A college student’s guide to financial independence

While there are benefits to being a dependent, part of becoming an adult is being financially independent, even if you still live under one roof with your parents. Contributing to the household—especially in a tough economy—will build your confidence, self-worth, and peace of mind. Here are five goals to reach financial independence.

1)     Get a job & hustle

This goal is pretty self-explanatory to help you achieve financial independence. Getting a job will provide you with your own paycheck and rid you from having to rely on others. That feeling of financial freedom will continue to motivate and encourage you to earn your own money. If you’ve got hobbies in arts or crafts, sell those items online and get paid for something that you enjoy doing anyway. You can also sell what you already own such as clothes you no longer wear or books you’ve already read. One person’s trash is another person’s treasure. You’d be surprised how many people would like to pay you to take those items off of your hands.

As we continue to truck along through the pandemic, be sure the job you’re seeking abides by the Centers for Disease Control and Prevention (CDC) recommended guidelines and try to find a job that has little to no direct contact with others. These jobs include (but are not limited to) stock person at a grocery store, virtual assistant, food delivery service, virtual tutor, data entry worker, content writer, or dog walker.      

2)     Apply for financial aid

Every year, the U.S. Department of Education gives out over $120 million in federal aid, loans and work-study to 13 million college students, allowing them to pursue their college careers with a bit more ease. There’s no catch, just paperwork. According to a study by NerdWallet in late 2017, $2.3 billion dollars was the total amount that the class of 2017 walked away from by not completing the Free Application for Federal Student Aid, or FAFSA. Surprisingly, not all students fill out the FAFSA form because they think they won’t qualify or they don’t prepare in advance to turn in their form on time. The FAFSA website is really easy to follow along, just note that—if you are dependent upon your parent’s income—you’ll need access to their income tax returns, W-2 and 1040 forms.

Not all schools require you fill out your FAFSA in order to be considered for merit-based aid but most scholarship funds require it in order to calculate how much money to award you. Sallie Mae—ranked as the largest student loan provider—gives a great breakdown on how to apply for scholarships, including providing a free national scholarship search. Hawai‘i Community Foundation is a great local resource guide to college scholarships and grants. Money to help fund your education is out there. Keep up the great work of putting in the research (such as reading this article) and continue to commit to putting in the work.

In a tough economy, it’s even more important to consider applying for financial aid. On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and President Trump updated the measure on August 8, which will suspend loan payments, halt collections on defaulted loans and set interest rates to 0% through the end of 2020. Depending on how long the pandemic will affect prospective or current college students, the relief act may continue indefinitely. This is when your financial independence abilities will be put to the test as it will be your responsibility to stay up to date with your FAFSA application and contact your loan officer for any questions or concerns.         

3)     Create a budget

It may seem tedious to keep track of every penny earned but it’s vital if you’re aiming to become fully responsible for your finances. If you already have a job, calculate how much you’d average making in a month and then list all of your important expenses (rent, food, school expenses, etc.) that you need to pay off first. Once you have your expenses listed—and organized how much each will cost—you’ll be much more attentive to where your money needs to be spent each month.

4)     Save now

Once you’ve established your budget for the month, and paid off important expenses, see if you have anything leftover to spare. While it’s tempting to spend your leftover monies on something fun, it would be wise to save some of it on the side. Today’s economic climate is a perfect example of why a rainy day fund is so important. The typical amount that should be saved each month is 20 percent of your income. And if there is no emergency ahead that needs you to dip into your savings, you’ll have saved up a chunk of change.

5)     Invest early

The number one regret among Americans regarding investing is that they didn’t invest sooner. Time is your biggest advantage right now. The great news for first time investors is that you no longer need a lot of money to make money. Thanks to the popularity of investing apps such as Stash and Acorns, you can start investing with as little as a dollar. If you prefer an in-person approach to learning about investing, start with your local credit union or bank. They have financial advisors on hand to give their clients free investment advice.  Talking with a human (even through a screen) will probably answer more of your questions than a chatbot could.

There are many benefits to financial independence other than the fact that it will rid you of having to rely on others. You can learn to manage your own money and have the freedom to spend it on whatever you’d like. You can build up your own credit score on a credit card and—with on-time full payments—get approved for larger purchases in the future such as your own place to live or a car. Just like any new endeavor, the key to financial independence is about having the right resources to help guide you along the way. This will lessen the amount of setbacks, get you closer to your money goals, and give you confidence in handling any financial situations that will come up in the future.