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.