For a lot of students, college is their first money management experience. Prior to this, they had been living with their parents and were looked after them financially. As and when they grow up and move out of their parent’s house, they start learning all about money.
However, almost every college student faces financial stress. There could be many reasons for this. Some of these students find it hard to cope up with a limited amount of money, where some are bad at managing money. Some students tend to spend more at the start of the money and then struggle through the rest of the month. Regardless of the reason, every student at some point in their college life needs help to manage their finances.
In this article, we first state some of the major financial problems that students face and will then present some effective ways that will help them manage their money matters. Let us get right into it.
Financial Problems for Students
To help students manage their finances effectively, it is extremely important to find out the financial problems they go through. These are only some of the issues they face.
Not Tracking Expenses
As stated above, it is a first-time money managing experience for a lot of students, thus they are unaware of the importance of tracking expenses. A lot of them are clueless as to where their money is going even though they are not spending unnecessarily. This happens when small amounts are spent frequently and at the end of the day they add up to a huge amount. Thus, without realizing it, the student spends a huge amount almost every day.
Additionally, students are neither organized nor responsible. As a student, you must take control of your finances and make sure that you are organized enough to use your monthly allowance throughout the month instead of finishing it off in the first week. When you are aware of the amount you have for the whole month, you will be able to create a plan and track your expenses.
Succumbing to Peer Pressure
Peer pressure is another major reason why a lot of students face financial stress. Not every student has the same monthly allowance. Some have a lot, while others are on a very tight budget. Thus, when they plan for a lunch or an outing, there will be students that cannot afford such activities financially. However, due to peer pressure, they agree to be a part of all such activities and end up spending more than their pocket allows. The result? They struggle for the rest of the month and in many cases may look out for a small loan so that they can continue such activities with their peers.
Getting a loan for such activities is a recipe for disaster. It’s a never-ending cycle and once you get trapped in this, it is extremely impossible to get out of it. You might sometimes ask your friends for money, sometimes your parents, sometimes you will abuse your credit card limit. Whichever path you choose, the result will the same – you will be stuck in a situation where it will be next to impossible to get out of. Thus, recognize your limits and learn to say no to things that you cannot afford.
Abusing Credit Card Limit
How many times have you thought you can afford something just because you have a credit card? As a student understand that you do not have a regular income. You might (or might not) have a part-time job; however, that will help you cover your academic expenses. Do not use your money to get things that you do not need. With social media all over, you are being targeted with ads and are being tempted to make a purchase, but as a smart individual, it is your responsibility to weigh the pros and cons of a purchase. Before you buy something, always ask yourself ‘do I really need this?’, ‘what will I lose out if I do not purchase this?’, etc. Do self-talk and then decide whether you really need the product or not.
Just because you have a credit card does not mean that you go about purchasing things and abusing your limit. Understand that whatever you buy, you have to pay for it by the end of your billing cycle. If you don’t, the bill keeps on adding until you make your final payment. Think if you can afford to pay the bill, decide if you pay the bill, will you be able to spend the rest of your mouth comfortably without any financial stress. Think along these lines, and if you think you can afford it, go ahead, and buy it. on the other hand, if you get even the slightest hint that you might get into a financial problem, drop the idea of swiping your credit card.
Try to differentiate between needs and wants. Needs are items that are essential and things that you cannot without. However, wants are things that you can easily avoid and can continue living your life without any issues. For instance, food items are eggs, milk, etc. are needed and you would need them even though you are living a lavish life. While expensive food items or eating out every day are things that you can avoid. You can function without them.
As a student try and understand what things you should invest in. You would need a laptop for your studies, assignments, quizzes, etc. Thus, save up and invest in a good machine that will help you accomplish your academic goals and tasks. Spending on such items is a necessity and you will gain a lot from it. On the other hand, if you spend on luxury items, buy expensive clothes, etc. you will be wasting your money as there is no gain from such investments.
Make smart spending decisions and spend only when you think there is a need, not a want. Invest in things that will be of benefit to you in the long run and will help you succeed in your academic career.
Managing your Finances as a Student
Now comes the tricky part – handling finances as a student. This is one of the challenging tasks that students have to face when they join college and have to live away from their parents. Here are a few effective ways to help students manage their finances smartly.
