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Digm Piece (Op-Ed)

Top Ten Freshman Money Myths

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Starting college is one of the most important and exciting times of your life. Now that you’re all “checked-in,” enjoy your college experience without worrying about where your next meal will come from by chasing away these common freshman money myths.

1. Parents are Money Moguls

While talking to your parents may not be top on your to-do list right now, it is important to clarify who is paying for which college expenses. For example, if your parents are helping with tuition costs, what about room and board, or rent?  Will you be responsible for covering the costs of books and various living expenses such as your cell phone bill and internet access?  You also should agree to a backup plan for emergency expenses that may come up such as car repairs or travel.

Also, remember that if you’re taking out student loans, you will be legally responsible for paying them back; although your parents may offer to help.  Some students are surprised to discover that their parents took out Parent Plus loans or private loans, and expect the student to repay them—so have a chat ahead of time. Check out our post on how much college costs here for more insight.

2. All Banks are Created Equal

Checking accounts are great money management tools which provide quick and easy access to your money; offer safety and convenience; and are much less expensive than using other services such as check-cashing stores, money orders or stored value cards.  However, checking accounts are not all the same, so do a little research and choose an account with little or no cost to you. Also, look for one that offers services such as online bank statements and free online bill payments. Oh… and be sure to compare their fee schedules. Once you have an account, always have enough money in your account to cover your purchases, ATM withdrawals and written checks.

3. My Financial Aid Package is Solid as a Rock 

Your parents may have completed most of the Financial Aid application process, but now it’s time for you to take a more active role and get a grasp on how the system works.  Review your Financial Aid package and make sure you understand the difference between actual grants which don’t have to be repaid and student loans which have to be paid back even if you don’t finish your degree.  Be sure to only borrow the amount you require to meet your educational and essential living expenses.  And remember, you must re-apply for Financial Aid every year by filing out the FAFSA; your financial aid package may change depending on your family situation and/or changes in available federal, state and institutional funding each year.

4. Budgeting is for Geeks

One of the biggest challenges freshmen face is making their money last for the entire school year.  You may have savings from summer earnings or some student Financial Aid refunds leftover after your tuition and other fees have been paid. However, those funds will quickly drain away unless you set up a budget right from the start.

Creating a simple monthly plan will remind you of which monthly bills you have to pay such as rent, car insurance or cell phone charges and how much you may have leftover for miscellaneous expenses such as food and entertainment.  Use a budget worksheet to make it easier and be sure to revisit it during the semester to make adjustments as needed.

5. Tracking Expenses is Boring 

You will be surprised at how quickly expenses such as doing laundry and going out to eat with friends can add up, so be conscious of what you are spending and set priorities.  Save money on books by comparison shopping and buying online using sites such as CampusBooks.com.To guarantee that you’re ordering the right edition, be sure to use the correct ISBN number. Also, look for free activities around campus because there is always something going on.  Use your budget to remind you of the things you must pay every month.

6. Banks Never Make Mistakes

Most banks and other financial institutions offer 24/7 online access to your account, so be sure to check recent transactions, account balances and your online statements often. Despite this convenience, it is still a good idea to keep separate track of your purchases and withdrawals, and keep your receipts. Merchants may not process transactions right away or may make errors. If you see something incorrect on your statement, be sure to contact your bank right away. You also may want to set up alerts if available at your bank that will automatically notify you if your account goes below a certain threshold or if a large purchase was made. And you’ll also want to stay on top your account for errors to make sure you’re not getting any fraudulent charges.

7. Use a Credit Card for all Your Purchases

If you do have a credit card, either in your own name or one on your parent’s accounts, only use the card for emergencies.  Keep your credit limit low and be sure to pay it off every month to avoid interest charges.  If you are carrying a balance, set a goal to pay it off as soon as possible, and always pay on time to avoid late fees on top of interest charges.

8. Don’t Worry About Student Loans Until You Graduate 

Freshman year is a great time to estimate what your student loan payments will be when you graduate. It’s also a good idea to compare your estimate loan payments to the monthly income you expect to earn after graduating.  A good rule of thumb is to keep your student loan payments to less than 10% of your take-home pay.

9. Credit Scores aren’t Important for Students

Having a low credit score could affect your ability to rent an apartment, buy a car or even get a job, so be extra careful. Make smart money decisions, such as always paying your bills on time to protect your credit history. You can check your credit report for free once a year by visiting AnnualCreditReport.com.

Keeping your identity safe is also very important.  Never share your PIN number with anyone and never provide personally identifiable information such as your Social Security number or your mother’s maiden name to an online solicitor unless you are absolutely sure the request is legitimate.  Also, be sure to keep your important papers in a safe place and shred anything that an identity thief could utilize to access your financial and other accounts.

