Have you ever heard of Dave Ramsey? He’s a finance personality, author, and host of his own radio program, The Ramsey Show. He also has a “Foundations in Personal Finance” course that millions of students take in high schools across the country. In this course, Ramsey speaks about Five Foundations:
- Save a $500 emergency fund
- Get out and stay out of debt
- Pay cash for your car
- Pay cash for college
- Build wealth and give
As you can see, some of these principles are great ways to get a head start on your financial journey and establish good money habits as a student. Let’s dive deeper into how they can help you as you figure out how to pay for college.
Get out and stay out of debt
Ramsey often advises people to cut up their credit cards and close their accounts for good. This mindset can also be applied toward student loans. Credit is only a temporary money solution; therefore, Ramsey would most likely advise you to chase after scholarships, grants, and other debt-free aid first and treat loans as a last resort. Indeed, it does take more work to apply and write essays for scholarship applications, but in the end, it's free money. Try thinking of applying to scholarships as a part-time job. For college students who already have loans, try working on paying them off bit by bit as soon as possible so you aren’t bogged down by high interest rates.
Budget for the present and the future
Budgeting is one of the best practices a financially smart individual can do. Budgeting under Ramsey’s solutions can be broken down into three categories: giving, saving, and spending. Every dollar needs to be given a name by breaking it down even further into smaller categories. Ramsey Solutions has created a budgeting app called EveryDollar that helps break down the information for you, but an old-fashioned paper or Excel budget works just as well. Students who start budgeting early in college have the advantage of being able to start saving for long-term goals like buying a house or paying for graduate school.
Prioritize affording college over going to reach schools
In this contemporary society that exalts Ivy League schools, consider your future career before thinking about which college to attend. (Remember, Ramsey wants you to pay cash for college!) College is one of the biggest purchases you will ever make; you don’t want to get a degree that doesn’t apply to your future career—plus, paying more for your college education does not guarantee you a job after graduation. Seriously thinking about your future may help guide you to which type of education and institution are best for you after high school. Starting at a community college can be a viable option for saving money before enrolling in a four-year institution. Again, going to a top university does not ensure that you will obtain a great job: experience, skills, and personality traits are all important parts of any employer’s hiring criteria.
If you’re still not convinced about these foundations, think about your goals in life and how much achieving them will cost. Ten years from now, do you want to regret making decisions that made you financially unstable? You can achieve financial peace in college and beyond with a little introspection and a lot of smart planning.