Part of going to College is growing up, becoming an independent adult. Part of that includes becoming responsible with money. This includes learning how to budget. Life is expensive and if you are paying for yourself for the first time, you might be surprised at just how expensive it is.
Costs might include a car loan and rent. Gas, electricity, and water are normally monthly bills. Then you have your phone, land-line and cellular. Food, laundry, and toiletries are required and, of course you need clothes and shoes. Don’t forget about Entertainment costs. You need to have fun as well, right?
Say you have no money left in the last week of the month and all your friends are going out. You want to join them and you decide to use your new credit card. The same thing happens the next month as well, and the next, and so on. If you aren’t paying off what you have spent on the credit card each month, you will be charged interest. That’s how the credit card companies make their money. The interest they earn from you is their profit and your loss.
To understand credit card spending, you need to think of it like taking out a loan. You take out a loan when you want to buy something but don’t have enough money to purchase it outright. If you use your credit card to pay for a night out with friends, you are actually taking out a loan to pay for this. And if you can’t pay your loans, it can get pretty expensive very quickly.
So here’s some advice. Avoid spending all your money each month by making yourself a budget and sticking to it. An easy way to do this is determine how much you need to spend each week, and withdrawal that amount of cash, one time per week. Pay for everything in cash, and don’t spend more than you withdrawal. Anything you save, set aside and treat yourself.
Save credit card spending for online purchases of big-ticket items. Never impulse buy. Ensure you have budgeted for them beforehand and have the money to cover the purchase in your account. Use the money you have saved over time, by your weekly under-spending to treat yourself now and then.
Budgeting is a skill, and college is a great opportunity to learn it.