Budgeting. Saving. Debt management.
These are the top three money skills when heading to college. Learn them now and they’ll pay off in spades over your lifetime.
Budgeting only works if you stick with it
Being consistent and careful in managing income and expenses is the key to success. A budget is like a road map for your money and when you follow it, it helps avoid unnecessary debt. Pick a template that makes sense to you, or set up your own spreadsheet. If you’re into apps, You Need a Budget (YNAB) is a popular one (the free version is plenty).
For income, this is generally a part-time job, summer job, money from parents, student loans or lines of credit. It can be a bit “lumpy” and inconsistent, which is why saving during times you’re earning well is really important. You’ll use this savings to pay for your costs in leaner times. Plug your income into your budget, and ensure you’re updating your template as it changes.
For expenses, include your living expenses, cellphone bill, transit pass, groceries and other items like social spending (coffees, parties, travel and meals). My advice on these nice-to-have expenses is to try to get the most value from the limited dollars you have for this — hello 2-for-1 specials and coupons!
Your template (or you depending on how you set this up) will subtract your expenses from your income. If you’ve got money left over, awesome; save some and enjoy the rest. If it’s negative, that means you’re spending more than you’re bringing in and you’ll need to cut back to balance your budget.
The last two steps of the budgeting process are straightforward; track your spending (almost all financial institutions in Canada offer some sort of tracking system for free), and, last, if you become aware of an unhelpful spending habit, do something about it! For example, if you’re throwing out food, set up a meal plan or simply buy less.
The art of socking away money for your future self
Don’t get me wrong — I love a good deal. But equally important as smart value-conscious shopping is the art of saving money for your future.
I get it. Where will the savings come from? You’re already on a tight budget, right? Start small with $5-$10 per week (one less coffee).
I too was on a tight budget when I went to school. So I kept my savings small and consistent. No matter what, I would find a way to put between $20-$30 per week into my free student savings account. This money was from shifts I’d worked when I wasn’t in class, babysitting and selling things I didn’t need anymore like old text books and hard drives. And when I worked more, usually during the summer when I had a few jobs on the go, I’d double, triple or quadruple my savings efforts.
I did this so that I could stay out of unnecessary debt, pay tuition and have money for my life; some travel, a new bike and social spending was mixed in there, too.
More valuable than the money I saved was this habit that I could save something, even if it was small, every week. Fast forward to now, and I still save money each week. It’s allowed me to build retirement funds and enjoy my life with my family.
What small but meaningful amount could you save each week while in school?
Credit comes too easy these days
Student loans are not bad debt. You’re investing in your education and that’s going to lead to future income down the road.
It’s the other kinds of debts that are troublesome for students, used for consumer purchases. Credit card balances are the most pesky. Unfortunately, credit card lurchers are everywhere. These are the sales reps for credit card companies that wait for the perfect opportunity to stop someone on the street and try to sell them a credit card. They come out of the woodwork on campuses, too, typically when teens head off to college or university.
Students get into trouble with credit cards in three ways. First is having too many of them (signing up for all of them the first week on campus). Second is using up too much of the credit that’s available — “maxing out.” Third is not paying them off in full and on time, resulting in high interest charges well over 20 per cent. And, of course, not paying it back at all will wreck your credit score.
Yes, credit cards are helpful in building up your credit score, and so my advice is to get one card with rewards that are helpful for you as a student. Keep the limit to $500-$1,000. Use it sparingly and pay it off completely every 30 days when the balance is due. This means having a plan to pay it off — before making the purchase.
Mastering budgeting, saving and debt management now won’t just get you through college — it’ll set the foundation for lifelong financial confidence and success.
