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Developing a new
view about credit
Mary Ann Campbell, CFP, founder of
MoneyMagic.com and a money educator, cites
unrealistic expectations as a major reason for high
student debt.
Campbell, who teaches personal finance courses, says
“Many students’ expectations of their earning
potential after college far exceeds what their
actual income will be.” She notes that some students
use their credit cards with abandon during college,
planning to pay off their debt when they land that
great job after college. Indeed, some students
forget that in order to get to the top of the career
ladder, there are a few rungs, i.e., less paying
jobs, they have to climb first. And the expense of
starting a new job and life on your own can just add
to existing debt.
Manning’s website,
CreditCardNation.com, contains a great resource
for students seeking a more realistic view of the
first few years after college. Using the ‘Budget
Estimator,’ a module designed by Manning, students
can identify an average yearly or monthly starting
salary for jobs in their particular major. The
program automatically figures in estimates for taxes
and social security payments. Students can then plug
in expenses for housing, car payments, utilities,
food, insurance, telephone and internet bills,
clothing, credit card bills, student loan payments,
and entertainment, etc. The module lets you know
when you have spent more money than you make, and
allows you to adjust payments as necessary until you
get the hang of how your money is best distributed.
Students that seem to have the most credit woes?
Those who believe their standard of living during
and after college should not vary from when they
lived at home on their parents’ income. Cable
television, cell phones with cameras, and new cars
become ‘necessities’ instead of nice extras.
Advice to grow on
When it comes to credit cards, students have great
advice for other students. Heather, a college junior
from Arkansas, recommends getting one card with a
low limit. “This limits the amount of credit you
have access to and therefore removes the temptation
to spend more than you have or more than you can pay
off immediately,” she says.
Another student recommends selectivity. “Don’t sign
up for a card that charges an annual fee to use it,
and read the terms of the card before applying. You
wouldn’t believe how many people don’t know what an
APR rate is.” For more information on finding the
best rated cards, check out
CardRatings.com. You can read reviews of cards
from other students and get the lowdown on perks of
various credit cards.
Campbell has three recommendations for students: The
first is open communication. Campbell says students
who are educated about financial matters seem to
have a better overall attitude regarding credit
cards. Students should find a trusted source to talk
openly with about money issues. Second, students
should switch from spending behaviors (such as
shopping) to activities that help you achieve the
same feeling of gratification or reward, such as
intramurals, exercise or campus organizations.
Last, but certainly not least, enroll in a personal
finance course as soon as your schedule allows. Says
Campbell, “If it’s not required coursework, take it
as an elective. You will learn a set of life skills
that will not only help you right now, but also
after college and for the rest of your life.”
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