For many, college life symbolizes a welcome to the “real world” among other things. One of the realities is this: for the first time many will be responsible for their own finances. Some, no doubt had parents drill them with personal finance advice for years and will hit the ground running. But for many college students, the college years will represent a time of limited funds with endless possibilities to spend. Regardless of how you’re paying for college, with money set aside by your parents or student loans, your finances should be on your mind.
Below are six steps that will help you create a financial plan for now and in the future:
1. Set Some Financial Goals – According to an article by Sarah Smith for DailyFinance.com, “A Harvard study found that 3% of their MBA grads made ten times as much as the other 97% combined. What were they doing differently? Writing down their goals and making them SMART, that is specific, measurable, attainable, realistic, and timely. Being rich some day is not a SMART goal. Saving the amount needed to fund a summer abroad program by next summer is. Whether your goal is saving towards a big purchase or paying down debt, Groebl suggests posting it in a place that you will look at every day.”
2. Look for Part-Time Work – This is not the easiest thing to accomplish, but it is still an important part of every individual’s personal finance planning. As a student, working full-time might not be an option, but even a few hours a week will help you earn some extra cash. Ask if your school offers work study programs since they may offer the most flexible schedules.
3. Track Your Spending – Do this for a few weeks and see how you are really using your money. Prepare to be surprised. We can almost guarantee that you will be shocked at how much you spend on certain things. When you see that 55% of your monthly spending is on eating or going out, you might want to re-think how much you really need to go out.
4. Start a Budget! – Make it a point to set up a budget sooner rather than later since many financial goals’ success or failure will depend on your budgeting skills. Find out what your income and expenses will be for the semester. Be sure to consider fixed expenses, like car insurance and cell phone bills, as well as variable ones. Use that information to set up a budget that works for you.
5. Stick to It! – Although setting up a budget is one of the most important steps in personal finance, it will only be beneficial if you follow it. Following a budget is an everyday thing. Fortunately, like anything else, budgeting will become a habit with time.
6. Avoid Credit Card Debt and Personal Loans – If you already have credit card or personal loan debt, work on paying it back as soon as possible to avoid high finance charges and extended pay offs. Having a credit card or personal loan payment can lead to financial stress, as well as inhibit your ability to accomplish your other financial goals. Remember the higher APR, the longer it will take to pay off the debt and the more you will pay in finance charges. And, always pay your bills on time! Consistent late and missed payments will have a significant negative impact on your credit rating.
There are of course other financial goals that can be established while in college, like saving for spring break, a car, new electronics, or a trip after graduation just to name a few. Whatever your goals are, make sure that they are attainable and measurable.