Managing Finances as a College Student: A Five-Step Guide

As we once again round the corner to summer break, students everywhere vacate their campuses and set off in search of a summer gig. Some of them have been working all year and are increasing their hours for the season, while others pick up the summer job they have kept since high school. Twenty-something-year-olds are universally scrambling for employment, experience, and a little extra cash. The looming question—aside from who will sign the checks—is how can students maximize their summer income to get through another school year? College comes with a slew of new responsibilities, including liability for your own finances. It can be overwhelming; with these five tips for financial success, however, it does not have to be.

I. Build a Budget

The very first step toward financial success is becoming acquainted with your spending habits. Track your expenses—both fixed and variable—over a month. This includes not only your recurring monthly costs, like rent, tuition, meal plans, or parking passes, but also your variable expenditures: how much did you spend on food over a month? How about gas? What about shopping and eating out? Do not forget to mark down small expenses too—you may be surprised how quickly those cheap vending machine snacks add up over the month. Once you have tracked your spending for a month you can sit down and evaluate. Consider how much of your monthly income went towards necessary expenses and how much you could be spending more wisely. When creating a budget, account for the required expenses first, and then see how much you have left over for non-essentials like eating out, shopping, and entertainment.

The very first step toward financial success is becoming acquainted with your spending habits. Track your expenses—both fixed and variable—over a month. This includes not only your recurring monthly costs, like rent, tuition, meal plans, or parking passes, but also your variable expenditures: how much did you spend on food over a month? How about gas? What about shopping and eating out? Do not forget to mark down small expenses too—you may be surprised how quickly those cheap vending machine snacks add up over the month. Once you have tracked your spending for a month you can sit down and evaluate. Consider how much of your monthly income went towards necessary expenses and how much you could be spending more wisely. When creating a budget, account for the required expenses first, and then see how much you have left over for non-essentials like eating out, shopping, and entertainment.

II. Set Savings Goals

Creating a budget and sticking to it works in your favor for several reasons. It is a great way to establish a healthy relationship with money and build financial discipline from a young age. It also makes finances more concrete and comprehensible. Perhaps most importantly,

budgeting allows you to start saving.

Your first priority when saving is to build an emergency fund. It is a cliche for a reason; you really never know when a rainy day will leave you short for cash. The fastest way to accumulate a rainy day fund is by following this simple mantra: Pay yourself first. Provided you have enough to cover absolutely necessary expenses, your first move should be to set aside a part of your paycheck in savings. Your goal for an emergency fund should be enough to cover three to six months of your rent, but it can also be spent to cover unexpected costs like car repairs or hospital visits. While you slowly build an emergency fund, it can also be beneficial to set short-term savings goals. Save enough money to take a trip or see your favorite artist in concert. Saving up for experiences is an excellent practice in financial discipline.

Further, consider automating your savings deposits through your bank. When you get a paycheck, a portion will go straight to savings so you are never tempted to spend it. Setting aside money this way is an investment in your future financial success; one day you will reap the benefits and be glad you thought ahead!

III. Start Building Credit…

As you enter into adulthood, you may consider getting your first credit card. Using a credit card responsibly can contribute to your future financial success by helping you build your credit score. As you begin looking into buying a house or a car, a healthy credit score proves to

lenders and landlords that you are financially responsible and can even help you get better interest rates. Try online resources like Credit Karma to keep an eye on your credit score.

IV. … BUT Be Careful with Credit Cards

It bears repeating: credit cards must be used responsibly. If you are not certain that you will use it responsibly, a credit card may not be for you. Using a credit card can be risky; it is easy to get a credit card and start spending money you do not have. Even if you intend to pay off purchases on your credit card immediately, you can accrue debt if your card’s interest rate and minimum monthly payment are not in your favor. Credit card debt is common– it does not spell permanent ruin for you finances, but it is best to not poke the bear on this one.

V. Start Small

The best thing you can do for your financial health is be mindful. Think about where your money is best spent and aim to save as often as possible. Small changes can go a long way; try shopping second-hand online or in thrift stores. Cook for yourself or try to maximize your meal plan rather than eating out. Make your morning coffee at home.

In the same vein, be wary of student discounts. College students are offered admittedly tempting incentives to buy all sorts of subscriptions and streaming services. Before you swipe your card, think critically. Remember that saving 25% on something you were not going to buy in the first place is not really saving. Most importantly, review your finances frequently and make adjustments to improve your spending habits. Finances are a long game. Being aware and thoughtful now sets you up for success in your future.

Student finances can feel suffocating. Just as you are investing in yourself by working toward your degree, you should think of yourself as investing in your future success by handling your money responsibly. It might take time to develop healthy financial habits, but that is the beauty of starting early. Do your best to make your future self grateful to you and remember that there are resources to help you find your way.