College living is an exciting and challenging undertaking for most students. Moving away from mom and dad, living on your own (or with a roommate), making decisions for yourself and having to manage your own finances are just a few of the roadblocks you will be facing. Having a plan in place beforehand and sticking to that plan as closely as possible can help to ensure that you survive the transition with the least stress possible.
Here’s how to make build a strong financial foundation during your college years. One of the first and most important steps for successfully managing money as a college student is to truly understand your expenses. It’s likely that you’ve never had to budget your own money before if you’ve lived with your parents your whole life. It can come as quite a shock the first time you’re faced with the harsh reality that there are limits on what you can spend. But, you can soften the blow by learning the basics of budgeting.
Creating a budget: A budget is simply a plan for how you’ll spend your money each month. To make your first budget in college, start by making a list of your fixed expenses, such as rent, tuition, books, utilities and food. Next, make a list of your discretionary expenses such as clothing and entertainment. Until you know what your monthly expenditures are, you’ll have a harder time making a realistic budget to work with. Add both your and discretionary spending together, then subtract that from your income to make a basic budget.
Learn to live within your means: A budget helps you see what you’re spending so you can avoid going into debt to maintain your lifestyle. As a college student, expensive electronics, going out with your friends and eating out multiple times a week are likely going to become a thing of the past. Make sure that you’re meeting your financial obligations before you start to spend on frivolous items that aren’t necessary for your survival.
Try to avoid accumulating debt whenever possible: Debt can quickly become overwhelming and will likely follow you for years beyond college. Keep a single bank card on hand for emergencies, but try to avoid using it for anything that isn’t absolutely necessary. If you’re going to use cards for purchases, only charge what you can afford to pay off in full each month.
Preparing for the Future: It’s never too soon to begin saving an emergency fund, putting aside money for a down payment on a home or even thinking about retirement. Even if it’s a small amount, say Rs. 100/-, putting a little bit away with each pay check will begin to accumulate over time and provide you with a much needed cushion if you’re put in a position where you need it.
The earlier in your life you begin to save, the better off you’ll be when it comes to having money saved for small financial emergencies and the big expenses in life. Don’t fall into the trap of thinking you can just wait until you graduate and get your dream job before taking your finances seriously.