Use a Money Managing/Budgeting App
We live in a technological world today; thus, you should make use of technology in the best possible way. To manage your finances efficiently, you can download budgeting and money managing apps that will help you manage your finances in the best possible manner. These apps are designed in a manner where your expenses are tracked, measured against your income or budget and you can get a bird’s eye view of where your money is going. These apps help you understand where you are spending your money, which expenses you can cut down and how you can better manage your monthly finances.
Moreover, some advanced money managing and budgeting apps help you save money as well. If you follow the steps, the app will direct you to enter your expenses and will set a budget for you accordingly. If you follow the budget religiously, you will be able to save a certain amount by the end of each month. However, you must be cognizant of one thing – enter all your transactions in the app with honesty. If you have spent $100 in a day, be true to yourself and enter the same amount in your budgeting app. You can trick the app, of course, but remember it will be only you who will suffer financially.
Set a Budget
Not all students understand the importance of setting a budget. They think that with a budget they will lose financial freedom and will have to spend carefully. Well, this is true to some extent. Budgeting does make you spend carefully; however, it is for your own benefit. You should be mindful of unnecessary spending and make sure that you purchase things that are required. Restrict your spending on entertainment and food and use the saved-up amount for your own benefit. For instance, you could get yourself an additional resource to successfully complete your degree, assignments, etc. While there are a lot of academic resources available, Essays UK is a trusted place where you can get help for your tasks.
However, do not get carried away by only setting a budget. Your job is only half done here. Once you have a budget in place, you should make sure that you follow it. Setting a budget and not following it will only increase your financial struggles. List all your expenses and then classify them as needs and wants. Once you have a list of needs, create a budget around those expenses. You have a limited amount for each month, thus do not spend money on things that you can do without. Do not include them in your budget, and you will see a noticeable difference financially. You will be in a much better position to spend money the whole month and will not be stressed about your finances anymore.
Set up an Emergency Fund
This is an important tip for managing finances. This is one reason why you need to set up a budget. All savings can then be used to set up an emergency fund that can only be touched when you are faced with an emergency. Even if you do not want to allocate your savings towards your emergency fund, you can include this category in your budget and then set aside an amount for this. This account can come in handy in a lot of situations. For instance, you need to visit your family urgently so you can use this amount to cover your travel expenses. Or if you are faced with a medical emergency, you have enough finances to cover your expenses.
Keep in mind that this is an emergency fund only and any amount allotted to this account is not to be used anywhere else. This is one of the best ways to deal with emergencies that might come up during your college life.
Work Towards a Positive Credit Score
If you are faced with a situation where you urgently need money and have no choice other than a bank loan, you need to be sure that your credit score is positive. A credit score is an important measure that guarantees that you will pay back the loan in time. Banks and financial institutions use this measure to learn about you and give out a loan based on your credit score. Another important reason to maintain a good and positive credit score is the interest rate. What would you do if you are granted a loan but with such an interest rate that you cannot afford repayments?
To make sure that you do not get into this trouble, build a positive credit score. There are a lot of ways to do so. First, if you have a loan, always make full payments and on time. This is a great way to improve your credit score and to let financial institutions know that you will repay their loan. Next, try and make do with one credit card only. The more you get, the deeper you get into debt. Try and utilize only a minimum amount of your line of credit i.e., withdraw only what is needed. This is a positive indicator that you are aware of your financial responsibilities and will repay the loan on time.
Get a Part-time Job
There is nothing like earning on your own. Even though you have just entered your college life, you can out with something small and get a part-time job for yourself. There are immense opportunities for students to earn on their own so that they can make some money for their expenses. Not only does a job give you financial independence, but you will also be able to apply your theoretical learning into practice. Earning for yourself is an unmatched experience and it will help you gain first-hand experience of all that you are learning in your academic life.
Additionally, a part-time job is a good way of spending your time. While you are free after college, thus, instead of spending time with friends or going out with them and spending money unnecessarily, go out and make some money for yourself! Once you start earning and get a job for yourself, there is no stopping. You will be able to apply your learning in your studies and will be able to relate your academic learning to the real-world setting. Thus, getting a part-time job will not only give your financial freedom but will also help you excel at your degree. If you have a loan, you will be able to pay it off easily and might not even need to apply for a loan again!
Following these tips will certainly help you manage your finances efficiently and will also allow you to save some money for the rainy days!
Halian Ronaldo is a content writer at ResumeCroc who has written hundreds of articles to assist students’ career life. He is managing a growing team of writers who love to help students with their academics. As for his hobbies, he likes to read articles, newspapers, and magazines to keep himself updated.