Heading Back to School—On a Budget

The leaves are ready to fall. Your tan is beginning to fade. There’s no question about it—the school year is starting.

This year more than ever, money is probably on your mind as you head back to class. But you don’t have to let finances tie you down—or worse, bury you in a mountain of debt!

Just follow these six, smart money rules:

Have a Budget

First pop quiz of the year: How much money do you need for books, utilities, transportation, and food combined? How much do you spend going to the movies or buying coffee each month? You probably don’t know—unless you write it down in a budget. Use ASA’s budget worksheet to record all your fixed and variable expenses—then stick to your budget like glue.

Go on a Spending Diet

Now that you know what you’re spending, it’s time to cut out the fat. Your ride may be slick—but taking the subway or bus instead means saving a bundle on gas, registration, insurance, parking, and repairs. And do you really need that fancy cell phone plan? After all, texting may be cool—but (free) face time is more fun. Used books beat new ones—they’re cheaper and may have handy notes from the previous owner. You can also save big by holding off on buying a computer and using your school’s computer banks.

Live Like a Student

Why live in luxury when you’re a student? Rent can be one of your biggest expenses. Slash costs by having multiple roommates and choosing a less glamorous part of town. Better yet—live at home if you can, even if it’s just for a semester or two. The savings on rent and utilities—and food, if you can get some home-cooked meals out of the deal—can help you save up for the future or make a big dent in your debts.

Join the Force

The workforce, that is. A part-time job, whether on campus or off, can be a great way to supplement your income and bulk up your resume. An added bonus: A job is a terrific chance to make new friends and bond over that daily grind.

Choose Paper over Plastic

I’m not talking about the bags at the supermarket here. I mean paying with cash versus credit. It’s easy to whip out the credit card for everyday items, like a latte, a dinner out, or a shopping spree at your favorite store. Unfortunately, that leads many students to end up with mountains of debt they can’t repay.

Keep in mind that, because of interest rates, a purchase made with a credit card ends up being even more expensive when you pay it off than its price tag says the day you buy it in the store. For example, if you bought a $35 shirt on a credit card with a low, 10% interest rate, then carried the charge as a balance on your card for five years—say, until you finished school and felt like you were making good money—before you paid it off in full, that $35 sale shirt would cost you almost $58. At 20% interest, closer to what most retail store cards charge, the shirt would cost you almost $95. It suddenly seems like a much more expensive shirt, right?

The best solution is to just buy what you can afford with the money in your pocket. If you don’t have the paper, it’s not going into your closet—or your stomach!

Borrow as Little as Possible

If you’ve followed the five rules above, you should be in good shape to follow this one: Don’t borrow more than you need to. Every kind of loan—even federal ones, with their low interest rates—is a serious responsibility and must be repaid. The loans you borrow today will mean loan repayments taken out of your paychecks for years to come.

Because having to live like a student when you’re all grown up due to your debt—that’s just no fun at all.

For more tips on saving money while in school, visit the borrower site on amsa.com. And have a great start to the school year!

Posted by Michael Ryan on September 12, 2008 at 04:43 PM EST

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