FAQs

Budgeting

1. I can keep track of my spending in my head, but there's another overdraft notice. What do I do?

Credit Cards

1. The credit card booth is right here, and they're going to give me a card! I’ll just look at the paperwork and interest rates later.
2. The credit card limit means spend all the way up to that point, right?
3. Does it matter if I'm late making payments?
4. How can I keep track of my credit score?

Financial Literacy

1. What is Financial Literacy?
2. Why should I care to learn about financial literacy?
3. I don't have much money right now - how will learning about managing money help me?
4. "I've got tons of income - student loans, financial aid, a high credit limit, parental support. I don't have to think about money!"
5. What are the most common mistakes college students make when it comes to their finances?
6. What mindsets do you think might contribute to those mistakes?
7. Any other mistakes you've seen?
8. How can students become smart financial planners? Any suggested resources?

Loans

1. "All student loans are the same - and if they're offering to loan me that much, I should take it. Easy money!"
2. "I'm poor now, but I'll have plenty of money when I graduate. I'll just pay back my loans then!"

Saving/Investing

1. Saving is hard, especially when I'm not really making much money. How am I supposed to save and make the most of my college experience?




Budgeting

1. I can keep track of my spending in my head, but there's another overdraft notice. What do I do?
No one can keep track of spending this way. Even if you could, why would you want to? Overdraft fees these days are usually a result of two prime culprits: debit card over-usage and recurring online purchasing. Using a debit card and purchasing online services and publications is not a bad thing. It's just the reality of our new world. Everything is electronic. However, keeping a check registry with you at all times and for all purchases would save you a lot of worry and grief. You actually need to feel the pain of giving your money away. You need to see your bank balance dwindle before your eyes so you can appreciate your purchase. You ask yourself "Do I really need this?," "Maybe I can get it next month when I have more money," "You know I'm only going to use this a couple of times anyway, then it will get buried in my closet." Not having the stress of overdrafts is a great thing and frees your mind to concentrate on other things in your life. You don't have to be rich for money not to be an issue or a concern; you just have to be wise.

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Credit Cards

1. The credit card booth is right here, and they're going to give me a card! I’ll just look at the paperwork and interest rates later.
RUN! Don't look back! RUN! If you are not pulling in an income (or are pulling in limited income), you have no business even talking to a credit card company. If your parents want to set up a credit account, then that's fine. They can help you be responsible with it. However, getting a credit card on your own while you are a college student with limited or no income is simply a bad idea and will end up costing you more in the long run - that TV on sale at Wal-Mart for $200 could end up costing $400 or even more! Six months later, you could easily be struggling to make payments and your credit has crashed and burned. You can buy an expensive HDTV and Blu-Ray Player and be the entertainment hub of your hall, but you will be paying for it for months if not years later.

2. The credit card limit means spend all the way up to that point, right?
Your credit score considers many factors, but one that is not well known is the amount of your credit limit that you use. Yes, that means if you have a $1,000 credit limit and you have used $800 of it, then you have a knock on your credit score. Large credit limits are great for just-in-case situations, acts of God, the unforeseeable unfortunate mishap, etc. They are not for shopping sprees. Use only what you need and not a penny more, and pay it off each month. If you can't pay it off by the next month, you don't need to be charging it. Also, try not to charge your groceries, restaurant bill, or fast food. You don't want to be paying interest on food you've long ago digested.

3. Does it matter if I'm late making payments?
Another part of your credit score includes making payments on time. While missing a payment is far worse, being late is a big knock against your credit, as well. No matter how well you do after that, it stays on your credit report for months if not years. This is another reason to avoid credit cards and unnecessary loans. Until you fully grasp the impact they have on your life, you should stay clear of them.

4. How can I keep track of my credit score?
Students need to sign up to view their free credit scores. There are several, but FreeCreditReport.com is one of the more prominent ones. Students should keep track of their credit score, stay up-to-date with their credit cards and loans, make on-time payments, keep a check registry even for debit card and online purchases, and communicate with their credit card companies and/or lenders if they run into any difficulties making a payment.

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Financial Literacy

1. What is Financial Literacy?
Financial literacy is the ability to understand and properly apply financial management skills. The primary principles of financial literacy include learning how to budget, track spending, effectively pay off debt, and properly plan for retirement.

2. Why should I care to learn about financial literacy?
Financial literacy helps individuals become self-sufficient so that they can achieve financial stability. Being financially illiterate can cause you to make poor choices when it comes to taking on loans, spending outside of your means, racking up credit card debt, and other negative outcomes.