10I Got This

If you are feeling overwhelmed and concerned about how you are going to make ends meet, please don’t hesitate to talk to your parents, Financial Aid counselor or a trusted peer.  You don’t have to go it alone.

Digm Piece (Op-Ed)

Do What You Love for Free – Here’s Why

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This is ParadigmMoney.Com, right? So, speaking about a paradigm shift should come as no surprise. In science and philosophy, a paradigm is a distinct set of concepts or thought patterns, including theories, research methods, postulates, and standards for what constitutes legitimate contributions to a field. When speaking about money, most believe it is something you work for and not something that works for you. In all truth, the one percenters understand this concept quite well. In order, to wake up and do what you love, you too must shift your thoughts when it comes to finances.

Doing what you love for free allows you to create freely. You can come up with disruptive, out of this world, never seen before creations that will rock this planet. Take Elon Musk from South Africa, founder of X.com which went on to become PayPal and sold to eBay for 1.5 billion dollars. Musk is also the CEO of SpaceX which designs, manufactures and launches advanced rockets and spacecraft. The company was founded to revolutionize space technology, with the ultimate goal of enabling people to live on other planets. You may say, of course, he can do this, he is a billionaire and co-founder of Tesla.

Not true. PayPal, Tesla, and SpaceX are all products of Musk doing what he loved. As a child, he was an avid reader and taught himself computer programming leading to the creation of X.com. He dropped out of college to start a company with his brother and here’s what he had to say about that PayPal deal… “My proceeds from the PayPal acquisition were $180 million. I put $100 million in SpaceX, $70m in Tesla, and $10m in Solar City. I had to borrow money for rent.” Elon Musk’s current net worth is estimated to be at about $13.3 billion. No bad at all.

The reality of the matter is the less you are attached to money the more money flows to you. Pay more attention to creating things that move the culture forward. Starting at doing what you love with ultimately position you for financial success and happiness.

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Digm Piece (Op-Ed)

How Much Does College Cost?

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How much does college cost these days? If you’re preparing to go to college and will need to find a way to finance your own education, this is one of the first steps to figure out.  Then you’ll want to find out all of your options and create a plan. Here’s a quick breakdown on the typical cost of college. (more…)

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Digm Piece (Op-Ed)

My Biggest Financial Mistake

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Happy Financial Literacy Month…the month where we shine a spotlight on financial education and the importance it plays in our lives. I talked before about my financial bounceback and received a few messages from readers about how that story showed them that anyone can have financial hardships.

Now it’s time to be even more transparent. To kick off Financial Literacy Month, I want to share my biggest financial mistake to date in hopes to further inspire people.

Whenever I want to accomplish something, I start with a plan and follow it no matter what. Some people called it stubbornness, but I like to call it persistence. One day, my persistence bit me in the ass-et, causing all kinds of grief and hardship. Having a plan can be great, until it’s not.

At one point in my life, I decided to leave a great-paying job to become a full-time entrepreneur. I was on a quest to follow my dreams. I knew the pitfalls and risks that came with my decision, but I felt like I was immune because, well it was my calling. Within a few months of taking the leap, I fell behind on my mortgage and almost lost my home.

Letters from the bank — and ultimately, their lawyers — came pouring in. In no time, my family was facing foreclosure. This was the first time anything of this magnitude had ever happened to me. I didn’t know where to start or what to do.

My family and I braced ourselves for what seemed like the inevitable: we packed our bags with nowhere to go. Just when I thought all hope was lost, I learned about less extreme ways of handling and resolving missed mortgage payments.

One option was a short sale. I could sell my home for less than I owed on the mortgage, if my lender would approve the transaction. The outstanding balance would then be forgiven. Another option was a deed in lieu of foreclosure. This would allow me to voluntarily give up my rights to the property instead of going through the stressful and costly legal foreclosure process.

Ultimately, I didn’t have to do either because I found one more option. At the time there was a federal government program called the Making Home Affordable Program which helped homeowners avoid foreclosure. I was able to do a loan modification where my lender changed the terms of my loan to allow me to make lower payments so my family could stay put. It made staying in our home a reality.

The loan modification began with a three-month trial period. After I successfully made the first three payments on time, the modification became permanent. While that was great news, the delinquent payments remained a blemish on my credit report. However, time does heal all. As I continue to make on-time payments toward my mortgage, the delinquencies will eventually fall off. Lesson learned. The next time I follow a dream, I’ll do it a lot more carefully.

Now that I put all my skeletons on the table, what is your biggest financial mistake? Use the comments below to tell us about your biggest financial mistake, what you learned from it and how you overcame it.

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