Living within your means can be a challenge at any stage of life. If, like many students, you have a limited budget and high expenses it can be particularly difficult.

The simplest way to avoid debt is to pay in cash or use a debit card whenever you can.

There are very good reasons to keep your debt level as low as possible. In the worst cases, high debt can have a significant negative impact on your lifestyle.

• Using credit and incurring high debt can mean you are paying more in interest — often a lot more — than the original cost of what you bought. See the example in the box to the right. And tuition is not a frivolous expense!
• Money that could pay for necessities — food, transportation, utilities — goes instead to paying interest on your debt.
• Debt makes it hard to save for your future: down payment on a home, travel, fun splurges, emergency funds, retirement.

High debt is expensive. Here are some ways to keep it under control.

Create a budget and stick to it

Online calculators and accounting spreadsheets can help you understand where your money goes. You can see places to cut expenses or increase your income to avoid having to borrow.

Borrow conservatively

If you must borrow to pay for school, accept the minimum loan amount absolutely necessary to cover your costs and get federal student loans first.

Before you take out a student loan, remember that when it's time to repay you'll have other financial obligations as well: living expenses, taxes, other debt.

Before you borrow, determine how much you will be expected to pay on your student loans each month and how that amount compares with the salary you expect after school. Around 5%–10% of your income is usually considered a comfortable student loan debt level. You can estimate your monthly student loan payments under various repayment plans using our Loan repayment calculator.

Restrict your use of credit cards

A credit card can be convenient but, even if you get a low-interest rate card, using it irresponsibly is likely to cost you a lot. A credit card makes it very easy to overspend or to buy items on impulse that you may not really need.

Using many cards compounds the problem: You only need one national credit card to build an excellent credit rating.

How can you avoid using credit cards?

• Limit yourself to one low interest rate (APR) card.
• Use that card for emergencies only.
• Don't accept increases in your credit limit. Keep it modest.
• Keep the card in a safe place where it's not easy to use for impulse purchases.
• Charge only what you can afford to pay in full each month.
• Pay your balance in full each month whenever you can.
• Ask "Do I need it or do I want it?" If you don't need it, don't charge it.

If you already have high credit card debt, consider transfering your outstanding credit card balances to one new lower-rate card and paying it off as quickly as possible.

If you remember that a credit card is a convenience — not a source of spending money — you should stay in good financial shape.