Have you ever approached the end of the month with your bank account drier than the state of Gujarat? It is universally known that being broke is just a part of the classic college experience. However, this situation can be a catalyst for learning good financial practices, which will help us down the line. Therefore, this is the perfect time to take control of your finances and live within your means.
This is where personal finance comes in. Personal finance is the art of monitoring and managing your finances to meet your personal goals. It sounds like a drag, but highlighted below are various methods and tools which will help you elevate yourself into a personal finance BOSS!
Various Types of Expenses in College
The first thing you’ll want to do is make a list of things you spend money regularly on.
The number one item on every college student’s list is always food. No matter how much we love mess food, we cannot resist those late-night cravings for pizza or Maggi. This is why a student must set a particular amount aside for spending on outside food and learn to stick to it. Instead of giving in and ordering food whenever you crave it, try to keep some filling snacks in your room. You can get packets of noodles for a low price or a small packet of bread and a spread of your choice to satiate hunger. Self-control is an integral part of managing our monthly budgets, but once in a while, we can’t help but cave into these cravings. For those times when we do end up spending on ordering in, we can try to ensure it is well within our budget for the month.
Another significant monthly expense includes our phone bills. A college student without 4G is like a human being without oxygen at this point. You can try and reduce this by using the library wifi or hostel wifi as much as possible. Setting a data limit on your phone and keeping it restricted is an excellent way to control the bill. Other things that add to our monthly expenses include grocery, stationery, transport and entertainment. Some of these expenses are fixed monthly expenditures, so it would be recommended to keep a specific amount aside every month to spend only on those particular items.
Whatever extra is left over in your budget can go towards your miscellaneous or indulgent expenditure, or you could save that money and thank yourself later!
Various Streams of Income in College
Your monthly income is how you can best track and control your expenditure. Your monthly income is a crucial component of your budget since it establishes the cap on how much you can spend. Here are some various revenue stream options in college:
Monthly allowance from home: as a young adult, you probably have limited substantial income sources. Therefore, requesting a specific budget from home may be necessary. Try to earn the monthly allowance by helping out at home by doing some extra chores!
Part-time jobs and Internships: A lot of organisations offer jobs on a part-time basis to students. These jobs provide students with the flexibility to study alongside their degrees. Not only will they add a few extra bucks to your wallet, but they will also give you work experience, which translates to extra bucks down the line. Part-time jobs like tutoring, graphic designing, blogging etc. will be a good option. Several websites are devised especially for students to earn something for themselves, like Internshala and LinkedIn.
Freelancing: There are a variety of areas that you can freelance in, depending on your skill set. Some of the best options for students include graphic designing, content writing/creative writing, blogging, marketing, research, and sales. Stipend may be based on a commission or incentive, while others will pay per the project requirements. This will be especially helpful as you are your boss and completely control your hours. Some of the best freelancing sites are Fiverr, Upwork, Selfy, Freelancer and Gumroad. Networking and freelancing go hand-in-hand now that we are back on campus. Small businesses can be more easily maintained and promoted. One should make full use of the advantage of being on campus to help expand their business.
Problems you may run into
College may be your first-hand experience with freedom but also with responsibility. Financial planning and decisions don’t come without practice, and here are some problems you may run into. Don’t worry; we have quick tips to help you bounce back to your A-game.
Rampant overspending: On campus, it is easy to overspend on food in restaurants, partying, groceries, and laundry. Though these are minute purchases, they do add up over time. We have been there, going out on a shopping spree, only to get to the billing counter, regretting our life decisions and watching our balance dip into the low double digits. This instinct of momentary pleasure and long-term guilt can be avoided easily! Set aside a portion of your budget to invest in your favourite products and extra services (like laundry), and set a manageable figure. This way, it will be a controlled and mindful purchase when you go out on a spree. Also, do practice a hefty dose of self-restraint!
Some good third-party apps to help track expenses are:
Not keeping an emergency fund: Saving a portion of your money for an emergency fund becomes incredibly important when living alone. It creates a sense of financial security. You can tap into the emergency fund for sudden significant expenses like going to the doctor or a prominent fancy place (I know it’s a wide range of options, but keeping the financial plan flexible is the game’s name).
Ignoring financial literacy: Not learning the basics of home economics, investment and budgeting will negatively affect you in the long run. The more you know about personal finance, the better. It will help you avoid getting into debt traps and bad loans.
Some good sites to learn more about finance are:
Overlooking cost-efficient activities: When you see your peers spend extravagantly, you will naturally desire to go out and do the same. But, we fail to realise that burning a hole in your pocket by imitating others will simply not be worth it. It is very easy to overspend on things like going out to eat and partying. But we must strike a balance between such activities and activities that are more cost-effective and rewarding, like hobbies and extracurriculars.
One cost-effective way to reduce spending is to buy things from big retail stores like DMart or Reliance. Stores are about 15 minutes away from campus by auto or bus. These stores offer excellent discounts on daily use items and snacks which can be bought in bulk. These are a perfect cost-effective option in the long run.
Note for first-year students: The initial spending which you’ll do when you’re settling into the campus, like buying calculators, stationery, bedsheets etc., will be quite a sizable investment, but make sure to invest in good quality products. These need to be used for the rest of your 4 to 5 years here, and to stand the test of time; they need to be of good quality. Also, don’t be intimidated by the initial mild overspending; that initial stimulus will help you settle here. Skimping out on these purchases to save money will hurt your pockets in the long run.
Good Financial Practices
Advisable financial practices to make sure you can discipline yourself into a budget is to track the amount of money you spend with apps such as Money Manager, Monefy and Money View. You can keep track of how much you spend, control yourself when you get closer and closer to your budget for the month, and save yourself from going over it.
Multiple Microsoft Excel and Google sheet personal finance templates can help you track your income and expenses. These are especially useful as they are bifurcated into categories, so you know exactly how much you earn and where it is being spent.
Some helpful links are:
Long-term planning when it comes to your finances is also crucial. This means setting goals for yourself and implementing measures to achieve them. An example of a goal can be allocating a portion of your income for savings or investments.
Prudent borrowing is another important financial principle. Never borrow more than you can return. Keep track of your loans and be diligent about repaying them.
The transition to college is difficult. You’re away from your parents for the first time, and you have to deal with everything they did for you beforehand—washing, cooking, and cleaning. You’ve got to pay attention to your finances and avoid overdrafts and credit cards. Learning personal finance may sound challenging and intimidating at first. But with small daily increments, planning, and consistency, one can achieve personal finance goals.
Written by Khushi Nigam and Agnes Chiramal for MTTN
Edited by Advaith Gurunath for MTTN
Featured Image via iStock