College is an important time in our lives, and not just because we’re spending four years learning and getting an education. College is also where many of us meet life-long friends and expand our social circles by going out and meeting new people. However, going out and meeting people costs money. As much as students want to have fun and go out, it can be hard to be responsible with their money if they don’t have good fiscal habits. Many students go into college without any financial literacy and do not take the time to set good financial habits that will help them in the future.
According to the National Association of Student Financial Aid Administrators, a “survey collected data from a nationally representative sample of more than 100,000 incoming college students — most from four-year institutions — in more than 410 institutions across the country. Overall, the survey found that most respondents struggled to answer basic financial literacy questions, and on average only answered two of six questions correctly”.
The importance of financial literacy is not emphasized enough to students as they enter college, so they don’t pay any attention to it until they don’t have any money left. On the bright side, it’s never too late to learn how to manage finances. That’s why I have come up with three steps that will get you thinking about your finances and creating a budget that you will actually use.
Step 1: Lay out income, debts, and expenses
The first step to managing your finances is to lay out your income, debts, and expenses. First, analyze your source of income, whether it is biweekly or monthly (whichever way you prefer). Your income is your baseline to how much you can spend. Second, analyze your debts. College and debt are almost synonymous. Most college students have their first experience with debt in college, whether those are debts from loans or credit cards. If you have any debts, make a plan on how and when they will be paid off. Remember, debts directly affect your credit score, so make sure to be responsible and be on top of your debts. Next, analyze your necessary expenses like bills and costs for transportation, school supplies, and/or food. Once you have this information laid out, you will be able to construct a plan to manage your money effectively.
Step 2: Input information into an easy-to-use template
There are many ways to analyze your spending patterns, such as spreadsheets and different applications. A free way to input your financial information is by using Google Sheets. They have a monthly budget template that is beyond helpful for those who want to see how and what they spend their money. On this pre-made template, you can adjust it to your specific needs. You create the categories that you typically spend in a month like bills and essential or non-essential expenses. If you are an avid coffee drinker and you find yourself spending too much on coffee, you can make that a category and set a limit for yourself for the month. Every week, you can input what you have spent during the week and see if you are spending too much or if you are within your limit. This template will help you see if you have any money left over from your income and you can transfer that money into your savings account.
Step 3: Take your budget on the go
Another way to analyze your income is by using apps on your phone or computer. These applications do the hard work of inputting what you spend instead of you doing it on a spreadsheet, and they provide you with a digital overview of how you are spending your money. According to Nerdwallet, one of the best apps to use is Pocketguard. This app connects all of your accounts and your bills in one place and gives you an overview of your spending. It also gives you advice on where and how you can save money. You can also personalize the categories like in the Google Sheet template.
All three of these steps allow you to be more conscious of your spending and saving, but in the end, there is no wrong way to save money. So, put the effort into managing your finances, and you will thank yourself. You will be able to prepare yourself for any unexpected expenses, or any big purchases you may need or want. Being financially literate is a life skill that will benefit you now and in the future.