What role does personal finance play for college students? In part three of the Money Mistakes We Make Growing Up series we look at the personal finance mistakes college students make, and how to avoid them.

It’s no secret many college students lead free-wheeling, sometimes reckless, lives. The dangers of this lifestyle are real; we are too frequently reminded by stories of alcohol-related behaviors shattering lives—or ending them. Despite the risks, a pounding head is the only consequence most students feel from another late night.

But another epidemic is targeting college students and threatens consequences not for a night or a year, but for five, ten, even twenty years. That epidemic is credit card debt.

If somebody asked me: What should I know about personal finance while I’m a college student? I would simply say: avoid going into credit card debt, and the rest will take care of itself. That’s why credit card debt is the one and only college money mistake this series features*.

Money Mistake: Carrying a credit card balance.

Credit card banks are eager to load up ignorant freshman pockets with plastic. Just head to any university in September and take note of the credit card offers plastering bulletin boards, student workers giving away swag in exchange for a credit application, even student phones ringing off the hook with telemarketers’ credit offers.

The result? Tens of thousands of students with little or no income but plenty of uses for money suddenly have thousands of dollars of credit. Most have never had to be financially responsible in their life. It’s free money, Baby.

While carrying a credit card balance is never an ideal situation, there are times in life, I think, when it is acceptable, such as investing in clothes or housing for a job or making ends meet during an emergency if you don’t have an emergency fund. But using credit cards to live beyond your means is never okay. In fact, it is catastrophic.

So why is Joe College in so much trouble? The same reason the credit card banks know he’s profitable. If he maxes out a card for a trip to Cancun freshman year, chances are he’s not going to make enough income (being a full-time student) to pay it off anytime soon, so he’ll be making minimum payments, barely touching the principal of his debt but lining the bank’s pockets with finance charges. Even when he graduates, Joe’s entry-level salary will be barely enough to eat on, let alone pay down his debt, and the bank will keep on collecting.

It’s hard not to spend money in college. There are a million things to do, plenty of time to do them, and often a vast separation of wealth between peers. In the real world, neighborhoods – sometimes even public schools – are more or less segregated by economic status. In college, however, some freshmen arrive on a scholarship and a 30 hour-a-week job to pay for food and books, others roll onto campus in their high school graduation present unloading flat-screen TVs and leather loveseats. The next day they’ll sleep across the room from each other and share classes and meals. For students of lesser means, avoiding the temptation to want what others students have is very, very hard.

Yes, college is a time to have fun, but it’s also a time to set yourself up for success. For some, this mentality comes naturally, others will need to work at it. The willpower to stick to your budget in college isn’t unlike the motivation it takes to hit the library on a sunny Saturday. The sooner you learn to make sacrifices now for benefits later, the richer you’ll become.

This article is from the Money Mistakes We Make Growing Up series.

*Numerous other topics including budgeting, saving, taxes, income sources all present unique challenges for students. I don’t mean to overlook them here, but within the scope of this series I felt credit card debt was the single most important issue to address.

In Tuesday’s post, Childhood Money Mistakes, we looked at financial mistakes kids and their parents make starting even at very early ages. Now think back to high school. How much did you think about money? Friends, football, first loves, and lots of fun, sure, but probably not dollars and sense.

Unfortunately, it’s this lack of thought teenagers give their finances that creates problems as they get older. What are the primary money mistakes we make in high school?

Money Mistake: Not Learning Personal Finance

Nobody taught me personal finance. Sure, my dad was giving me lessons in the “value of a dollar” from a very early age, but when I grew older and held my first full-time summer job and suddenly had decent chunks of money to save or spend, nobody explained to me the importance of saving, the power of compounding interest, or the dangers of debt.

Granted, even if my parents or my school were offering formal lessons, I was still very much a dependent, and real-world lessons of budgets and interests rates wouldn’t have held my interest very long.

But a few personal finance lessons can go a long way, early in life. Financial education programs need to be an important part of public education. Where they’re not, it falls upon parents, teachers, coaches, and mentors to fill the gaps. If you, like me, learned personal finance 101 too late in life, remember that it’s never too late to take a refresher course, and the more you keep the rules of personal finance on your mind, the wealthier you will become.

