A college life is the most memorable years. The long study hours along with ample time to spent with friends is actually a fun. Moreover, whether you live in campus or at home, there is a sense of self dependency which gets developed as you start taking decisions yourself. Lot of aspiration too build up for the future as you start learning about the corporate world.
However, this freedom also brings lot of challenges especially about finances. There is lot of peer pressure as your friends and room partners in hostel may do lot of things with money. This may lure you to follow them because of fear of leaving behind. But all may not be necessary for your situation. A personal finance behavior developed here gets carried to the situation when you start your own family. Any mistake can jeopardize your financial well-being. Hence, managing own personal finance becomes a highly important aspect even when you are a student.
Here are few steps which one should follow as you move in your college days:
1. Budgeting– As a student you receive money from various sources for meeting your expenses. Money from parents, scholarships and at times part time jobs are taken when one has responsibilities. Along with this there are also expenditures like college fees, dining with friends, books, travelling, etc.. which form part of this lifespan. Most of the time students do not plan on these expenses if they have an easy source of money. There might be liabilities like education loan which parents would have taken or for someone not from a healthy financial status, scholarship is the major source of meeting college expenses. A budget then becomes a necessary to have awareness about money you receive and how you spend it. With it you can plan to put a limit to your aspirations and ensure you avoid any impulse spending. It also keeps you inform whenever you exceeds money you receive from any of the sources. The best option is to create it monthly since most of your expenses would be on monthly basis.
Download the worksheet to know what should be there in a
A budget like above helps manifold. One it keeps you aware on your unnecessary expenses and second it tells you how much savings you are able to make in your college days.
2. Identify Goals– Goals are aspirations which you want to achieve in life. It can be small such as buying a new mobile phone or your first bike or big when you want to purchase a new house. As a student you create all such dreams which keep on adding up while you are enjoying this life time. But there can be no bigger gift to your parents then contributing money from your savings for any purchase which is going to be utilized by you only. It is also a big relief to them seeing you keeping yourself aware on issues related to money and avoiding unnecessary expenses. You should draw a list of all such goals so that you are clear on the funds you will require to meet them. This list will also help you to differentiate between your needs and wants.
3 . Learn to Build Emergency Fund– Most of the time your parents would be doing it for you. Even after starting your career, you are relaxed for few years due to parents support. But emergencies can arise even during college days. There can be smaller needs like funds required for college events which you did not estimated, travelling as part of studies, some smaller health problems etc. which generally arises during this period. It is a wiser choice to start contributing smaller amount from your savings so that even a small emergency fund can be built for such requirement. Once you land up in the corporate world you will be able to utilize this learnings efficiently for bigger emergencies.
3. Learn about Investing– This will probably the first time when you will work on investing your money. But before you fall in the aspirations of quick money making, it’s wiser to have awareness on the various aspects of investments like risk, return, selection and monitoring. Although you may be reading most of it as part of your curriculum but things are different when it comes to implementation. Since there may be very less help available in your campus start reading good books or subscribe to magazines/newsletters on personal finance to keep you updated. With most of information resources online now, there are lot of blogs/websites now to read about personal finance. You can get hold of some of them and make reading it a regular feature. Professional Experts also now give a helping hand to students to learn about basics on personal finance. Utilize the means which is most approachable to you.
3. Start Investing– Once you are on a saving spree it’s more important to utilize the money efficiently. Any volatile investment bear fruits in the long term and earlier you start more you gain. If you are a good reader, you would have learned bit about power of compounding, equity market etc. SIPs are the most viable means when you do not have large sum to invest. Through regular contributions you can plan for the long term. If you are on higher education you would be operating your own bank accounts. Start investing through SIPs now. Once you have earmarked some funds for those smaller emergencies, contribute some amount from remaining towards investing. There are options for contributing monthly, quarterly or half yearly. Opt which is most suitable to you. However, this may not be viable when you are below 18. In such situation keep accumulating the savings and as you reach the required age, start investing. This will inculcate a discipline in managing your savings which you will carry to your future.
5. Learn About Loans – With some students it may happen you start sharing loan liabilities with your parents as you start your career. This liability can run for 3-4 years which is a good enough time. It can be huge burden if it arises suddenly. So make your- self aware on loan liabilities during your college days. Learn how education loan works and what it requires to keep your credit healthy. If you are able to save for such liabilities it can be a boon for your finances. Although, parents will be there to help you but building those smaller emergency fund can be a good source for avoiding any default on EMIs.
6. Avoid Student Debt– There might be credit cards from your parents which have been given to you for emergencies. But a free credit always results in impulsive buying especially when you do not have to share the burden. Once you get use to such situation then living life on credit can become a lifestyle reason for you. But any such behavior can lead to problems of debt in early years of your career. So ensure your credit buys are in control even if it does not involve any botheration.
7. Take Professional help– Professionals are now giving help to students or new generations. Their objective is to let you control your own personal finance by learning more about it. As a student you can always take help a financial professional if it requires. Involve yourself in conversation to resolve your queries and attend seminars/lectures within your reach. In some you might have to pay a small fee which will be worth if it helps you in increasing your awareness.
Lot of entrepreneurs rises straight from colleges cause as student you are always keen to try new things in life. Learning personal finance is also a fun. Budgeting, cash flows, investments etc. are areas which you will find interesting when working with numbers. Make this learning a regular feature to ensure you start your career with a good knowledge on your own personal finance.
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