A lot of people assume that basic money management is a skill you just automatically have. Like what’s so complicated? You work, you save and you spend. Right? Well, although it seems very black and white, money management isn’t as easy if you’ve never been exposed on how to do it best to fit your needs. As students, we feel as though we’ll just learn these things when we’re older, but the best way to be financially smart with your money is to foster good habits while we’re young.

The best thing you can do financially for yourself is to create a budget. Everything makes more sense when you write it down, and trust me, you do not realize how much you are spending on everyday things until you write it down. Your budget should consist of things such as your saving goals, your expenses and your leisure spending.

Sticking to a budget can be difficult, however by having financial goals you want to work towards, they can be great motivators to help you stay on track. Some common saving goals are purchasing a car, a year's worth of rent so you can move out of your parent’s place, a vacation getaway, a new laptop, or phone. Having these goals in place will help you remember what you’re working towards and that your budgeting is not all for nothing.

Another way to stay ahead of your money is by having a different type of savings, usually referred to as a sinking fund. These are for your planned and unplanned expenses that may arise in the future, so stashing some money away for those things now can greatly help your future self when these expenses occur. Sinking funds can include: an emergency fund, as you never know what could happen; car maintenance, which you can dip into when you have an oil change or need some car repairs done; veterinary fees, can be used for pet check-ups or emergency care; or something like gifts or Christmas, you know that someone’s birthday or Christmas happens every year, so slowly budgeting for it will be a stress reliever when the time comes.

Now let’s take a look at your expenses. Some common student expenses can be your phone bill, gym memberships and subscriptions. Review all the expenses you pay for on a monthly basis. Ask yourself if all these things are necessary? For instance: see if your workplace offers any discounts with mobility companies, maybe cut the costly gym membership and use the free gym on your school’s campus, or maybe take advantage of student subscription deals instead of paying full price. There are many ways students can cut back. Now that you have evaluated what expenses are necessary, figure out how to pay them on time and effectively, without it hurting your wallet too much.

Leisure spending, this is where most of us struggle when dealing with our finances. However, remember budgeting doesn’t have to be this negative restricting thing, you just need to account for your leisure spending on your budget, which in turn will help you reach those savings goals you’re working toward. Some discretionary spending you may be doing is restaurants/takeout, entertainment, or clothes. The best way to find out how much you really spend on these things is to gather one to three months of your transactions. That way you know how much you can realistically budget for yourself to ensure you set yourself up for success. It’s okay to spend on these things, just not in excessive ways. There are small initiatives that can be taken to help minimize your leisure spending. For example, instead of buying coffee every day, maybe make it at home before school or work. Of course, that doesn’t mean you will never be able to enjoy Starbucks again, but instead of 5 times a week, treat yourself to once or twice a week instead.

Now that you know your savings goals, your expenses, and what you like to spend leisurely, what do you do? There are many different methods of budgeting, you can write it down in a journal or in your phone’s notes. Another popular method is, taking cash envelopes and stuffing them with money for different categories. Having an envelope to grab for the week with your restaurant budget can be beneficial as you can only spend what you carry which keeps you accountable to your budget. Of course, taking out cash can be cumbersome as well so if you’re more of a digital person, there are various apps that help you budget. Some popular ones are: Mint, You Need a Budget (YNAB) and Every Dollar. These apps can help you budget your money with your phone and make it effortless so there aren’t any excuses.

Budgeting does not have to be a chore, just something habitual you do in your daily life. It’s funny that as young adults, we think all this knowledge will just be ingrained into us once we hit adulthood. That is too far away to start being smart with money, take control of your finances today to help you give your adult self a head start.

Written by:

Hao Nguyen
Business Development & Marketing Coordinator at Swob Inc.