Money Mistake: Setting Only Short-Term Savings Goals

Teens that start saving early have won only half the battle. Often motivated to save for big ticket purchases like a car or international travel, teens are rarely looking beyond graduation. And who can blame them. The real world doesn’t yet exist.

$1,000 stashed away before the age of 16 in a simple high yield savings account yielding 4.50% would grow nearly ten times before the teen turns fifty. Cars and higher education expenses aside, a teen that saved just $500 a year for four years in high school would have a decent emergency fund available before they even begin work full-time. I don’t know about you, but something so simple would have been helpful!

Money Mistake: Not Studying

When you’re young, there are a million things that seem more attractive than hitting the books. But consider this. U.S. Census Bureau confirms what your guidance counselors told you: stay in school, and go to college. The median annual income for Americans with a bachelor’s degree in 1992 was $32,629, compared to just $18,737 for high school graduates and a paltry $12,809 for high school drop-outs. Put simply, the more education you receive, the more you’ll earn. Partying too hard in high school means you risk having a lackluster transcript, which can weigh you down for the rest of your life.

This article is from the Money Mistakes We Make Growing Up series.

Remember allowances and piggy banks? Those were the days when a crisp one dollar bill was for candy, not something to be divided between tax collectors and landlords and banks and utility companies. Sure, times have changed, but have your spending habits?

If you were like most me, and most children, you probably stashed a few coins away in your piggy bank now and then, but knew how easy it was to sneak some coins out the top for a soda on that extra-hot day or a couple of candy bars at lunch. Unfortunately, spending habits, just like many of our other mannerisms, develop at an early age.

Here examples of money mistakes many of us make (or unwittingly teach our children to make) before becoming a teenager.

Money Mistake: Not saving a fixed percentage of every week’s allowance or earnings.

Saving is a habit that we either learn early in life, or we don’t. Good for you if you stashed all or part of your allowance away each week to save for an expensive toy, a school trip, or even college. If you squandered your allowance, chances are you still have trouble saving today. Fortunately, it’s never to late to learn a good habit, and automatic savings plans make it almost effortless to save. Grab a high yield savings account today, set a goal (down payment on a home or car, vacation, or an all-important emergency fund), then have an amount you can afford automatically deposited every pay period. Then, forget the account even exists until you reach your goal.

Money Mistake: Viewing allowances as “free money”.

If you received an allowance, regardless of whether it was in exchange for completing defined chores or not, how you perceived your first income can have lifelong implications. Didn’t see your cash as compensation for work? Chances are you were more likely to spend it before receiving next week’s cut, were not motivated to get your first job, and maybe you still resent working today.

Regardless, it’s important to remember free money is an oxy-moron. Just as you received an allowance as a kid, unexpected windfall as an adult are not licenses to shop ‘til the balance drops. In fact, consider it a golden rule of personal finance: Ignore unexpected income. Use it only to pay down bad debt, otherwise save it.

Money Mistake: Lazy summers.

There’s nothing like the memory of lazy summer vacations riding bikes and taking a dip in the nearest swimming hole. But if you didn’t work just a little bit during your summer vacations, how much harder was it to take that first job? Sure, you need to be old enough to hold down a real job, even when school’s out, but what about mowing lawns, cleaning attics, or walking dogs?

Not only is it important to earn (and save) a little money early on, but kids that begin work younger develop a strong work ethic for life, and going door-to-door to find work for yourself is the ultimate lesson in entrepreneurship. These are skills that will pay for the time lost lounging one-hundred fold over the course of your life.

Money Mistake: Repaying mom and dad for that new video game.

This one’s the parent’s mistakes, not the child’s, but it definitely impacts the child’s financial future. How many times do kids whining for a new toy, video game, or other gadget wear down their parents to the point of saying “just this one time”? But financing your kid’s every whim is far worse than spoiling him or her. It eats away at a child’s ability to save (the discipline to save, especially as a child, is already hard enough), and instant gratification reinforces the notion of being able to have what you want, when you want, without work.

