A 2021 survey indicated that approximately 74% of college students experience financial challenges. Yikes! It’s not uncommon for students with financial struggles to experience anxiety, depression, and other mental health problems. Overworking to boost your finances can lead to high-stress levels and low academic performance. But, you can avoid these by practicing smart money habits. Here are a few financial management tips for college students.
1. Create A Feasible Budget
While it’s easy to assume that spending on little things doesn’t cost much, you’ll quickly discover that these ‘little things’ can take a chunk of your monthly income! That’s why it’s essential to create a budget to track your spending habits. A budget can also help you avoid incurring debts, improve your credit score, and save.
Creating a feasible budget is key, though, as an impractical one can yield the same result as not creating any. First, determine how much you get monthly and asses your expenses (both reoccurring and one-time).
Here’s a tip: Categorize your expenses into needs/wants to allocate your funds practically. There will always be things on the list of needs that you can probably live without, and when you pay attention this, you’ll be able to cut them and lower your overall expenses. Many online budgeting tools are available, too, to make the process easier.
2. Try Automated Savings & Investments
Savings and investments can help you navigate emergencies without difficulty while covering your educational expenses. You’re also setting yourself up for future financial stability as you build your saving habits at this stage.
One effective way to save is to try automated savings, as it allows you to allocate resources to your accounts at regular intervals without you visiting your bank or financial institution. This way, the desired amount you decide to save will be deducted automatically once you receive your monthly income.
However, it’s important to consult with your bank or financial institution first to determine if automation works for your savings and investment accounts. If you understand the financial markets and are considering investing in bonds, you can ask your bank to deduct the investment amount automatically. But, ensure that the amount allocated to your savings would not cause financial strain, as that can defeat the overall purpose!
3. Limit Credit Card Payments
Sure, using a credit card for payments can help you build a good credit score while providing security for emergencies. And, you can also benefit from various rewards points. However, it can be financially disastrous if used irresponsibly.
For some people, a credit card can be tempting and leads to unnecessary spending. Plus, if you’re not ready for the responsibility, you risk incurring debts that can be difficult to pay on time. This can reduce your credit score, which in turn reduces your chances of getting loans, mortgages, and other financial aid in the near future.
Instead, consider making most of your bigger purchase with cash to avoid impulse buying. If you’re hoping to build credit, you can instead use it for only emergencies, or for something routine like gas so that you can easily pay off the entire balance each month and avoid high interest.
Managing your finances in college can be beneficial in many ways! Hopefully, you can choose to move forward responsibly so that you can pave a happy and financially stable future for yourself.