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10 Budgeting Basics
It is not only skyrocketing tuition costs causing financial problems, but also students not knowing the “rules of money” and how to apply those rules to the game of postsecondary admission.
Should you need to borrow money for your education, remember that you are investing in your future and the investment will only appreciate. For most students who have debt, the average undergraduate debt load is $21,000. This represents the cost of the average new car that many of you would gladly pay for over five years. Cars depreciate, but your education will only appreciate.
But without following the rules of the game, you will be doomed to repeat mistakes that previous students have made. Here are some tips to follow.
Save, save, save!
The best time for your family to start thinking about saving for postsecondary school was when you were born. The second best time is right now. When the ministry calculates a student’s contribution to postsecondary ed, they expect that while in high school, you will save two out of every three dollars you make for your education. This means that if you earn $90 a week at your part-time job, you should be saving $60 of it for college or university costs.
Stay in control
Don’t look at what you should have done or what the government should do. Instead, focus on what you can control about your education. There is more power in action than in reaction.
Develop a plan
Put your and your parents’ contribution promises on paper. Include how much each of you expect to contribute, and make sure you know how much your parents expect you to pay back. You and your parents should then sign the paper to avoid surprises.
Know the process
The Ministry of Education and Training, under federal guidelines, believes that families are responsible for supporting their children for four years after a student has finished full-time high school studies. The provincial guidelines require parents to provide their financial information for five years after a student has finished full-time secondary studies. Students and/or their parents do not get to declare that they are independent.
Apply for help
Ontario Student Assistance Programs (OSAP, online at http://osap.gov.on.ca) is user-friendly. You need to apply in May or early June for the fall programs. Attend presentations that are put on by high schools on how to apply for the funding. If you are surprised by the amount of funding you receive, check with your school to make sure that you did not make a simple error. Be honest about your and your family’s income. The ministry has checks and balances to make sure that needy students get the funding they deserve.
Everyone should apply for funding, as the Aim for the Top and Queen Elizabeth II scholarships uses the ministry database for administering their funding. They have different need criteria than OSAP but use the same data. You do not know what life will be handing you during the year. Even if it is a nil assessment, should your circumstances change, you can get funding within two weeks when you notify the school of the change in your family situation.
Remember, OSAP is to assist you with your education, not to totally fund school. Do not forget that OSAP loan money is debt.
Consider credit
If you do not qualify for OSAP funding, you can apply for funding using a student line of credit. All major banks offer student lines of credit. Your job is to ask the right questions so that you get the best product. Start with these questions:
What is the interest rate while I am in school full time?
When must I start paying the principle on the loan?
What will be the interest rate when I am no longer in school full time?
What is the amount of funding that I can access each year?
What is the maximum amount I can borrow?
Know that you will pay interest on this line of credit daily. This is different from OSAP, which does not charge you interest as long as you are in school full time. Therefore, for student lines of credit, you should be paying down your line during the summer. If your interest rate is 1 per cent above prime and today’s prime is 4.5 per cent, then when you pay down your line of credit during the summer months you are in fact “investing” your money at 5.5 per cent.
Separate your wants from your needs
Have you learned the difference between a want and a need? I call this the difference between buying a chocolate chip cookie and a glass of water. It will not matter how much money you can get for your education if you do not make good financial decisions.
Consider a part-time job
Many people think that having to work to pay for school is a new concept. I do not find this to be true. The government has documented that students who work between six and 15 hours per week do better at school than students who do not work at all. However, students who work between 15 and 20 hours may have their A’s become B’s and the B’s become C’s or worse. More than 20 hours of work per week can lead some students to drop out of school because paying the rent and eating become more important than their marks. Budgeting for your education and knowing how much you will need to work is vital.
Search for free money
You can search for scholarships and bursaries online. You need to get online now in an effort to meet the many deadlines. One site to try is www.StudentAwards.com. Just answer the questions and wait for the Web site to give you the different awards you should apply for and their deadlines.
If an award needs an essay, volunteer work, references or just a little extra attention, you have a better chance of winning if you put forth effort because many students do not put a lot of work into their applications. Remember that you are building a résumé as well as applying for awards.
Have a backup plan
You can get your education many ways. Have a plan of your own. You would not do a puzzle without constantly looking at the picture of what you are making. It is the same with planning or paying for your education. Have
a plan A, plan B and plan C. There are many ways to accomplish your goal. If you decide failure is not an option, then you will be open to the many opportunities that are available. Too many students self-eliminate from awards because they want to be told they will win before they put the work into the application. But you cannot win if you do not apply.
If you do not have comprehensive knowledge of the money game, enlist someone who does. Remember, you need to have control of your decisions, not a third party. Many schools, guidance counsellors and financial offices offer programs to educate you and your family. One book I would strongly recommend for you to read is The Wealthy Barber, by David Chilton. The first 80 pages or so gives you a handle on the basic financial game rules. To keep in the game, ask questions, seek answers, start now and empower yourself to become the leader in the game!
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