By Maxine Witherspoon
As a college student when you are just starting out in your financial life things that you never thought were important becomes extremely important. You are so excited about getting your first credit card, you want your own place because you can’t take living on campus any longer, and you want to look for an affordable place to live, which will involve rent and maybe utilities. If you have a vehicle buying gas can become an expense, doing your own taxes, or just learning to make a paycheck stretch until you get paid again can be difficult.
This type of responsibility is huge for someone who is just starting out in the financial world. Some students may have family members who may help them with this type of responsibilities, but what if you are on your own with know one to help you? Becoming financially independent is a big step; it gives you the opportunity to make your own decisions and choose your own path in life. There is a lot you need to know in order to make the right decisions. When I say right decisions I mean needs versus wants I can give you a perfect example. “Should I buy food or should I get those $200 Jordan’s that I saw the other day”? Sometimes the things that you want may seem so tempting that you start to think of them as important as the things you need. It’s a struggle learning how to live on the money you have because you maybe use to your parents lifestyle. I have seen so many people get in a bind because they were living beyond their means, and that was because they were trying to keep up with the Jones or their priorities were messed up.
Living within your means leaves you with money to save for the future, including a cushion for emergency expenses and a foundation for investments, and savings for a goal like one day getting your own home or traveling to another countries. What you need to find out is how much money you have coming in a month and how much you have going out? This is what you call a cash flow, make a chart and list all your sources of income for the month in a column, and how much each one provides, then keep track of all your expenses for the month. Keep track of all expenses for the month, and you can collect receipts in an envelope and mark down other expenses in a notebook and tally them up in another column on the chart. If you have more money coming in than going out you are doing great because you know have a positive cash flow. That’s where you want and need to be, and to maintain that positive cash flow you now need to create a budget.
When you create a budget you slice your monthly incomes into chucks, allotting a portion to each type of expense you have. For example you may divide your spending into expense categories like savings, rent, food entertainment, clothing, miscellaneous etc… It doesn’t make sense to assign dollar amounts for each budget category, base your budget on reality. At the end of each period you will see how much in each category. The chart that you make up will show you how you can cut some expenses, like dropping some of the services on your phone, increasing your grocery money and decreasing you’re eating out money. The key is to stay on track with your budget once you decide how much money you will spend on each category, and this will require some recordkeeping. Example if your rent is $650.00 (not in NYC!) a month what you allocated and what you spend will offset each other exactly. But what happens if you allocated $200.00 for the restaurant meals and by the middle of the month you’ve already spent $220.00? Whenever you are thinking about spending a little more money check first to see if it fits in the budget. If there’s not enough left in the category where it belongs you have to decide if it’s a need or a want, and how much can you take from another budget category to afford it. The bottom line is you are sticking to your budget, and keeping your positive cash flow.
Managing your money wisely and learning to live within your means requires a lot of time determining what your goals in life will be. Planning how and where you want to live and learning all you can about ways to manage your finances can only help you in the long run. Always remember to budget get a good handle on your cash flow. The money coming in, where it’s being spent, learn to live within your means and you have the power of time on your side. The sooner you get started the better.