If you have to give your son or daughter a loan, charge interest and make a lesson out of what interest is, why you’re charging it, and why you want to avoid paying it. If you don’t have the heart to keep the finance charges, use them to start a savings account in your child’s name.

Money Mistake: Comparing money, toys, mom and dad’s jobs, etc with friends.

Keeping up with the Jones is a tragic social epidemic in our materialistic society. Even sadder, it starts before we even understand how money works.

Even as babies, we want what other children have. As we grow older and begin to understand that there are vast disparities among our peers’ homes, clothes, and belongings, we naturally continue to covet what others have. It’s always easier to compare ourselves to people who have more even though Buddhists have long known (and doctors now agree) it makes us unhappy to do so.

Chances are the children that were happy with what they had, shared it with others, and never longed after friends’ material possessions, are doing pretty well for themselves today, and are happier to boot.

This article is from the Money Mistakes We Make Growing Up series.

This week I’m presenting a series called Money Mistakes (And What You Can Learn from Them).

The series includes four articles, each focusing on personal finance during a specific age group: childhood, high school, college, and graduate.

There are lessons here for working adults, college students, teens, kids, and even parents. The first article will be up later today, then a new one each day until Friday. I hope they help you to live a little bit richer.

Childhood Money Mistakes

High School Money Mistakes

College Money Mistakes

Graduate Money Mistakes

What does it like to live on $10 an hour? Is America’s income gap good or bad? How much is a dollar worth in Manhattan? This month, New York Magazine has written a provocative series on money in New York.

A Hard Earned Life, my favorite article, tells the story of a security guard’s struggle to support himself and his two children on $10 an hour.

The Spending Diaries is a voyeuristic look at the weekly spending of six New Yorkers from different income brackets, ranging from $20,000 a year to over $1 million.

Interesting as this is, the magazine could’ve found better candidates on the low end. The grad student they profile has parents paying his rent, and the “junior professional” already making $54k at 25 is hardly an example of somebody watching pennies.

I don’t know about you, but I think Money Under 30 readers, and other personal finance bloggers out there, could teach all six of these guys a thing or two about spending habits!

The Value of a New York Dollar (76.2 cents) is an interesting look at New York’s high cost of living. Even if you’re not in New York, this analysis helps one understand the factors influencing cost of living.

The series also includes coverage of the city’s income gap (NYC’s wealthiest denizen David Koch is worth $12 billion while over one fifth of the city’s inhabitants have a net worth of zero or less), dealing with friends with money, and a survey of money habits of 100 service workers, teachers, and midtown suits.

The bottom line? New York provides a thoughtful glance into the personal finances of a modern city. A must read for anybody interested in money.

Making a simple change in how you spend your down-time could end up saving you thousands of dollars a year. The good news? You won’t even notice what you’re not buying. The bad news? You have to give up TV and reading magazines.

According to a September 2006 CBS News report, the average American sees up to 5,000 ads a day. 5,000 advertisements every day! Whether it’s billboards, radio spots, glossy magazine ads, television commercials, or web banner ads, that’s 5,000 times every day someone else is trying to coerce you to spend your hard-earned money.

Even for the dedicated spend-thrift, that’s a lot of pressure to spend money. And whether we notice it or not, these advertisements influence our lifestyles more than we like to admit. After all, if advertising didn’t work, thousands of marketing professionals would be out of work if advertising didn’t’ work.

How do you avoid shady ad-wizards conning their way into your wallet? Unfortunately you can’t always help the billboards you drive by or the subway posters you walk past. You can, however, choose to view less advertising. The easiest ways to limit your advertising exposure is to stop watching TV and stop reading consumer magazines.

Give up TV? Am I crazy? Not at all. Not only will cutting down or eliminating TV viewing reduce your ad exposure, it will get you off the couch and give you time for more rewarding pursuits, whether it be reading, calling an old friend, or pursuing a hobby.

As for magazines, there are undoubtedly many that provide educational content that you enjoy, but there are many others, like fashion and gossip glossies, that are merely pages of mind-numbing fluff cleverly crafted to disguise a an equal number of pages of advertising. Not only are these magazines rife with colorful imagery carefully crafted to seduce you into lusting after the latest clothes, gadgets, and booze; the articles are feature the latest, greatest, and most expensive. Personally, I find it hard to read a fashion or lifestyle magazine without feeling tragically unhip — and thinking some new underwear might change that.

Even if you can’t rip yourself away from the tube or avoid perusing the newsstand every now and then, think about all the advertising you see in a day, and which ads you voluntarily view. Slice a few out of your day and you may find yourself with fuller pockets down the road!

Weekly money-saving news you can read in a minute.

Ben Mims from the Mississipi State Reflector describes how to pan fry any meat with olive oil, peppers, onions, and vegetables for ten minutes and get three healthy meals for the price of one: stir fry for dinner, frittata for breakfast, and a sandwich for lunch.

The Hartford takes its personal finance education program for college athletes, Playbook for Life, to Gonzaga College. While I’m all for financial education, I’m sure those 1% of NCAA athletes that go pro will make nice clients for The Hartford someday!

Check out last month’s top 30 money-saving tips at BankRate.com or submit your own for a chance to win $100. Last month’s winner? One part vinegar and two parts water in a spray bottle makes a cheap and effective way to clean fruits and vegetables.

Free Money Finance digs into five tips to save money this holiday season. Yes, folks, it’s about that time again. The best ideas? Thoroughly research any available coupons or rebates at sites like couponcabin.com or fatwallets.com. At checkout, ask the clerk if there are any flyers, coupons, or discounts you may have missed. It never hurts to ask.

SmartMoney has tips for winterizing your home and car to avoid a costly tow or frigid night when the snow flies. Every car should get a three-point check-up before winter: tires, battery, and fluids. For the home: check and seal leaky windows and doors and tune-up your heating unit. If you rent, drafty windows or a dirty heating system will still cost you; push your landlord to winterize your flat or reduce your rent for a high heating bill.

MSN Money has some strong words for a reader wondering: Should I pay off my boyfriend’s debt? No, you shouldn’t; in fact, you should leave him.

Personal finance writers are snobs. We talk about how everybody must pay off those credit cards and save a minimum of ten percent each month. But what can personal finance do for you if you’re just trying to make ends meet?

Recently Mighty Bargain Hunter mused: Are savings tips unhelpful to those who need them most? That article was in response to the MSN article: Too Broke to Save? Never.

It got me thinking about one simple truth: Personal finance is not about getting rich or staying rich!

What the heck is personal finance, then?

Personal finance is the art of using the money you have to live independently.

Think about that for a second. With all this talk about savings accounts and credit cards we often forget the very simple, yet very elusive, goal we are all trying to acheive: An indepenent life, and hopefully, after that, the ability to live the life we choose.

If you’re unemployed or supporting a family on two minimum wage jobs, living independtly is the only concern. Usually the lottery seems like the only ticket to the life you would choose.

For low-wage earners, personal finance goals are the same: spend less than you earn, get out of debt, and save.

Managing to save or invest money is more challenging when you’re scraping by, and if you can save you should have different priorities. Rather than saving for luxuries like retirement or vacations; savings goals should be focused on living as comfortably as possible on what you earn and on earning more. That means extra money is best used for going back to school, moving to a less expensive area, or starting side work.

If you can find a living wage you should be able to live comfortably. But to do it, you need personal finance. In fact, you need personal finance a lot more than somebody who makes enough that they don’t worry about daily spending.

It can be hard reading about the lattes and dinners out that other people balk at cutting from their monthly budget to save money, but it is a reminder of how we fall into the trap of consumption.

The biggest but most preventable threat to financial stability is wanting more. We watch TV and read magazines and we want the latest clothes, the coolest cars, and the biggest homes. And while most of us accept that we cannot afford a BMW or a mansion, we are always tempted to get something that is just a little bit better or newer. But often it’s that “just a little” bit that we can not afford. Yet thanks to loans and credit cards, they always make it seem easy to get that little bit.

