When you’re drowning in textbooks and preoccupied with new ideas, new classes, and new friends, financial planning is probably the last thing on your mind. Who wants to budget every coffee and orange juice when there’s life to live, right? Wrong.
It’s never too early to start honing your financial planning skills. Robert Biscontri, CGA and assistant professor at the Asper school of business, said that the first step of budgeting is determining your income and your fixed monthly expenses.
Sources of income can be anything from job wages, scholarship funds, or money from parents. Expenses will vary from person to person, and may include food, phone, and car payments.
Biscontri said that timing is an important consideration when calculating costs.
“Work out the timing of your big expenses like tuition and rent, and compare that to when you have money coming in. Just because you have more money coming in at the end of the year than what you expect to pay out doesn’t mean that you can pay your bills when you are supposed to.”
He also recommended tallying your amount of “flexible” money. Vacations and gifts for friends and family might warrant a little extra cash stored away.
Calculating all your expenses on pen and paper may seem like too much work. Fortunately there are apps galore for budgeting – check out iReconcile, Expenditure, Moneybook, and Toshl. My favourite tool is Mint.com.
The Mint.com website and app make budgeting so easy you barely have to lift a finger. The site will compile your transactions from all accounts (credit, debit, etc.) and organize them by category.
Over time you’ll be able to see trends in your spending graphed in pie charts. You can set budgets monthly, receive email alerts for low balances on accounts, and set alerts for bill payments. It’s budgeting for the digital age.
It’s time to gift your trusty old piggy bank to a younger sibling or cousin. You’re an adult now, so take a cautious step inside those big scary buildings called banks. They’re not as ominous as they seem.
If you currently own a savings account, you might notice that every month or so you receive a little extra deposit in your account (say, $3.40) without actually making that deposit. That’s your interest.
Interest, in the most simplistic terms, is the bank “borrowing” the money you deposit for a little while and paying you a tip for your troubles – even though your money won’t visibly leave the account.
But here’s the catch: the money that you earn through interest is taxable. Since you’re earning money, it’s technically income. A simple solution is to open up a tax-free savings account (TFSA).
“This is a simple saving account that you can deposit and withdraw from, but [you] don’t have to pay any tax on the interest earned from it up to $5,500. [ . . . ] The interest rate may be lower on your TFSA, but the fact that you don’t need to pay tax on the interest earned may make the effective return higher than you first thought,” said Biscontri.
Are you wondering where the money to save might come from? Try to transfer the philosophies behind saving into your everyday life. Food is often a large expense for students, and one way to save a little more is to cook more meals at home.
If you need to increase your sources of income, the work-study program on campus is available for students with documented financial need. Certain eligibility requirements are necessary.
Mistakes to avoid
“The most common mistake made is spending more money than you have coming in,” said Biscontri. “Don’t forget that your credit card limit is not income. This money has to be paid back.”
It’s an easy mistake to make, but a potentially risky one. Spending money you don’t have through credit card use can incur high interest fees – what we discussed earlier, but you’re the one borrowing now, so you have to pay the fees.
Another mistake to avoid is putting all your eggs in one basket. Biscontri suggested opening more than one bank account, so that if for some reason you cannot access the first account, you have a back-up plan.
Tips and tricks
Consider your expenses in terms of “needs” versus “wants.” If you’re like many students and have a budget as tight as skinny jeans, Biscontri offered a tip.
“Withdraw the unallocated part of your money in cash and only use cash when spending. This way you can simply count how much money you have left in your wallet to work out how much you can spend till your next [source of income arrives].”
If on a tight budget, credit cards should be kept for true emergencies, said Biscontri.
“Another round of drinks on Friday night may not actually be the emergency you think it is at the time. [ . . . ] If you don’t have it with you, you can’t use it!”
Purchasing alcohol from liquor stores is significantly cheaper than purchasing drinks at bars. A more budget-friendly night out might mean a night in – host some friends if you have the space to do so.
Honesty is the best policy. If your friends tend to enjoy extravagant, money spending activities that just aren’t in your budget, tell them so. A simple, “Dinner isn’t in my budget right now, but how about coffee or a walk in the park?” should suffice.
Faculty associations like the Human Ecology Students’ Organization and UMSU often offer free events such as movie nights. UMSU’s Celebration Week begins Jan. 27 and will be filled with free food, speakers, and movies.
Purchase textbooks used as much as possible, and/or find a “textbook buddy.” If you’ve made an honest and trustworthy friend in your class, they may be willing to split the cost of the textbook and share it with you. This strategy will be most helpful for those who prefer studying in groups since you’ll both require use of the textbook during exam time.
Finally, check out the campus resources infobox in the print version of this article for some helpful tools, financial or otherwise.