Entering college is both a liberating and challenging experience. Like many students, your first venture into college might be your first taste of adulthood. As a result, college is the ideal time to learn about finances and develop good habits to take with you post-graduation.
Identify sources of income and expenses
The first steps to financial responsibility are identifying both your sources of income and your expenses. Take into account every form of income available to you, identify the most stable of those incomes and note that some months you may make less money than others.
Next, take note of every expense you could possibly have, including food, transportation, school supplies and recurring monthly bills. Overestimate your possible expenses; it’s better to underspend and have money left over than overspend and scramble for the funds at the end of the month.
Set savings goals
Instead of living paycheck to paycheck, strive to have money stored away in a savings account. If possible, save a chunk of your income first and spend the money you have left after. Save, then spend. Even if you can only afford to save $20, make a conscious effort to put money away every month. Slowly but steadily, your savings account will grow, and you’ll have a fund in case of emergencies or for a down payment on a car or even a house one day. As Federal Student Aid suggests on their website, think of your savings as an expense itself, and consider it untouchable.
Prioritize everything
Rank everything involving your finances according to its importance and necessity. This includes your expenses, your spending and your savings goals. As Hitha Herzog, a consumer spending columnist and published author, states in an article for U.S. News, separating your “wants” from your “needs” is crucial in budgeting. Once you’ve determined whether something is necessary, you want it desperately or it would simply be something nice to have making decisions about what to spend your money on will become much easier.
Keep track
If your go-to methods of spending are debit or credit cards, keeping track is easy; simply view your statement online. If you prefer cash, develop a system so you may keep track of where those bills are going, and whether you should continue spending that way or be more frugal. Phone apps are helpful, but even logging your spending in a notebook works. Once you make it a habit to keep track of even the smallest expenses, it’ll be less of a mystery where your money is going, and you can adjust your spending accordingly.
Use credit sparingly and knowledgeably
It is extremely beneficial for college students to have at least one credit card. Not to rack up debt, but to build credit instead; which makes things like buying a car, getting insurance and buying a home easier and more affordable, according to U.S. News. The key is to avoid overspending and to pay it back in full. Instead of maxing out your card – whether you can afford to pay it back or not – spend less than 30 percent of your limit. This will show that you are reliable and don’t overspend, which will improve your credit score faster.
Do your research
More than anything, it pays to do your research. Find out what kind of savings account would be best for you, as well as what credit card benefits you most and how best to use it. For school expenses, compare prices before you commit to a purchase. Shop around for textbooks and school supplies, taking shipping prices into account as well, and make the most informed and affordable decision. Most importantly, keep yourself informed and be aware of your purchases, expenses, savings and priorities. Developing these careful practices now will help you get through college affordably and prepare you for life after you graduate.
