Like every one of us, students need to look after their finances well. We all need to know how much money is coming in and how much money we are spending.
Tracking these two amounts and using the following tips will enable you to manage your finances better. You’ll also stress less about money.
#1 Track Your Money
The first step towards improving your financial situation is to know where you are financially. It means you need to be aware of the amount of income you have and the amount of spending you’re making.
A good habit to nurture is to track your money regularly. Use this Student Budget Tracker to record all the amounts that you spent in the past month. Try and include every single purchase or payment you made.
Then write down all your sources of income that you received last month. These may include your student allowance and the income you made from working part-time.
Compare the amount you spent to the income you received last month. Did you overspend and exceed your income? Or did you spend less than your income?
Congratulate yourself if you had surplus money last month. I hope you saved up that amount.
But if you spent more than your income, do not despair. Read on to find out what you can do to improve your money management.
#2 Buy What You Need
Do you save money regularly? Or do you spend more than your income?
Whatever your money situation, it’s a very good idea to set the goal of reducing your spending. The old adage “a penny saved is a penny earned” remains relevant today.
People who manage their money well know the difference between what they need to buy, and what they want to spend on. Develop the self-discipline to avoid always buying the things you want – this is successful money management.
Let’s look at an example. A pair of Nike Air shoes usually costs around $200 or more.
$200 shoes are clearly a want and not a need. If you buy Nike Air shoes, you are paying a premium for a famous brand, and becoming poorer by $200!
But if you buy a more affordable pair of shoes (just to replace an old pair that’s worn out), you can easily save more than $100. This $100 can become part of your saving or emergency fund.
Let’s look at another example:
If you continue using your current phone that’s working well, you can easily save yourself $400 to $600 or more, by NOT buying a new phone.
I know of Ara students who have chosen to work extra hours and pay by hire purchase, just to own a pricey phone. They are paying a lot of interest with their hard-earned money. This isn’t advisable as it harms their finances.
Therefore, set the goal now of buying just what you need. Question your spending.
Avoid buying the things that you want but actually don’t need.
Your finances will improve greatly when you:
• Track your income and spending
• Avoid unnecessary spending and develop a saving habit.
Check out this money advice for students: Victoria University of Wellington.