Money Management 101

By : Josephine Parks, CFP

For young adults moving away from home for the first time to attend college or university, September brings a whole new reality. One of the biggest challenges they’ll face — besides having to do their own laundry for the first time — is managing their finances. With that in mind, here are seven financial survival tips for students, many of which are equally valuable post-graduation.

1. Make a budget

It’s not rocket science. It’s not even higher mathematics. So why do so many people have no idea what they spend in an average month?

Track all your expenses for a month and use that figure as your starting point for a budget. Based on that figure, pay yourself an allowance once a week. If you have money left over at the end of the week, great. If you run out early, then just tough it out until next payday.

2. Put your plastic on ice

As an adult, you should have a credit card. It’s extremely useful in case of emergency and a great way to establish a good credit rating. The key is to use it responsibly. If you plan to make a necessary big purchase, or an emergency arises, then go ahead and use your card. Otherwise, leave it at home so you won’t be tempted to use it for impulse purchases.

3. Go slow on the fast food

It’s easy to fall into the habit of grabbing a burger and fries from a fast-food joint or filling up your grocery cart with heat-and-serve meals. Not only is this kind of food hard on your budget, it’s hard on your health, too. Instead, why not take this opportunity to learn how to cook? Plenty of easy recipes are available on the Internet, and you may even discover that you enjoy it.

4. Bank smart

Contrary to popular belief, not all banks are the same, so shop around for the best value. Choose the banking account that best meets your needs for the least amount of money.

5. Use used

Textbooks are expensive — even when you factor in the income tax credit. Most campuses have textbook sales in the first few days of the semester, where you can pick up used course material for a lot less than what it costs to purchase new.

6. Use cash only

It’s so convenient to use a debit card to pay for things that it’s easy to forget that your bank balance goes down with every swipe. And unless you’re a meticulous record-keeper and faithfully write down every purchase, it’s easy to overspend. Not only that, but every time you use your debit card there’s a chance that someone could “double-swipe” it or see your PIN and gain access to your account. To play it safe, pay with cash.

7. Study hard

And finally, the most important tip of all is to work hard at your studies and complete your degree. According to the 2007report of the Pan-Canadian Education Indicators Program (published in partnership by Statistics Canada and the Council of Ministers of Education), university-educated workers between age 50 and 54 earn more than twice as much as 50- to 54-year-olds who have only a high-school education. In addition, the report noted that the unemployment rate in 2006 for high-school dropouts (12%) was three times the unemployment rate of university grads (4%). The bottom line? It pays to stay in school.