into your savings account.
  • Start a small side hustle, such as tutoring or driving for Uber, and funnel that money into savings.
  • Use cash back apps like Rakuten or Ibotta when you shop online to earn cash back on top of what you’re earning with your credit card.
  • Check to see if your bank offers a cash back rewards program for checking accounts to earn money when you spend with your debit card.

3. Think about the long term

Last but not least, consider what kind of financial goals you’re hoping to reach and what it’ll take to get you there.

For example, you might want to buy your first car or buy a home down the line. For that, you’ll need good credit to get approved and land a great interest rate. You can start working toward that goal in college and after college by using credit cards responsibly and staying on top of your student loan payments.

Saving for retirement is another big money goal and you can get ahead by checking out your employer’s retirement plan in the early stages of your career. An individual retirement account or IRA is another way to save if you don’t have a 401(k) at work.

Whatever your financial goals are, make sure they’re specific and that you’re tracking your progress. For example, that might mean reviewing your credit card statement each month to see what you’re spending or checking your credit reports each quarter. The more tuned in you are to your money and credit, the brighter your financial future is likely to be.

Rebecca Lake

Personal finance writer and small business expert

Rebecca lives on the North Carolina coast with her two children an assorted collection of pets. In addition to freelance writing, she also authors a blog focused on making and saving money.