Planning for college is one of those things that sneaks up on you right? If you are a parent, you can’t believe how time has flown. As a student, you have no idea what you’re doing. With no concept of what college life is, and how expensive college really is, the parent-son/daughter team jet-sets into the unknown.
But what if there was a way to get a leg up? To get insider tips on how to be financially prepared for college while still in high school? Here at Golden Financial Services we love getting our friends a head start on the right track. With that in mind, here are some tips to be as financially prepared as possible for college, while still in high school.
Avoid Student Loans at (Almost) All Other Costs
The term “student loan,” in reality, is akin to the term “predatory loan” but just with a nicer sounding name. Student loans are designed to reach a youthful audience, where students are backed by parents with the best intentions for their grown children as they step off into another world, away from parental guidance. The lender is banking on the idea that they can secure a high-interest loan with the student, and have a safety net of a guarantee by having the parents as a back-up in case the student either can’t pay the loan or if the parents are paying for the loan from the beginning.
Oftentimes students are presented with the loan application on the spot, without the consultation of parents. Knowing the terms of the loan before signing any paperwork, if you must take out a student loan, is vital. Just remember: You can take the form without signing anything, and consult together on the need for a student loan. According to Forbes, student loan debtors owe a combined $1.5 trillion as of 2019. The student loan debt epidemic has become so large, it is affecting the housing market as collegiate graduates continue to spurn homeownership in favor of staying longer in their parents’ homes, or renting with several roommates. The primary cause: Mounting student loan debt that is crippling their early careers at entry-level positions.
DaveRamsey.com drops some perspective this way: “For example, did you know that 55% of millennials who are paying on student loans say they are postponing having children? Or that 41% are delaying getting married? Or that 86% have made career sacrifices because of their student loan payments? Y’all, that’s ridiculous.” We’d suggest exploring other options and using student loans as a last resort.
Take a Seat, Use Online Tools to Calculate Your Expenses and Come up with a Budget Plan
While you might be thinking, “Why didn’t this blog start here?” we actually are that serious about student loans that we had to put it first. And we’ll probably mention it again further down in this blog.
Moving on, the first step in actually planning finances is to sit down with some tools and figure out what your real income vs expenses spread looks like. Golden Financial Services has a few free tools you can use to calculate your budget and debt. Specifically, start with a Debt Calculator and account for every expense, no matter how small. Once you know your monthly debt amount, slide over to the Budget Calculator so you can compare monthly obligations to monthly income. Additionally, if you can budget aggressive debt payments early, use our Snowball Payment Calculator to start making a dent in your debt today. Not familiar with the debt snowball payment method? We’ve covered it a few times in our blog.
It’s not as simple as simply having extra money, as we all well know. Living within your means is the other element to this tip. Aptly named TheBalance.com shares some insights: “A budget helps you see what you’re spending so you can avoid going into debt to maintain your lifestyle. As a college student, expensive electronics, going out with your friends and eating out multiple times a week are likely going to become a thing of the past. Make sure that you’re meeting your financial obligations before you start to spend on frivolous items that aren’t necessary for your survival. Remember, college is probably going to be a time of your life when you make very little money, so you had better be prepared to make some sacrifices.”
Now armed with concrete tools, knowing what you have in extra income at the end of each month can prepare you for payments on tuition and textbooks.
Open a Savings Account
Specifically, open a 529 college savings account. These types of savings account offer tax-deferred earnings and tax-free distributions on education expenses. SEC.gov offers a longer summary: “A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.”
The piece continues: “There are two types of 529 plans: prepaid tuition plans and education savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsor a prepaid tuition plan.”
Final Thoughts
Finding the right college for a specific set of skills (and dreams) is still the top priority. However, taking the necessary steps to be prepared for college is just as important. It’s never too early to start planning. Use online tools to know your limits, look into government-funded programs to assist you with creating wiggle room in your income, and avoid student loans at all costs!
If you found our blog looking for financial advice or assistance with credit card debt relief or debt consolidation, call Golden Financial Services today at (866)-376-9846 or info@goldenfs.org. You can check out the rest of our blog here, and do your research on our services here. Let’s talk soon!
