Almost everybody these days has some sort of debt on their personal balance sheet. There are some who state that debt can be classified into good debts or bad debts. What constitutes a good debt and what constitutes a bad debt? The standard definition for good debt is debt that helps you to make more money, while bad debt is one that makes you poorer.
However, in my personal opinion, there is no such thing as good debt or bad debt. A debt is a debt, which means you owe somebody or some company money. Too much debt is never a good thing, be it good debt or bad debt. Good debt can turn into bad debt overnight. For example, a mortgage loan used to purchase a property which later crashed in value by 40%. Good debt was raised for an investment, but it turned into bad debt because now the house is worth less than the value of the housing loan you owe to the bank.
There are some books which term car loans as one of the bad debts. The financing costs of a car are indeed high, coupled with depreciation of the car and maintenance makes car ownership a very expensive affair. Now, that would be bad debt isn’t it? What if the car is the tool that helps you to make money, it’s a form of transport to get you to various work places. Perhaps the fact that you own a nice car helps to build confidence in your clients so you can close more sales. Would it still be bad debt? Or is it now good debt?
Another example is a credit card. It is often made out to be the worst debt to have, for good reason. The credit card balance left over time incurs the highest interest rate of over 20% per year. A credit card is a great utility for cashless transaction and allows you to enjoy one month of interest free payment if used in a disciplined manner. The reward points and cash back schemes are more incentives to use the credit card as a way of saving money. If you could save 3% for every dollar spent on the credit card, it definitely makes sense to swipe your daily expenses onto the card.
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With August around the corner, college students need to start thinking about the new school year. Whether you’re just starting college or going back for another year, you will have to balance your expenses with your limited income and still focus on your studies. With the average student graduating with over $24,000 in college debt, it even more important today for them to plan ahead financially.
Build Your Budget
You might not have a lot of expenses during school, but that’s no excuse for not having a budget. Even with limited income, you can develop excellent financial habits when you make a budget early on in life.
If you’re starting your first year, you might not have a clue where to start for a budget. Visit your college’s financial aid page and search for projected expenses for students. With these figures, you can put the information into your personal budgeting worksheet and start the school year right.
Apply For Financial Aid and Work Study
If you've completed your FAFSA, you should call or visit your school’s website for information about student jobs or last minute scholarship information.
Most schools don’t post the work study positions until the fall, so if you’ve completed your FAFSA and are eligible for a position, keep checking the job posting site often. It doesn’t hurt to make contact with the department you would like to work in and talk with the secretary or department chair about open positions. Be prepared and bring a resume to stand out from other applicants.
Search For Used Books and School Supplies
One of the most understated expenses at college is buying books for the year. It’s not uncommon for textbook to cost $150 to $300 for one class that lasts only 16 weeks! Before you buy, try these tips to save money:
- Borrow from a friend. Ask around on facebook or in your dorm to see if someone is keeping their old book. If you can borrow from a friend, you can end up saving hundreds of dollars each semester.
- Visit a local used bookstore. Most college towns have a local bookstore that sells used textbooks for a discount. Plan ahead and bring your class list to the store to find the best deals.
- Search on Craigslist, Amazon or eBay. If you want to own your books, but don’t mind a used version, go online and search for some great deals.
(image credit: Carlos Porto)
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