For the majority of students, college is both an exciting and demanding experience. Moving away from your parents, living on your own (or with a roommate), making your own decisions, and managing your own finances are just a few of the challenges you will face.
Having a strategy in place ahead of time and adhering to it as closely as possible will assist to guarantee that you survive the change with as little stress as possible.
Here’s how to lay a solid financial foundation while in college.
Managing Your Expenses And Budgeting
Understanding your expenses is one of the first and most crucial stages to properly managing money as a college student.
If you’ve lived with your parents your entire life, you’ve most likely never had to budget your own money. The first time you’re confronted with the unpleasant reality that you have spending constraints might be pretty shocking.
However, you may lessen the shock by understanding the fundamentals of budgeting.
1. Setting a Budget
A budget is just an outline of how you want to spend your money each month.
Begin by establishing a list of your fixed costs in college, such as rent, tuition, books, vehicle payments, utilities, and meals. Make a note of your extraneous costs, such as clothing and entertainment.
To create a basic budget, add your fixed and discretionary expenditure together, then remove it from your income.
Your income includes money earned from employment, student loan return checks, side hustle earnings, and any money provided on a regular basis by your parents.
If you have no idea what you’re spending in these categories, you should connect your bank account to a budgeting software which keeps track of your transactions. You’ll be able to readily see where your money is going this way.
You won’t be able to create a realistic budget to work with until you know what your monthly expenses are and what you spend the most money on.
2. Living Within Your Financial Means
A budget allows you to know what you’re spending so you can avoid falling into debt to maintain your standard of living. Expensive electronics, going out with friends and eating out numerous times a week are likely to become a thing of the past for you as a college student.
Before you start spending on frivolous things that aren’t vital for your existence, be sure you’re meeting your financial commitments.
Remember that college is likely to be a time in your life when you will make very little money, so you should be prepared to make some sacrifices.
3. Avoid Getting Into Debt
Debt can rapidly become unmanageable and will most likely accompany you for years after graduation. Keep a single credit card available in case of need, but avoid using it for anything that isn’t absolutely required.
If you must use credit to make a purchase, charge only what you can afford to pay off in full each month. This can help you avoid interest costs while also improving your credit score.
Improving your credit score is vital because once you graduate, you may wish to rent an apartment, obtain a loan to purchase a car, or eventually purchase a home.
For these sorts of financial transactions, your credit score is important, and the higher your score, the easier it may be to obtain authorized and the best interest rates on loans.
4. Planning for the Future
While you’re thinking about your spending, don’t forget to consider saving. It’s never too early to start saving for an emergency fund, preparing for a down payment on a house, or even planning for retirement.
When you have an unforeseen expenditure, an emergency fund might come in handy, and the earlier you start saving for retirement, the longer it has to grow.
Even if it’s a tiny amount, such as $25, putting a little bit aside with each paycheck will add up over time and give you a much-needed cushion if you find yourself in a situation where you need it.
The sooner you start saving, the better off you’ll be when it comes to having money saved for tiny financial crises as well as large needs in life, such as retirement.
Don’t fall into the trap of believing you can put off taking care of your finances until you graduate and find your ideal career. Life does not always go as planned, and time is your most valuable asset when it comes to conserving money.
Even though the few dollars you save every week in college don’t seem like much, you’ll thank yourself after graduation. And if you start your first job, you can keep saving by changing your budget to account for a (hopefully) increased salary and taking advantage of company perks such as a 401(k) plan.
Managing real-life costs and attempting to prepare for long-term financial objectives are challenging challenges for the majority of individuals, not just college students.
Establishing oneself as a responsible adult at an early age will aid in the establishment of a solid financial future.
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