5 Financial Mistakes You Made in College and How to Fix Them

September 2, 2014

Written by Tami Tolsma

College: some of the best years of your life. Hopefully you look back on your college years with fond memories of good friends, fun activities, and hard tests.  Unfortunately, there are often a few bad financial habits you may have formed during these few years that could have a negative long term effect on your wallet. Here are a few money-savvy tips to break some of the typical pitfalls of college finances.

 Financial Mistake #1: Failure to save for your future.  College is a period of life when your cash outflows are significantly greater than your inflows.  But the earlier you can start socking away money into your Roth IRA or company retirement plan, the better!  I’ll never forget sitting in my 10th grade World History class listening to my favorite teacher take a detour from World War II to give us a valuable time-value-of-money lesson similar to the following.

Say you were to save $1,000 per month for a 10 year period from age 25-35 and then cease all contributions for the next 20 years.  Assuming you made 6% interest on your contributions, by the time you were age 55 you would have around $542,474.

But if you were to save nothing from age 25-35, and then for the next 20 years from age 35-55 you saved $1,000 per month (that’s twice as many contributions), your nest egg would only grow to $462,040— in spite of the fact that you put in twice as much at the same interest rate.  The key difference is when you put the money in.  The hardest time to save is early on when you are starting out.  But even if you start with $100 per month, try to get in the habit of saving as early as you can.  Your retirement self will thank you!  If you can’t do it on your own, you can always get help and learn how to start saving and investing your money.

Saving Pennies


Financial Mistake #2: Living Paycheck to Paycheck.  College students often don’t have a choice in this matter and it’s not really a mistake while you are in college.  I can remember working part-time all semester to have just enough to cover my fees and books for the next semester.  It becomes a mistake when you continue to live this way after you have graduated and started your career.  As soon as you are able, save an emergency fund.  Start with 3 months’ worth of your expenses and build up from there.  Yes it is an inconvenience if your car suddenly breaks down, but it shouldn’t cause you to lose years off your life worrying about where to get the money to pay for the repairs.  If you have so many expenses that you get anxiety in the days leading up to payday, maybe you should examine your finances and see which expenses are unnecessary and can be cut out to simplify your life.


Financial Mistake #3: Frivolous Spending.  Student loans are often unavoidable.  Your education has to be paid for and sometimes the only available option is loans.  However, leveraging yourself to purchase cars, computers, furniture, Christmas presents, or other “stuff” is a different story and completely avoidable.

  • Frivolous Spending on Expensive ThingsCan’t afford a brand new car?  There are plenty of reliable used cars out there that will get the job done.
  • Don’t have cash for that brand new game system your kid (or you) really wants?  Say no sometimes; they will probably only play with it for a month before they get sick of it anyway.

This mistake piggybacks on Mistake #2 and is becoming more and more prevalent in our culture as Americans feel the need to have the latest and greatest model of everything.  I’m not advising you to completely deprive yourself of every nonessential; sometimes a new gadget can be a great reward for an accomplished goal or a special treat to make someone’s day.  I’m saying don’t complicate your life by buying things you can’t afford on a regular basis.  You may have heard the saying, “The borrower is slave to the lender” without realizing it comes from Proverbs 22:7, but it is entirely true.  Minimizing debt in your life is never a mistake.


Financial Mistake #4: Fast food as your most frequent source of sustenance. Here’s a practical tip that can save you some serious “dough”: start packing your lunch.  The average American spends over $230 per month on food prepared outside of their home.  Fast food seems relatively cheap in the grand scheme of things – doesn’t it?  But those pit stops accumulate quickly. Say you get a combo

Eating Out Too Muchfrom your favorite drive through for lunch – most fast food places nowadays charge anywhere from $6-12 for that coveted sandwich, side, and drink.  If you were to make a sandwich at home and pair it with a banana, chips, and a drink you’re looking at less than $2 a meal.  Small choices like this improve your fiscal and physical health.  Instead of frequenting that greasy fast food restaurant, take your packed lunch outside and read a book or take a walk during your lunchbreak.  You’ll be refreshed and more focused when you head back to your desk.


Financial Mistake #5: Having a different credit card for every day of the month.  In college (and after) you are bombarded with credit card offers.  Companies offer special rates and rewards and it is a dangerous, slippery slope to get caught in.  According to, the average 2014 US household owes $15,480 in credit card debt.  It’s so easy to swipe a plastic card and take something of value home with you, but don’t forget that you will have to pay for that item very soon.  One danger of having multiple credit cards is forgetting which ones you’ve used and consequently forgetting which bills to pay (bring on the late fees!). Too many credit cards can also lower your credit score and make it harder for you to get important things that you might actually need (like a house).  Best practice is to keep your credit cards to a minimum.

If you have made any (or all) of these mistakes in the past, now is always the best time to break the bad habit and replace it with financially responsible decisions.  Now is the time to get a proper financial plan in place to make sure you secure your financial well being in the future.


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