Skip to content

Tips for College Students AND Their Parents

March 25, 2009

This is the time of year when high school seniors anxiously await their college acceptance letters. While much is made of getting into college, often times students are left to their own devices and ill prepared financially for this rite of passage into adulthood.  This week, I’m taking a close look at college students and money management.

      College is the time where many financial habits, good and bad, are born.  First, I’ll start with the good.  On every college campus, you will find students who are either working to put themselves through school and/or creating gigs to bring in a little side money.  What may seem to be frivolous money made from a side gig, can amount to a substantial income.  Think about it: Let’s say a college student decides to braid hair on the weekends in her dorm room.  She charges $30 per client and sees 4 clients each weekend throughout the school year for a total of 32 weekends.  At the end of the school year, she would have earned $3,840 dollars.  That’s REAL money and could be the sign of great earning potential after college.  However, this can all be erased by having bad spending habits. 

      It’s a known fact that few college students truly track their spending.  The National Association of College Stores estimates that the average college student spends nearly $3,000 per year on non-essential items; such as, clothing, dining off campus, and music.  If the money you spend (your cash outflow) is greater than the money you make (your cash inflow), you will always be playing a catch up game, robbing from Peter to pay Paul, in the hole, etc., etc. 

      I encourage students to “Check Yo Self.” (Ice Cube featuring Das Efx, 1993). Students who are smart about finances during their college years are more likely to keep their future debt in check.  Check out my five tips for making this 2006-2007 academic year a financially savvy one. 

1.  “Control,” (Janet Jackson, 1986)

      Unfortunately, many college students get in financial trouble; thanks to credit card debt.  Lender Nellie Mae’s 2005 published study showed that three out of four undergraduates began the school year with credit cards, and the average outstanding balance was $2,169.  The sooner you clean up your credit card debt, the faster you will be on the road to financial recovery.  Yes, the $150 jeans that you had to have your freshman year could keep you from buying your first house seven years from now! 

      Start by getting a free copy of your credit report.  This will tell you how “bad” the situation really is.  Next, you will need to get rid of those high interest credit cards (especially the store credit cards), and look at consolidating loan programs.  Finally, consider taking on an additional job or gig that will give you the income to pay down some of that debt (see tip number 2 below for more on this).  .

      For more information, check out www.annualcreditreport.com, to get your free annual credit report andwww.ftc.gov/bcp/conline/pubs/credit/bbcr.htm to get tips on cleaning-up a credit report. 

2.  “Get It Together,” (India Arie, 2002)

      Whether it’s a part-time job in your college library or selling Kente cloth, a side job is a great way to help you build your resume and increase your financial stability.  If you just landed your first college J-O-B, remember, you may need to file a tax return.  In January of each year, you should receive a Form W-2, Wage and Tax Statement from your employer which lists your income for the previous year. Include this amount on your tax return and attach a copy of the Form W-2.  If you don’t get your Form W-2 by the middle of February, contact your employer; maybe it really did get lost in the mail, or your dog ate it, or whatever other crazy excuse you can think of. Keep in mind that you still have to report your salary income, even if you don’t have a Form W-2.  Uncle Sam doesn’t care about excuses.

      Also, depending on the job, you may instead get a Form 1099-MISC Miscellaneous Income which will report the money that you received.  This means that you were treated as an “independent contractor” and, thus, you are responsible for paying your own taxes on the money that you made.  You will use Form 1099 to report your income on Schedule C, Profit or Loss from Business (Form 1040).  Remember to also include all expenses related to your part-time gig. 

      Finally, if you’re still singing, “Where The Party At,” (Jagged Edge, featuring Nelly, 2001), perhaps you should turn this curiosity into a money-making venture and throw parties on the side.   If you opt for your own business, make sure you report your income; this will most likely be on  Schedule C, Profit or Loss from Business (Form 1040).  

      When in doubt about what to file during tax time, check to see if your school has a Volunteer Income Tax Assistance program (VITA).  VITA is a free tax preparation service sponsored by the IRS and run by volunteers (typically accounting majors when located on college campuses). For more on VITA and to see if your school has a VITA site call 1-800-829-1040. 

3.  “Get Rich or Die Tryin” (50 Cent, 2005)

      Start saving NOW! If you can put away $250 a month in a tax-advantaged plan, like an IRA (Individual Retirement Account), your nest egg could grow to about $1 million by the time you’re 65; “Time is On Your Side,” (Earth, Wind & Fire, 1972).   You have to start early, and you have to keep making your contributions every year. Before you know it, you’ll be saying “I’m Rich!”

4.  “Joy and Pain” (Maze, featuring Frankie Beverly, 1989)

      This tip is especially geared to the new college graduate.  Let me be the first to congratulate you on making it “Through the Fire,” (Chaka Khan, 1984).  Now that your great accomplishment is over, someone is surely now saying “You Owe Me” (Nas, featuring Ginuwine, 1999). It’s time to start paying off your student loans, and there is some good news. You may be able to deduct up to $2,500 of interest on your student loans. Note: The loan must be in your name, not your parents.  For more information on decreasing your student loan debt, visit, www.abcloanguide.com.  

5.   “We Are Family,” (Sister Sledge, 1979) 

      Create a legacy by passing on your financial and tax knowledge to your younger friend, cousin, sorority sister, frat brother and anyone else you can mentor.  When others see you getting it together, they’ll want to know your secret.  Share the wealth, and you and your friends and family can all come up together.

Shannon King Nash is the author of the award-winning book entitled, “For the Love of Money: The 411 to Taking Control of Your Taxes and Building Your Net Worth.”  She uses song lyrics and entertaining stories ripped from the headlines to teach readers how to manage their finances and taxes.  Shannon is a CPA, Tax Attorney, and regular expert commentator for various national magazines including Upscale Magazine and Jet.  Based in Los Angeles and Atlanta, you can contact the Nash Management Group at 818-986-2665.

Advertisements
No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: