The following article is a guest post from Laura of Green Panda Treehouse. It’s also the first article in the College Money Network’s “Back To School Shuffle” series, where we will be sharing articles on a variety of back to school topics and giving away an iPod Shuffle and other prizes.
After graduating college, many people plan on starting work in a career they love, handle their finance responsibly, and build a fulfilling life. I want to show you how you can get your finances together with transportation. I’d like for you to be a college graduate without a car payment tied around your neck.
Lower Transportation Costs Now as a College Student
First off, do not spend a lot of money if you’re buying car in college. I recommend getting a car that can get you to class, work, and home. If that car is $1,000 or less, than go for it. I had a reliable car that was $500 and lasted 3 1/2 years. You can get a nicer car later, but you’re a college student and your income will be be lower than normal. Once your income increases after graduation when you are working full time, you can slowly increase your spending.
If you live in a city with decent public transportation, take advantage of it. It’s a great chance to free up some cash for later and you’ll be helping the environment.
Build an Automated System
Open a savings account specifically for purchasing a car. I use ING Direct for my savings and one advantage is you can open a sub-savings account very easily.
Every paycheck you receive, automate at least 5-10% of it to go towards your car fund. Have it deducted from your checking account into your savings account. You should be getting some income while in college because you want to build your resume up with practical work experience. Find an FDIC bank or CUNA credit union that offers high interest rates for savings and watch it grow faster.
I worked as a beer-tender occasionally to earn some cash and tips. I helped out during concert seasons, so I was usually out of school for most of the nights and it put some money into my pocket.
Use your tuition refund. Some savvy college students will be getting some money in the form of tuition refund. This is a great chance for you to sock away money. After setting aside money for your emergency fund, put 20-30% of your refund into your car fund account. As long as you don’t have any credit card debt, have fun with the rest of the money.
What kind of financial aid is available?
- Federal Pell Grants
- Federal Supplemental Educational Opportunity Grants
- State Grants
Fill out your FAFSA early. Besides getting qualified for federal grants, filing easrly can also open up oppurunties to get state grants. You’ll cut down on having to rely on student loans.
Hunt for more scholarships. FastWeb is a popular site that searches applicable scholarships for you.
By taking advantage of automatic transfers, you can painlessly build a car fund that you can use after your graduation instead of getting a car loan and being in debt.
Your Take
How have you saved money for your goals?
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I wish I had saved more money for a car in college. Actually, I wish I had saved more money during the early years of college, period! I wasted so much money during my summer job after freshman year, and I have no idea what happened to the money I made in my on-campus job sophomore year. It wasn’t until I started reading personal finance blogs my junior year that I got my act together. A word of advice to current college students: don’t be like me. Start today, so you don’t have to wonder what happened to the money from your first two years of school :-\
Couldn’t agree more with your point about car buying in college. I bought my truck from my dad. It was a year old and $10,000 still needed paid off. Horrible idea. Despite the reliability, I always hated paying that monthly payment all the way through college. I suggest any and all college students deal with the not-so-attractive car for now to have a more comfortable one later. Well worth the savings.
Dave
LifeExcursion
Thanks for the advice!
Stick with the Financial Samurai 1/10th Rule guys! The rule states that you should spend no more than 1/10th your yearly gross salary on your car.
The rich do this, should you?
Hang tough! Cars are the #1 personal finance killer for young folks!
Financial Samurai
This is exactly what I do with ING. So far I’ve managed to avoid financing any of my vehicles, and I never want to. My Civic hopefully still as LOT of life left, but I’m contributing consistently to my ‘Car’ account on ING.
I never used to think and save this way, but now it seems like common sense. I now do the same thing for my next computer and trips as well.
Great advice. You’re not going to be able to get that spiffy new Prius right out of college, or maybe even for the next couple of years if you’re paying your dues working in an industry you love. A car is first and foremost transportation and if you’re worried about what you’re going to look like driving it, it doesn’t matter.
