Leaving home by the time your 18 could be one of the happiest moments of your life, or the worst. On top of that you are plummeted into a world of finances, employment (for survival, not just shoe shopping) and debt.
Relying on student loans, credit cards and lines of credit can be a daunting task. If you are smart, in between lectures and bar hopping, you can spend 1 hour a week taking care of your finances, tracking your spending and your credit will pay you back in ten folds down the line.
Here are a few simple steps to help the budgeting process:
1. Open multiple bank accounts
When you receive your student loan, it is more than usual your tuition is taken off the top, if not, ask that it is, purchase your text books, then calculate your monthly budget.
Example: (Amounts are fictitious)
Cell Phone/Bills $150.00
2. Take your monthly fixed items (Rent, Cell phone/Bills) and deposit in to one of your accounts (Account # 1). You may have to supplement this account, if you are supplementing this account from a line of credit, do so monthly to avoid high interest. Write all your monthly cheques and set up online payments for your cell phone and credit card/line of credit minimum payments from that account and check it monthly to make sure all items are deducting correctly. This way you know your bills are covered for the semester/year.
3. Your next account will be a savings account (Account # 2) where you will deposit all the money that is left over, hopefully there will be. Set up a monthly standing order or transfer to your checking account (Account # 3) for your spending/Groceries/Gas and that is the money you will live on, once it’s gone try not to dip in for more or you may be living the last 2 months of school on something less than skinny noodles.
4. Use your credit wisely. If you work during school your pay cheque should be deposited into your savings account to be transferred for your monthly living expenses or supplement your fixed bills account. Use credit for emergencies only, we are not talking, my boyfriend dumped me and I need to go shopping or I’ve worn this blouse twice already, we are talking, my car broke down, I need an emergency text-book or my computer needs repairing.
5. ALWAYS make your minimum payments on all your financial obligations, banks will offer you credit card after credit card, don’t get in to deep. Keeping the monthly balance low and making your monthly payments will help build your credit for the future.
Don’t think you won’t need credit later down the line, you will. Car purchases, Mortgages…its all coming and it’s time to lay the foundations for that good credit now.
You won’t be in school forever but learning to budget early will pay off. Working during the summer can repay some of your debt and also save for the next year, you can always use a little crazy cash and buy a few new clothes before you hit the bars again in the fall.