Learning how to properly manage your finances is probably the most valuable lesson anyone will ever learn in their lifetime. Your ability to manage your finances will affect every aspect of your day to day life for years to come. As you start out on your own, you are probably attending school or earning a degree. You need to know how to manage life along as well as how to balance your school schedule. For many, the task is daunting. Here are a few finance tips for new college kids going out on their own.
Create a Budget
Now that Mom and Dad aren’t around to pay for your expenses, it’s critical to establish a budget so you don’t run out of money. Creating a budget is simple, especially when you don’t have that much overhead. Make a list of your income – all of the money coming in for one month. Then, make a list of your expenses – include rent, utilities, food, bus pass, laundry costs, etc. Set aside a certain amount of money for each expense, and when the money runs out, stop spending.
Don’t Use Credit – Yet
Most young adults don’t fully understand credit, and improper use of credit can damage your credit score for years to come. Sometimes the mere thought of buying now and paying later can drive many young people into mountains of high-interest debt. Give yourself at least a year of living on your own before you apply for any credit cards. Wait until you have a little experience being on your own, living within a budget, and demonstrating financial restraint before going all in.
Don’t Spend Money You Don’t Have
It can be tempting to spend money you know is coming in at a future date – either from a tax return next month, or a paycheck next week. Do yourself a favor and don’t spend the money until it’s actually in your bank account. It’s a good habit to have and can help you stay within your budget and avoid splurging.
Take a Finance Course
Enroll in a basic finance course offered through your university. These types of courses educate students on critical financial principles, like how to create and balance a budget, how credit card interest works, how best to pay off debt, and how to be smart with your money. These basic principles will be invaluable to you in future years, and you’ll be so grateful you educated yourself when you did.
Managing your finances can seem like a daunting prospect, but it’s not overly complicated. In a nutshell, don’t ever spend more than you make. Live within your means, and don’t overextend yourself with unnecessary debt, and you’ll be all the better for it.
About the author
Eileen O’Shanassy is a freelance writer and blogger based out of Flagstaff, AZ. She writes on a variety of topics and loves to research and write. She enjoys baking, biking, and kayaking. Check out her Twitter @eileenoshanassy. For more on money management and getting out of debt check out ChewningLegal.com.