Budgeting is a very simple concept: you manage your financial inputs and outputs hoping to keep your input higher than the output. As a student, you have to deal with expenses and obstacles that don’t generally come up in other stages of life (such as tuition fees). Here are some steps and tricks to help you save money even when living on a tight student budget.
- Define your financial goals
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There are three types of management when talking about money: (1) strategic, (2) tactical and (3) operations. Strategic management is concerned with your financial goals and your current goals. Tactical management refers to the systems you build to deal with regular money flow, and your individual financial decision. Operational management is your day-to-day spending habits (like buying a Tim Hortons coffee over a Starbucks coffee). The best way to ensure all of this is to sit down and create a financial strategy. You should set goals that make sense based on what you want out of life and what your current situation is. It is okay to be optimistic but remember to also be realistic. Doing this will help you create systems to set a path and start moving forward.
- Do a financial IEOT test
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This is a test in which you write down your income, expenses, opportunities and threats. For income, think of how much money you are bringing in and how much of that is going to be spent on stable costs (TV, phone, utility bills). Next, for opportunities, think about the probability that your income increases in the future. Do the opposite for threats; what if your income decreases suddenly?
- Getting your number
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One exercise I recommend doing is getting your number. By that, I mean the number of dollars you have to spend each month. This list should include any and all expenses that are definite for each month, such as rent, utilities, phone, car insurance and groceries. The final total of all those expenses will be your number.
- Savings account
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What I have begun doing is taking 75 percent of each of my paychecks and putting them into a tax-free savings account. This is money that will sit there until you need it, with no extra taxes, interest or hidden fees. For example, if you get a biweekly check of $500, 75 percent of that amount ($375) would go into your savings account. You can adjust how much you put into the savings account by reviewing your monthly “number.” Additionally with most savings accounts, it takes 24 hours before the money becomes available if you need access to any. In my opinion, this allows you not to make impulse purchases; knowing that I have to wait 24 hours to buy something out of my budget makes me think twice before I splurge. This account can also be used an “extra” expense account. As a student, we spend so much money on textbooks, school supplies, electronics and tuition. Having this emergency stash of cash is a great push towards being able to buy these excess items without the worry of having no money left. I would recommend opening a savings account right away to help you save your money as fast as possible.
- Auto-payments
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I started doing this recently and let me tell you, it works! I have started automating payments on all of my monthly expenses. This leaves me with the exact amount of money to spend on leisurely activities without having to worry about having to pay my bills. Automating your credit card payments is also a great way to keep your credit score in check.
With that, you should have a good idea of how to start budgeting as a student. Planning is key and it needs to begin now. Setting goals and laying out your expenses and savings is what will help you make sure that your money is spent efficiently and effectively. Leave overspending in the past and start saving that hard earned cash!