Another awesome thing about driving an old/beat up/not-so-great car is that the insurance costs are low. My car is worth about $600 on paper, so anything more than a ding, and it could be considered totaled. Instead, I opted out of the collision insurance and just have the required compulsory insurance for my state. If anything happens to my car, it’s not a huge loss if I lose it, and if it’s still drivable, I’ll keep driving it.
I have some ideas already, for example busy schedule, lack of money, and stress. But I need more ideas because I need to write a three page essay on it also. I really would appreciate it if you can share some of your ideas.
I think the best advice is that students should not be buying a car, and even after you don’t want to saddle yourself down with debt b/c you may not be staying with your first job out of school for a long time. Continue living car-poor until you can really afford it. A lot of people feel entitled and want to buy a car to reward themselves after graduation.
That is only getting your foot in the door. You have to repay student loans and save money first!
For the summer vacation, unviersities in S.Korea starts mid or end of June until the end of August. Depending on each year and each university, sometimes it can end until the first week of September. So basically a little more than 2 months. `N unversity students get more vacations than the lower the lower education schools.
A car for college is for the most part unnecessary especially if you are living on campus and your school offers transportation, but if essential it is a good idea to just get a beater car that will take you where you need to go. Saving is key in college as hard as that sounds. It’s nice to leave college knowing you don’t owe as much because of savings from excess financial aid or from part time work.
I disagree with everyone saying a car isn’t necessary for college students. Some people have jobs or live off campus, and there’s not always public transportation.
I think yourBGS’s suggestion is great: get a cheap car without a loan. Ideally, the car will last throughout college and maybe a year or two beyond. I know my life would probably have been uch easier if I spent some of the money I wasted on beer on a cheap car & hadn’t had to buy one right after college, just as I was also paying for a cross-country move!
I have been trying to get a car loan for a year now and keep getting rejected because my debt to asset ratio from college is so high. It is frustrating. However, I love the BGS suggestion and went that route. I now have a functional car that is not great but gets me from A to B. I have set a goal on SmartyPig.com and am getting close to getting the car I actually want.
Toyotas and Hondas last a long time and are fairly easy to find parts and service as long as you don’t buy one that’s been wrecked and rebuilt. That is what car fax reports will tell you. Forget the Pontiac, they don’t age well.
I’m in the second semester of my freshman year of the University of Wisconsin – Milwaukee and I have it entirely paid up. I have taken no loans, got no help from my parents, and have received no grants. I started working when I was fourteen and was never a careless spender. I may be living paycheck to paycheck now between rent and student payments and books, but it’s been feeling so good to have no loans taken out.
I’m doing very well in school as well, in case you were wondering my work/school circumstance.
I’m definitely going to use this advice. I just graduated and was looking into going to grad school. I wanted to upgrade my ride but my car I have now is dependable. I think I will take these tips into consideration as i’m preparing to make my first big purchase. I planned on purchasing a bicycle and ride it when the weather breaks.
I set up 7 different savings account at ING under my log in. I deposit a small amount into each account each month based on the goal of that account. I have one for a car, Christmas, vacation, emergency fund, house down payment, and medical expenses. It’s great to see my savings goals in this way. It motivates me to want to save more.
Students always find it difficult to get first time car buyer student car loans since they do not have enough money to make a big down payment which can reduce the interest rate, nor do they have high credit ratings which can make the loan process easy.
Thanks for the share this good idea. Buying a car is very difficult for students now they can afford for their dream car.
“We thought it would be a fitting tribute to him to start this memorial fund with the goal of helping other creative individuals,” said his father, Doug Studebaker, in a written statement.
I have a savings account with ING as well. I set up sub accounts as you mentioned in this post for car, vacation, Christmas, emergencies, and wedding. I love how I can see my savings goals and how much is in each account at a glance.
This has been a challenge for me. I have recently been starting to reduce expenses by couponing–it really has made a bigger difference than I ever thought possible. I actually feel like a fool for spending full price without coupons before!!
Great advice! Is this article being added to the freshman orientation packet?
