a year ago
Mounting evidence suggests that millenials are terrible with their money. About 26% report that they overdraw on their checking account, and another report shows they average about $42,000 of debt. While alarming, this is not entirely the fault of young people. A rough economy and skyrocketing tuition rates certainly puts college students at a disadvantage when it comes to managing finances. The harsh reality of the situation is that students must spend money in order to afford an education - but that does not mean you have to spend beyond your means. Constructing a sound budget is the first step towards financial independence in college.
Getting into Good Habits
College is a time where freedom and responsibility collide. While it’s easy to have fun while away at school, taking the time to come up with a financial budget for your college years is often overlooked. And this isn’t just a trend in college - only about 41% of all Americans claim to budget their money. This lack of organized management leads to oversight and overspending - two things that college students are especially prone to considering their busy schedules. In order to reverse this national trend, students should get into the habit of categorizing and managing their money and continue doing so after they leave school.
In order to reduce the chances of inefficient spending, take the time to figure out how much money you make, and how much you’re willing to spend on certain activities like partying and eating out. Keep in mind that bills like tuition, car/phone payments, and rent must be taken care of before spending money on fun activities. Plenty of data exists that shows the cost of living for a college student can vary from $11,000 to almost $20,000 per year - so it’s important to figure out where you fall in that spectrum before trying to budget.
Reevaluate Your Financial Situation
When creating a proper budget, it’s worth looking into how much you’re paying for certain monthly expenses, and try to find cheaper alternatives. College-specific costs like student loans can be complicated - so take the time to review which loan options work for your specific financial state. Aside from these bigger expenses, daily costs can also pile up. Some conservative reports estimate that college students can spend over $1,000/year on personal items like food and technology. While it may not seem like much in the moment, these expenses are what can get most students into debt, as they accumulate over time.
The best way to avoid these mistakes is to tailor your budget to meet daily needs. Some categories you should consider are food, personal care, gas, and home/dorm maintenance. Prioritize how much you need to spend on each one, as this will help determine your most pertinent financial needs.
In college, much of the learning occurs outside the classroom. This is often the first time students are away from their parents, and must completely take care of themselves financially. Naturally, mistakes will be made and learning from these mistakes is a valuable part of growing more fiscally mature. However, in order to maximize the money you have in college (which usually isn’t much), budgeting is the foundation upon which all other money management decisions will be made. So get into the habit of doing it often, and you will find that managing your money is much less daunting of a task.
Keep up with the Typical Student daily email