After reading an article on SmartMoney on what a student needs financially for college, I thought I’d give my own thoughts about the things you’ll need to establish a solid foundation and succeed financially in college. Before I do that, in a future article (ha! tricked you), I wanted to explain how I dealt with finances in my “formative years,” i.e. college. Personally, my financial situation was largely unchanged between the time I entered college and the time I left from a liquid asset perspective. My bank account balance when I started in 1998 and when I finished in 2003 was probably very close numerically. In looking back, I’m glad that I didn’t fall victim to credit card debt and the other traps of our consumerism culture. That’s not to say I didn’t spend money, I certainly did, but I’m glad I didn’t spend in excess – which is the difference. It also helped that Pittsburgh, PA is an inexpensive town to live in.
Now, I said it was largely unchanged from a liquid asset perspective; from a non-liquid perspective, I was in the hole about twenty thousand dollars because of student loans but I think that’s acceptable because it’s being financed at 3.5% (all consolidated Stafford loans). From a retirement aspect, my father told me about Roth IRAs so I had one of those as soon as it was possible, though it was still recovering from the 2001 burst like everyone else’s.
When I went to college, I did not have a credit card. All I had was an ATM from a bank account at home, a checkbook, and my wits. I soon signed up for an AT&T Universal card that no longer exists and used that card for approximately 7 years, earning 0% cashback but also paying no annual fee – which was good enough back then. I didn’t get a local bank account until my sophomore year and basically withdrew enough money on my trips home to cover me the couple months until I would go back.
Earning Income in College
I think my entrepreneurial spirit was fostered in my time-abundant college years because throughout high school I had believe that hard work in school is what you needed because it would get you into college and get you a good paying job. While I still believe that, I think that the idea that I could sell something on eBay and earn as much as I did doing a work-study at minimum wage (or slightly above it) really turned my world upside down. While I continued to work during the summers and winters, during the school semester I would instead sell items on eBay or work on side projects rather than take on a time consuming job. With summer internships, I was learning valuable knowledge and gaining work experience that would translate into something that would extend beyond my job. With a semester work-study, I learned nothing and so it was nothing more than a paycheck… well I might as well get paid working fewer hours and doing things that were fulfilling in other ways. So, my earning of income was from summer internships, winter jobs, and odd projects during the school year.
Spending in College
The limited amount of cash I kept on-hand and the “poor student” mentality reinforced the fact that I couldn’t be spending like crazy, which was good, because if I spent all my cash then I’d be in trouble until my next visit home (this would only be true for my freshman year but it was enough to reinforce that mentality forever really). What helped a lot in curbing spending was the fact I didn’t have a car, which meant no maintenance bills but also meant I was going to malls to buy clothes or things like that. My spending was basically on food, alcohol, surprise surprise, and electronics like an XBox, computers, and other gadgets. Since I didn’t make any big purchases and Pittsburgh was so cheap, it wasn’t that hard to not spend a whole lot of money.
Saving in College
Heh, didn’t really do that outside of a Roth IRA. I can’t say I was financially prudent besides spending less than I earned though even that wasn’t a conscious decision as much as it was a product of not spending what wasn’t in my wallet.
By the time I left college I probably had two or three credit cards, relying primarily on a Discover card because it offered double cashback ($20 cashback became a $40 gift certificate). Discover was my main card for that reason and I used it so often, mostly for online purchases that I would resell, that I had memorized the card number. Other than the credit cards, my financial “evolution” wasn’t really as far as my writing today would indicate. I didn’t learn much about financial topics until much much later so if you’re going into college or just leaving college and find yourself clueless, don’t fret – I didn’t know much either (not that I know a ton now but writing for this site gives me ample opportunity to learn and get corrected when necessary).
Ultimately, I think I certainly made many financial mistakes while in college but the fact that I lived in a cheap city and because of my situations, the mistakes were minor or practically non-existent. The credit card I had was pretty much worthless except in emergency situations and I was pretty much on a financial island, but I didn’t know that and luckily it didn’t hurt me. Pittsburgh was inexpensive so even if I didn’t have a budget (though I admit right now I still don’t have a budget), my subconscious kept my spending in check enough that I didn’t get into any trouble. Knowing what I know now, I probably could’ve left college with a few more dollars saved while still having as much fun as I did and in a future article I’ll write what my ideal financial college setup would’ve been.
If you want to share your college financial war stories, good, bad or ugly, please do!