3. I don't have much money right now - how will learning about managing money help me?
While it's true that many students may not have much income during college, the skills you learn now will help ease the transition once you do graduate and start earning a full-time salary.

4. "I've got tons of income - student loans, financial aid, a high credit limit, parental support. I don't have to think about money!"
While some students may not have a ton of income throughout college, others may be blessed with more than enough. However, past economic crises have taught us that nothing is for certain - the wealthiest person can be living large one month, and bankrupt the next. Count yourself lucky that you have the opportunity to build a solid financial foundation. Save. Limit your loan usage. If you don't need it, don't buy it, but if you do need it, buy with the money you have - not money you borrowed.

5. What are the most common mistakes college students make when it comes to their finances?
The most common mistakes are procrastination, not updating information, and probably the most common mistake of all is not creating and sticking to a budget.

6. What mindsets do you think might contribute to those mistakes?
Part of this comes with youth and inexperience, and the simple fact that dealing with finances is not as fun as hanging out with your friends. Many adults feel the same way about dealing with finances so you can't blame students for their natural aversion to these issues, but these are still important matters students must undertake with care and attention.

7. Any other mistakes you've seen?
Living "the high life," students will borrow up to their Cost of Attendance, which they certainly can do, to help with their living expenses. However, some students choose to live in the more lavish apartments with higher rent, eat out often, and spend more money than they should on weekends. Suddenly, that extra money they had for the fall semester is gone. They lose their scholarship or grant and can't get their loan increased. Therefore, students don't get back as much in the spring as they had in the fall, and they don't know how they are going to pay their rent for the semester. If you have a credit balance, use it sparingly and save as much of it as you can. You can use it to create a small savings account for yourself to use for living expenses throughout your college years, or you can send some of it to your lender to reduce your loan debt.

8. How can students become smart financial planners? Any suggested resources?
Baylor's Student Financial Literacy is a great place to start. We not only provide information on budgeting and debt management, but our website offers online resources that students, alumni, faculty, staff, and parents can access from anywhere. On our site, students can create an account in "Financial Literacy 101" and access tons of tools like calculators for estimating financial costs and a Loan Snapshot where you can upload your federal loans. For additional one-on-one expertise, connecting with a financial literacy coach or financial aid counselor is an excellent way to get the details of your awards and to help you manage your loans.
More Information: https://www.baylor.edu/sfl/index.php?id=967219

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Loans

1. "All student loans are the same - and if they're offering to loan me that much, I should take it. Easy money!"
All loans are not the same. Not by a long shot. Federal education loans are still the best loans out there for students. They do not require a credit-worthy co-signer, they are backed by the federal government, and they have some of the most favorable rates you can find. In the world of alternative education loans, each lender will offer different interest rates, repayment options, interest rate reduction incentives, origination fees, processing feed, etc. It's best to start with lenders with which you are comfortable. From there you compare their loan options to each other and find the one that works best for you both presently and for the future. Looking at a loan as easy money is a trap. Students need to remember that it's not free money. It's a loan. Someone is letting you use "their money," and you can rest assured that they will be calling on you to get it back with some extra (interest) just for the privilege of having used "their money."

2. "I'm poor now, but I'll have plenty of money when I graduate. I'll just pay back my loans then!"
This is a fairly true statement, but you should still be careful with all your loans. Students are advised to create a worksheet to determine just how much they will need to take out in loans to not only help them pay their university charges but also whatever they may need for their living expenses. Students should also always keep in mind that life can change direction on dime. At 18 or 20 you may have plans to be a corporate attorney making hundreds of thousands of dollars a year, then find you have a passion for social work or pro bono litigation. All three of these are great career paths, but students should bear in mind that their earning potential can change. Consequently, accruing the smallest amount possible in loans is a wise choice.

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Saving/Investing

1. Saving is hard, especially when I'm not really making much money. How am I supposed to save and make the most of my college experience?
It is hard to save while in college because most college students live month to month on finite budgets. But here is a suggestion that can help you save and make the most of your college experience: work as much as you can in the summer and save as much of that money as you can. If finances are an issue, going home for the summer allows you an opportunity to have your room, food, and living expenses covered. You can take the summer to work, save, and limit your expenditures. Divide what you have saved by nine months to use during the academic year. Now, not only have you saved some money, but you have added some more work experience to your resume and prospective future employers will be impressed. In some cases, attending summer classes is also financially beneficial. Take advantage of the discounted summer tuition rates and possibly accelerate your degree plan and graduate a little early.

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