Keep up the good work,
Eric
Go to your bank or credit union and get approved for a loan. Go to the dealership and buy the car. They write the contract or purchase order and you can take that to your bank or cu and your loan is for the amount of the purchase of the car. The dealer might have access to your bank or credit union directly and they can take care of all the paperwork. They might also be able to get you a better rate than the bank.
I would be very careful about buying a car for less than $1000. In that price range there are a lot of junk cars that are not worth buying. Buy the wrong car and it might cost more to keep on the road. My girlfriend has had a couple bad experiences with cheap cars. Eventually she had to escape all the problems and get a new car instead.
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In my experience, I find it better to pay off whatever you can sooner. That way, once you pay it off, you can put what you save from paying on that one to paying more on the other.
In theory it sounds good. But here’s what happens. You borrow the 100 grand and now you have financed your two old cars for 15,20 or 30 years. If that isn’t bad enough statistics show that you will have more car loans, credit cards, etc. PLUS the 100 grand loan in 5 years. You cannot “borrow” yourself to prosperity. Pay off your obligations without refinancing and you will be proud of your actions.
You forgot the best way to make extra money in the car!
Charging people for rides, I know it sounds cheep but every penny counts right? If you’re driving your friends from home to school or vice versa, why not make some money for gas and your back pocket.
Great Post! Lots of good advice.
Matt
This has always been difficult to do. Saving has to be one of the hardest things especially at this age!
Good advise. Although, I can tell you didn’t get your masters in English:
“If that car is $1,000 or less, (than) go for it.”
*then
Having taught financial markets topics in the classroom, I can certainly agree with the comments in this article relating to the value of students learning about the subject and their lack of confidence in that area – even among finance concentrators.
Many forget to look ahead and plan for the future repurcussions of those decisions.
Starting at the right time of year is important so that you can take the necessary progression of medical courses and not get stuck taking more advanced courses before learning all the details from earlier courses that were only offered in the fall.
as they are viewed as a disturbance to the rest of the class. Usually a few healthy doses of sarchasm works very well to get the point across
The way I place miles on cars through the time pay it off Ill ought to turn around and get an additional one particular so Ill in no way be with no a vehicle payment.
The way I set miles on cars through the time pay it off Ill ought to turn close to and get an additional 1 so Ill in no way be without having a car payment.
Thank u my man. You are so cool. I have read all that u wrote. I can try all of them
Nice Post. Lots of great info. Thanks for the tips. I like the idea of automatically deducting for your car fund.
So many thanks. in my opinion lots of webmasters must read this.
Countless skip the initial Emergency Fund to start off paying credit card debt off right away. Even though that drive is wonderful, you won’t break your self from using credit card debt in case you dont conserve the original quantity.
A lot of skip the original Emergency Fund to start off paying debt off proper away. Even though that drive is fantastic, you won’t break your self from making use of credit card debt in the event you dont conserve the original amount.
Numerous skip the original Emergency Fund to start off paying debt off perfect away. Even though that drive is wonderful, you won’t break your self from using debt if you dont save the original amount.
A great number of skip the original Emergency Fund to start out paying credit card debt off correct away. Though that drive is fantastic, you won’t break your self from utilizing credit card debt if you dont save the original amount.
Why are u writting so many comments so marketing?
The way I set miles on cars through the time pay it off Ill have to turn close to and get a different one so Ill certainly not be with out a automobile payment.
The way I put miles on cars by the time pay it off Ill must turn close to and get a different one particular so Ill in no way be with no a vehicle payment.
The way I set miles on cars through the time pay it off Ill need to turn close to and get one more a single so Ill by no means be without a car payment.
Would be nice just to have a rich dad who could purchase it for me, but that is in my next life!
Great tips especially for those of us just getting started with grad school or college in general. I have always driven cheap (and reliable) $500-$600 cars bought at a nearby auction. Other steps I have taken to save: having an apartment within walking distance to campus, buying books at discount online stores, making own food (no cafeteria plans), most basic but adequate phone plan, no cable tv (internet for entertainment if need arises), and most importantly, learning to buy things because I absolutely need them and not because I just want them for the sake of amassing stuff for comfort.