Before we begin, let’s start with the general understanding that money itself has a cost. It sounds strange to those who are not in the financial world, but a dollar borrowed from one source may be more expensive than a dollar borrowed from another source.
If you borrow a dollar from a friend (pay them back- they WILL remember), they likely will not charge you to borrow it. Borrow it from a credit card company, and not only do you have a stack of papers to sign, they may charge you $.25/per year to borrow that dollar. This, of course affects the overall value of each of the two dollar examples. ($1.00 – $0.00 = $1.00; $1.00 – $0.25 = $0.75)
Okay. Now we understand this basic concept of the cost of money, let’s look around the world of college and find the pitfalls.
1. Credit Card Debt
Personally, I’m dismayed college campuses allow credit card vendors on campus to hawk their services, but they do. This is probably one of the best opportunities to go from having a little money in the bank to swimming in debt. The typical sales pitch includes a very charismatic handsome or beautiful salesperson offering you teddy bear/water bottle/cash back “just for filling out an application”. You wouldn’t want to say no to this beautiful person who just became your best friend, would you?
2. Student Loans
This is often times one of the first opportunities a college student has to make a big financial decision: How much of their living expenses should they finance versus getting a job to cover? This is an individualized question with no cookie cutter answer, but generally, stay away from borrowing as much as you can for the above illustration reason. At some point, you will have to pay it back, and that money will have to come from somewhere. When it comes from that somewhere, it will not be available for other things in the next life stage(saving, investing, house, marriage, etc).
3. Get in and Get Out!
Students, yes, college can be a blast, but remember, the clock is ticking. The longer it takes you to finish your degree, the more expensive college becomes. Someone has to pay that bill. Also, if you stay in school longer than you should, realize you are delaying your earning potential.
4. Price College Wisely
Sometimes that Ivy League degree that costs half a million dollars may not be worth it- especially if the course of studies does not justify the expense. Many students (including high performing students) are choosing to go to a local community college to complete general courses prior to transferring to their favorite notable university to slash the cost of college almost in half! In the real world, it is true that most prospective employers do not care where you went to school if you are applying for your second or third job. They only care about your work capabilities and your likelihood to make a strong and positive impact at their organization.
5. New Cars
Everyone likes a new car. Stop reading for a moment and imagine the smell of a new car. Mmmmm. Okay, that was fun. That costs you $30,000-$40,000 minimum for your new fancy car smell. By the way, some of the worst driving I’ve ever seen in my life has been in and around a university campus. Seriously, some of these students think they’re driving bumper cars. Do you want your fancy new car to endure that? Perhaps you should consider finding a dependable mode of transportation or keep that used car running a while longer. In most cases, even a costly repair or series of repairs beats a car note. Especially when you watch people try to parallel park for the first time. While they’re talking on their cell phones. When they’re late for class.