Managing money as a student is extremely hard because your income is not as much as a full-time employee or self-employed. However, it also does not mean that just because you have less income you cannot make most of your money. Financial experts suggest that you should always contribute to emergency cushion so you do not end up chasing lending institutions.
A rule of thumb says that you should set aside at least 10% of your income to the emergency cushion. However, it is impossible to follow this approach when your income is not stable. If you are a student, you will have either a part-time job or freelance income source.
In this scenario, you may not be able to contribute at least 10% of your income to the emergency corpus every month. It is not difficult either. You can easily take a 10% chunk of your weekly income or whenever you get income in order to transfer to the emergency cushion. However, building emergency corpus is not enough. Here is how you can manage your finances well as a student:
Create a budget
There is no denying the fact that you spend money like water when you are too young. You just start to earn money and eventually you become addicted to it. If you keep spending money here and there, you will never be able to manage your finances.
Whether you have been taught budgeting or not, you should create a budget. Club all streams of income including that you receive from your parents and debts and categorise then into your expenses.
Make sure that all of your expenses fit into your budget. If you are not getting from where to start, you can take help from your parents. Since they have more wisdom and knowledge than you about budgeting, they can certainly help you.
However, it is likely that your expenses are worth more than your income. In this situation, you will have to either increase your income sources or cut back on your expenses. If you cannot get another income source, you should try to live off a lean budget.
It will include only essential expenses. You will have to leave out all discretionary expenses until your financial situation becomes better.
Set a spending limit
Even though you earn a good amount of money, you may not have left with enough at the end of the money because of your prodigal behaviour. You will have to set a spending limit so you do not end up spending more than your budget.
Just knowing where your money is going is not what your budget aims at. You cannot solve your purpose with budgeting unless you set a spending limit. Make sure that you set a target that you need to meet all of your expenses from this money.
This will restrict you from spending the whole of your earnings. Further, this is a great way to set aside for a rainy day. If you meet all of your expenses within the set limit, you will be able to transfer the rest of your funds to the emergency cushion.
You will have to change your spending habits. If you roam around with your friends, make sure that you all prefer to go Dutch and you do not feel shy about ordering something that falls within your budget. Many students do not hesitate to spend money when they are with friends and this is when they slip up going beyond the spending limit.
Do not pile up debts
One of the biggest mistakes students often commit is they keep piling up debts. It is not a good sign that you borrow money to fund your regular expenses. Just because debt is easily available does not mean that you will chase them to do it. Do not forget that debt can quickly bite you if you do not understand how they work.
A rule of thumb says that you should take out a loan when you need money urgently. For example, an ideal time to borrow money is when you have to borrow money to have your laptop repaired instead of doing it for eating pizza with your friends. Another thing you need to understand is the amount you can afford and required.
For instance, if you have £100 in your savings and you need in total £150 for your laptop repair, make sure that you do not borrow more than £50. Always remember that you have to pay off the whole debt along with the interest. It can seem easier to borrow more than £50, but you will eventually find that it is extremely hard to pay back.
Other ways to save money
Although budgeting and setting a spending limit are essential to manage your fiancés, there are various other ways as well that you can follow to make most of your money:
- Stop buying new books. Of course, you will have to buy new textbooks updated every year, but most of the books remain the same. Therefore, you can avoid buying new books. Instead, buy secondhand books. You can save at least half of the prices. You can get some additional books for projects from your college library. Use it and then return. This is also a great way to save your money.
- Stay with your parents if you find accommodation far from your college or university. It does not make sense to rent a room and bear additional travelling cost knowing the fact that your income cannot support such expenses.
- Increase your income sources. Get some work or do a job that pays you good remuneration. This will help you meet all of your regular expenses easily.
The bottom line
Managing money as a student can be undoubtedly challenging, but it is not impossible either. All you need to do is to take stock of your monthly expenses to know how much money you need to earn every month. Keep tabs on your everyday expenses so you do not spend more than your budget.
Author’s bio: Sharon Smith is a financial consultant at RecentFinance and writes finance articles too. Her job is to help students and unemployed people get loans for unemployed from RecentFinance at affordable interest rates. She has written many articles to spread education about financial management.