Effective money management is not for any particular segment of people. But then there's one community that almost never gets talked about, when it comes to talks regarding money - students. Why this is quite hilarious is, in comparison to the other segments of people, students actually have lesser avenues, and as a result, lesser knowledge to manage their finances. Hence, more people should be concerned about educating the student community in managing their money. But sadly, that doesn't happen!
Another thing that is true in almost every student's life is that among all the enjoyment and excitement of the college life, planning money takes a backseat. And although college life is colloquial to being broke (try to recollect your college days and how you were always broke), talking and planning about money is never a priority.
Don't worry! I'm not telling you to start planning for your future from your early 20s only. Your 20s are there to gain experiences and make explorations, and you should fully take part in the two. So, without bundling you with life worries so early, let's talk about the biggest challenges that the students' community face, throughout the world, and how you can make your way out of these.
1. What do you want and what you need
College life is one big whirlpool of wants and needs. As students, we do a lot of things either in impulse or due to peer pressure, and a good majority of them don't bear any fruits. Similar is the case with the numerous 'shopping mall rounds' and the 'reckless purchasings'. And peer pressure is arguably the biggest influencer when it comes to unnecessary spends. Think about it.
You've lost your phone and you need a new one now. So getting a new phone becomes your 'need' here while getting an iPhone becomes your 'want' here. Sure, your roomie has one as well and who doesn't love iPhones but now is not the correct time to own brands. Although this is not specific to college life only, but not being able to differentiate between your wants and needs can be really unhealthy for you. But how to help the cause? Before making any purchase, answer the below two questions, and then decide for yourself.
- Will this product make my life easier?
- How many times will I actually use this product?
You'll be very often presented with alluring products and compelling methods that would want to turn your want into a need. But boy! you got to hold tight!
2. Credit cards
No matter how much you try to advocate it, as a student, you DO NOT need a credit card. Credit cards turn you into an impulsive spender, which is something you need to desperately avoid. A credit card debt, especially at the current stage where you don't have any income, can be seriously detrimental for you. Banks play this game like a pro as they very smartly position credit cards as your need. Not only that. The 'no-cost credit card' is also one of their much populated marketing gimmicks, but what no bank ever talks about is the 'hidden charges'.
However, if you do feel that credit card is a handy option to take care of your last minute expenses, you need to first take care of a few things. And if you do own one, paying off your bills on time can actually be good for your credit history; hence, if you can be absolutely sure about the following few things, credit card might not become that bad an option for you.
- Credit card has benefits. And with benefits, come responsibilities - Be mindful of those.
- Credit card is a loan, and not free money - Never forget that.
- Not paying your credit card bills on time will result in you paying late fees, accrued interest charges and principal on top of the two - Make it a religious habit to pay the bills on time.
3. Track your spending
I know this 'tracking spending' is boring. And you might be wanting to close the article at this very moment. But hear me out for a second and you'll realise what I'm saying is different from what you get to hear always. There's just one small thing you need to do.
Everyday after having dinner, write down the total expenses of that day. If you want you can also note down the various daily expense routes but just the total amount, in front of the respective date, should be sufficient as well. At the end of the month, this will give you an idea of your usual monthly spending and you can then take a call on your remaining money, whether what you're left with is sufficient for you or if you want to cut corners to have more money in your hands. After a couple of months, even before the new month starts, you'll know how much you need, to manage your usual expenses and you can then spend the remaining money somewhere else, in case a need (and not want) arises.
So, what do you think about these tactics - easy or difficult to implement? Tell us in comments.
About the author:
Samant Sikka (Chief Dreamer & Founder, Sqrrl.in)
Sqrrl is personal finance, Fintech venture targeted at young Indians helping them improve their relationship with money ultimately helping them Save, Invest & Prosper!!
- Student of Financial markets & human behavior for 20 yrs.+ helping investors, Institutions & advisors.
- Experience across Strategy, Sales, Business Development & Advisory Roles.
- Stints with Axis Asset Management, Goldman Sachs, Franklin Templeton, AIG & Darashaw & Company.