When’s the last time you got “just a little” more than you could afford? Was it a new pair of shoes? An extra round of drinks? Leather in your car? And you know what? It never ends. Because even if you become rich beyond your dreams, there will always be more — bigger yachts and faster jets.

Despite what every advertisement ever made is trying to tell you, money doesn’t make you who you are. Not your car, not your home, not the clothes you wear! Now of course those things make impressions. But other people’s impressions are not your character. Their impressions are not your values. They are not your soul!

There are millions of people out there competing for your hard-earned money including, perhaps, us personal finance writers preaching about the fires of debt and finding redemption of saving. Resources like this site can give you the knowledge and tools to resist temptation, earn more money, and spend and save wisely, but after all, personal finance is personal.

Whether you make $5 an hour or $500,000 a year; only you can figure out how to best use your money to get by, to get ahead, and hopefully, to be happy.

Want to slash dietary dollars without going hungry or eating fast food three meals a day? A frugal friend of Money Under 30 serves up some mouth watering money saving ideas.

Pot-Luck Parties

Ditch dining out and throw your own party instead! Pot Luck (bring your own) parties are the wallet-friendly way to entertain. I’m more relaxed at pot luck parties than when my friends try to entertain on their own. When everyone brings a dish there’s something for everyone, and the host may get the bonus of leftovers. Going pot luck also means you don’t have to rely on dead-beat friends for beer and pizza “chip ins”. Already do BYOB? Try bringing your own meat for a fun BBQ or your own candy for a Halloween ho-down.

Try Group Cooking

Cooking most meals rather than taking out saves a bundle, but cooking for one or two can be frustrating and even wasteful. In the spirit of the pot luck, invite your friends over the next time you whip up a four- to six-serving meal. You can even get them to help in the kitchen. Make it a weekly event and take turns hosting, or agree in advance to share a few dollars on ingredients. There’s nothing like a home cooked meal with friends for just $3 – $4.

Dining Out Deals

With or without your amigos, hanging around home is only fun for so long. Eating out can pummel your paycheck, but it is possible to dine on the cheap. Wherever you go, ask locals for recommendations. They’ll know the spots that have great food and great prices.

Bars offer crazy food specials to get drinkers in the door. In Boston, for example, several places offer chicken wings from 10 – 20 cents each. A ten-wing meal leaves you bursting for just a buck! There’s also a bowling alley with dollar cheese pizzas, and two places with all-you-can-eat taco bars late at night (no alcoholic drink purchase required – so buy a soda for $1.75). Happy hours almost always come with super cheap food. Of course the key to saving here is to avoid the booze. If you have friends that drink invite them along so the bartender doesn’t notice you only dropped a dollar!

The Frugal Gourmet

Want more than pizza, tacos or wings? Can’t blame you. You can enjoy even the best dining in town for cut rates. In big cities look for “Restaurant Week” events where you pay a fixed price to eat at some of the best restaurants in the city (but watch out for lesser restaurants that join in to make a profit). Special occasion? Some restaurants regularly offer multi-course meals, wine included, with fixed prices that can be a steal. Or try lunch, when the exact same food is often more than half the price of dinner. Some upscale restaurants also offer lunchtime faire at the bar anytime.

Leftover Gold

If you’re going to spend the money to eat out, never be shy about asking for a doggy bag. Even the swankiest of restaurants won’t bat an eye. Portion sizes in American restaurants are so huge these days that one “meal” can be several. The next time you’re dining out, think about what meal will be best for breakfast!

Alternative Eateries

Too lazy to pack a lunch? Scope out college dining halls and other cafeterias for cheaper alternatives to take-out. Colleges and universities often offer vast buffets of food for between $5 and $10. Schools with “stations” (grill, sandwich, salad, etc) may have better, healthier food for fast food prices. Hospitals are another public source of inexpensive meals round the clock.

Getting into debt is like craving pancakes at midnight on a Tuesday when you know the 24-hour diner is a good two hours away. Your conscious tells you not to do it, but all reason is thrown out the window when your grumbling stomach begs for that mile-high stack of sticky carb pucks and a side of sausage links. (As if you’d listen to that tee-totaling little twerp of a conscious anyway, right?) [...]