It is tempting for a college student struggling with work, school, and the costs of a college lifestyle to stay out of credit card debt. Since the average graduate leaves school saddled with over $20,000 in student loan debt, having a massive credit card bill on top of that is a recipe for financial disaster. Here are some tips for college students to avoid credit card debt while in college:
Have A Budget
Even if you don’t make much or have too many expenses, chances are you often overspend in areas like entertainment and food. Regardless of how much you make or are obligated to spend in essential living expenses, having an outlined budget of for unexpected expenses and expenses related to fun/activities is crucial for keeping you in check. A good rule of thumb is to keep a budget of 5% of your monthly income for entertainment purposes. So if you make $2000 a month at a part time job, you should keep your entertainment expenses below $100. Food should be kept below %15, and set aside another 5% for unexpected medical costs like a trip to the Dr.
Live Below Your Means
Going hand in hand with having a budget is living below your means. For some college students, the lifestyle of eating Ramen noodles every night is expected. After all, how many rich college students do you know walking around with expensive clothes and driving a BMW? Probably very few. To live below your means is to spend less than you make by pretending you actually make less than you do. If you set aside 10-15% of your monthly income towards a savings, or better yet future student loan payments, and live off the remaining 85-90% you will find that you graduate in a far more secure financial position than most.
While using credit cards to bridge this 10-15% gap can be tempting, remember that you don’t need to pay for everyone’s pizza that night at a party and you certainly don’t need to buy your friend a pair of designer clothing or the latest iPhone. Remember, there is plenty of time to have nice things when you have the earned income to support it. For now, focus on getting a solid financial footing while you earn your education.