We all have experienced “being broke” in college. What with high expenses on textbooks and social activities and limited income, it’s unusual to find a college student who isn’t financially strapped in one way or another. While some things may not be in your control, managing your finances in an effective way may help you have a little extra cash to keep you sustained through periods of heavy spending. Here are four steps to help you get your finances in order:
1. Make a Budget
Budgeting is key to keeping track of your money. You always know where your money is going and how much you have left over in case of unplanned spending. Once you get the hang of it, budgeting becomes a natural habit, and is actually quite easy. First, make a note of all your current spending for a fixed duration, say, a month. This will help you determine your usual spending habits. After you have determined your spending patterns, compare your expenses to your income, and note down areas where you can cut down spending.
Budgeting apps like Mint are extremely helpful when it comes to being able to access your budget anytime. Remember to always allocate an amount for miscellaneous expenses that don’t fit into your regular spending. Whether you use this amount is immaterial; if you experience a period of necessary high spending (say, buying new textbooks), this amount will come in handy.
2. Have Goals
Having a goal will motivate you to stick to your budget. It will prevent you from randomly spending on unnecessary things. Set aside a small amount of your paycheck/allowance each month to go towards fulfilling this goal. At first, you won’t enjoy setting aside money that could be used elsewhere, but after a while your funds will start building up, and you will begin to appreciate the little bank you’ve created to meet your goals.
3. Save where you can
Opening a savings account in college is a wise investment. Over time, the money in your savings account will accumulate and earn interest. In any particular month, if you spend less than your budgeted amount, be sure to put the remainder of your money into your savings account rather than binge-splurging. You’ll see more growth in your savings account over time. Other ways to save include making changes in your daily habits. For example, if you spend a lot of money on your car, consider learning some auto-hacks, such as gas savings or using the bus more often. Take packed lunches to class rather than buying food, and make your own coffee in the morning before class rather than grabbing one at a coffee shop. At first it doesn’t seem like much, but these changes in your daily routine do add up!
To increase your savings, you can also consider various ways to gain supplemental income. Today, we live in an age of constant connectivity, meaning that you can work from practically anywhere. According to this infographic, 61% of American homes had wifi in 2012. Since then, the number has only gone up, creating more opportunities for online work. As a student, you could tutor online, write for paid blogs and magazines, and even do surveys to boost your income. These are opportunities that don’t require you to travel far, and won’t take up much of your time – but will get you some quick cash.
4. Plan for the long term
It’s always good to keep the bigger picture in mind. Even as a student, it’s important to consider the future at some level, though it doesn’t have to be your top priority. Long-term planning includes having a savings account, a retirement and pension plan, and long term insurance. For example, if you know you would like to retire abroad, it is vital to factor this into your goals after college, as research shows that retiring abroad can be quite costly. When following through with the required actions to achieve your goals, you’ll want to keep this in mind. As a college student, you may not be in a position to actively plan for the future, but it is good practice to make a timeline that incorporates the long term, such as paying off debts or when you will start saving for retirement. This way, you will be well-prepared for the future. Even though long term planning can be tedious, it will hold you in good stead through the years.
Using the four basic principles of budgeting, goals, saving and long term planning, you can start to get your finances in order. Even though you won’t have much money to deal with as a college student, understanding and utilizing these concepts will help you both now and later.
This article was contributed by guest author Akshata Mehta.