We all have experienced “being broke” as millennials. Especially in college, what with high expenses on textbooks, social activities and limited income, it's unusual to find a college student who isn't financially strapped in one way or another. While some things may not be in your control, managing your finances in an effective way may help you have a little extra cash, and keep you sustained through periods of heavy spending.
Here are four steps that will help you get your finances in order, and hopefully leave you with some extra spending money:
Make a Budget
Budgeting is the key to keeping track of your money. Budgeting allows you to always know where your money is going, and how much you have left over in case of unplanned spending. Once you get the hang of it, budgeting becomes a natural habit, and is actually quite easy.
Before you actually make a budget, the very first step is to monitor your spending. It makes no sense to assign some arbitrary numbers to your expenses, and then try to manipulate your spending to fit those numbers. To track your spending, take note of how much you spend in a given month, including everything from regular expenses such as groceries to more spontaneous spends. For this, you could an Excel Spreadsheet, or even apps like Mint and YNAB. After you have determined your spending patterns, compare your expenses to your income, and note down areas where you can cut down spending.
Having a goal will motivate you to stick to your budget. It will prevent you from randomly spending on unnecessary things. Set aside a small amount of your paycheck/allowance each month, towards fulfilling this goal. At first, you won't enjoy setting aside money that could be used elsewhere – I know I didn’t. After a while though, my funds will started building up, and I appreciated the little bank I’d created, as I was finally able to fulfill some of the bigger goals I’d set out for myself.
Save and save more!
Opening a savings account in college is a wise investment. Over time, the money in your savings account will accumulate, and earn interest. In any particular month, if you spend less than your budgeted amount, be sure to put the remainder of your money into your savings account rather than binge splurging. This way, you’ll see more growth in your savings account over time. Other ways to save include making changes in your daily habits. For example, if you spend a lot of money on your car, consider learning some auto-hacks, or even using the bus more often. Personally, I started making my own coffee every day rather than buying a cup. At first, it doesn’t seem like much, but these changes in your daily routine do add up!
Think about the Future
It’s always good to keep the bigger picture in mind. Even as a millennial, it’s important to consider the future at some level, though it doesn’t have to be your top priority. Long-term planning includes having a savings account, a retirement and pension plan, and long term insurance. For example, if you know you would like to retire abroad, then it is vital to factor this into your goals after college, as research shows that retiring abroad can be quite costly. As a millennial, you may not be in a position to actively plan for the future, but it is good practice to make a timeline that incorporates the long term, such as paying off debts, when you will start saving for retirement etc.
Using the four basic principles of budgeting, goals, saving and long term planning, you should be able to start to get your finances in order. Even though you won't have much money to deal with as a millennial, understanding and utilizing these concepts will help you both now and later.
Grab TCM's Guide To Saving on a Tight Budget!