“I’m broke.” It is a phrase commonly found among students, and it’s no wonder: the cost of college rises even in recessions and students often have to dish out money quicker than they can earn it. So what can students do when they find themselves surrounded by bills they can’t pay off? Here are some simple steps you can apply right away:
-Track your purchases. I mean everything. Even that coffee you had in the morning, and even that brownie you had after lunch. Often, you will find those “little” things add up to be larger than
you expect.
-Create a monthly budget based off your salary. You’ll quickly remember rent, groceries and car payments, but don’t forget things like entertainment (movies and dinners), maintenance (haircuts
and manicures) and unexpected expenses (like car repairs or a doctor’s bill).
-Try to budget for savings too. As a student, you likely won’t be able to start saving for retirement, but you should try to put aside a sum each month towards savings. It’s not only good practice, but you never know when you might need to pull from an emergency fund.
-Compare your proposed budget with your actual spending and share the comparison with a trusted friend or relative who understands finances. They might be able to point out some practical changes you can make.
-What can you cut out? Often students burn themselves out by working too many hours to pay for their dream car or expensive clothes they don’t need. Consider getting a cheaper car so you can keep expenses low and focus on school. If you can live with your parents, take advantage of that. If you can rent a room instead of an apartment, do so and simply store your extra belongings elsewhere. Once you are out of school and working full-time, then you can reward yourself with a bigger place, nicer car, more clothes, etc. But for now, wait. Concentrate on school.
-The small things matter. If you have to have coffee, make it at home. Watch a movie at home (you can even get a free one from your library!) instead of in a theater. Learn to cook healthy food instead of eating out. (Cheaper cuts of meat taste just fine after simmering in a crock pot.) Go through your wardrobe before you shop, and “hunt” just for what you need. And start with discount places like TJ Maxx, Marshalls, Filene’s Basement or Century 21. Be careful not to go to the store without a price limit or goal in mind. Even better: leave the credit cards behind.
-Try cash only. This is an accountant tip. Instead of using credit cards, “pay yourself” each week the amount you are allowed to spend. When you run out of cash, you can’t buy anything else. Be careful though; don’t forget about gas and groceries!
-Is your job working for you? Sometimes students find themselves in low-paying jobs when they have technical skills that could work for them. Are you good with computer, numbers, or writing? Why not skip the local grocery store and target a bank, mortgage company or office where you will be learning valuable skills on top of better pay? But make sure your resume and cover letter are updated. You should make practice of doing something each day to get yourself one step closer to your career or a better job; following up with contacts, improving your resume, or posting your skills online.
-Pay off debt. Ok, so this might not happen tomorrow. But start with the card or loan with the highest interest rate. Pay off what you can as soon as you can, but continue to pay minimum payments on the other cards. And whatever you do, don’t rack up other unnecessary charges. The idea is to get the balances lower, not keep them even or see them rise.
And lastly, educate yourself. Read tips on managing your finances and use them. Learning to save can be just important (or more important) than how much you earn. Rich Dad, Poor Dad is a great book that tells the story of two fathers and how one lived in the “rat race” while the other learned to save and work smartly, thereby becoming rich. Alwaysfrugal.com has some tips, including buying cheaper groceries and not shopping when you are hungry. Howstuffworks.com has an article “10 Tips for Staying on Budget” which includes cutting out bad habits like cigarettes and alcohol. In any case, keep at it and budgeting will soon become second nature to you. And your wallet will thank you for it.