Many high schools and college students claim not to have received any education concerning budgeting. For that reason, they don’t tend to think about personal finances management as an important skill. What is more, many of them believe that this doesn’t concern them until they receive their first salary on a full-time job. But, in fact, everyone has personal finances and, therefore, a budget to manage.
There are many great financial tools and techniques available today, especially for students. Learning about them means giving yourself the opportunity to take advantage of this knowledge and enter the job market confidently afterward.
Top 5 Reasons Why Budgeting Is Important
Budgeting is a great way to start taking ownership of your financial health, and it doesn’t have to be complicated. Just an Excel sheet or a simple notebook should be enough. Here are the 5 good reasons to start one:
– You can understand more clearly where your money goes.
– Find the balance between spending and saving.
– Avoid panicking in case of an emergency.
– Launching a small startup without getting into debt.
– Adaptation before going deep into the world of rents, loans, and debts.
If you are full of determination, let’s start with the basic steps everyone should take.
Self-Organization Is Key
1. Calculate Your Earnings
The important thing is to organize yourself well to optimize financial management. First and foremost, you will need to check the records of your expenses and earnings. Indicate precisely how much you usually receive, would it be scholarships, freelance jobs, pocket money, etc., per month. If some of the income sources are not regular, calculate your average income comparing the last 6 to 12 months.
2. Track Your Spendings
Above all, you will need to write down all of your fixed expenses, such as rent, insurance, textbooks, subscriptions, fees, and others. After that, we have variable expenditures, including food, entertainment, clothing, decorations for your dorm room, and everything else. Ideally, you will need to track your spending habits for several months, writing down your purchase categories. In this way, you will have a clearer image of how you spend your money. These are the categories you might want to include:
– food outdoors
– entertainment (cinema, concerts, festivals, dance classes)
– hobby, sports
– college (textbooks, pencils, tablets, books)
– home (utensils, decorations)
– subscriptions (streaming services, phone bills)
3. Define Your Financial Goal
You might think that keeping a record of all your expenses is too much of a fuss, but you will get the benefits after doing this a few times. Then, the most interesting part begins: you will start seeing clearly your consumer behavior and will be able to manage it.
Let’s say you would like to buy something expensive, such as a new e-reader, but you don’t manage to save money because you spend 100% of what you earn. Analyzing your expense reports, you may notice that you spend on eating outside once as much as if you were cooking at home for a week. Here’s your strategy for the nearest future: eat outside once a week instead of 3 times, and put aside the amount you saved. It is just one example, but you will come up with numerous ideas regarding your case. Promised!
Finally, having figures in front of your eyes, you will be able to define your financial goal. Although experts recommend investing 30 to 70 percent of one’s income, you can start with something smaller, like 5 to 10%. You can save them for your emergency fund or, sure thing, put them aside for the purchase of your dream (or of your necessity). If you have several dreams, for instance, you would like to travel to France, buy a better smartphone, and move to a bigger apartment, you can create 3 separate funds for them. It’s entirely up to you! Just don’t forget to define which amount should be put aside monthly (or weekly, if you wish).
4. Create an Emergency Fund
No one is safe from unexpected emergencies. Even if you are planning and anticipating, it is unfortunately still possible to have to face unforeseen events or accidents that will require going out of your established budget. In general, financial institutions advise having working capital capable of covering 3 to 6 months of salary. However, not everyone is able to achieve this, and, above all, situations requiring such amounts are fortunately quite rare. This is why, for a student, it is advised to start with precautionary savings of around $1000 to $3000, which will cover the vast majority of unforeseen expenses.
Ideas on How to Save Money Being a Student
– Check if alumni are selling their old textbooks. If yes, why do you need to buy new ones?
– If you often use services that offer college papers writing, try to look for the ones that offer student discounts or seek help from your classmates who are good at essay writing.
– Research all of the free opportunities you have on your campus: gym, library, counseling. Maybe you could have fun working out with your friend following a video on YouTube (which is free) instead of going to a paid gym?
– Be aware of your opportunities. Is it possible to apply for a scholarship? Maybe, instead of going somewhere expensive for a vacation, you could do volunteering abroad?
– Don’t do groceries when you’re hungry. You will end up buying things that you don’t really need.
– Check on the shops and cafes that offer student discounts and opt for them.
– Check on your bad habits: overconsumption and smoking are not only harmful but also expensive.
Personal Development Is the Best Investment Strategy
Following the steps enumerated above, you are more likely to become a successful investor in the future. However, for the moment, you should concentrate on your studies and self-development as a way to invest in your future. Indeed, the more attention you devote to developing your hard and soft skills now, the higher your salary will be. Besides, you will be more conscious and take ownership of your finances.