Finance is by no means a simple field of study. For most students, however, managing personal finances doesn’t have to equate to brain surgery. Certainly the majority of students enter college know very little about balancing accounts, creating a budget, or appropriately utilizing credit. That doesn’t mean there aren’t resources available to help students learn what they need to know so that they can make wise financial decisions in their future. Here are a few guidelines that should help every college student get on track with sustainable personal finance practices.
The place to begin, naturally, is by taking a course in personal finance (such as Finance 101 or the equivalent). This will serve as an introduction to all the areas of finance that affect the average adult, from budgeting and balancing accounts to managing credit and investing, as well as some background in basic economics. From there you can start applying the lessons you learn to managing your own finances.
So what do the finances of the average college student look like? Many students are juggling a variety of incomes and expenses. In terms of money coming in, you might have student loans, scholarship funds, grant money, funding provided by your parents, and perhaps income from a part-time or full-time job. As for expenses, most students are responsible not only for college-related costs like tuition, books, and related fees, but also for living expenses like dorms and a meal plan. Then there are extras like transportation, not to mention clothing, entertainment, and so on.
Managing finances begins with planning a budget that takes into account all the money coming in and going out. It must include every bit of income and expense, and it should not only account for regular monthly expenses but also irregular costs like tuition or insurance payments, just for example, as well as frivolous spending (clothing, entertainment, that morning latte at Starbucks, etc.). When you’re first creating a budget, think about saving receipts for a month so you can get some idea of where your money is going. This could be a major help when creating your budget and trying to plan for unknown expenses.
The next step is to try to keep your budget balanced. Living within your means (i.e. spending less than you earn) is essential. However, you also need to pay attention to wasteful spending. Wasteful financial practices could include late fees and overdrafts, just for example, as well as any interest you pay for credit purchases. When you have limited funds, it’s nice to have the emergency backup a credit card provides, but it can be extremely tempting to use a credit card like cash. If you want to know how much you’re wasting by using a credit card, simply add up your interest payments to see how much you’re throwing away annually for the privilege of purchasing on credit.
As a student at Northeastern University, you’ve already proven you’re smart. Now it’s time to learn how to manage your finances wisely. With a little instruction, some planning and maintenance, and common sense, there’s no reason you can’t learn how to keep your finances in order, not only during your time in college, but beyond.