Stay on top of your student finances
3 MIN READ
For students starting college this autumn, managing money can be a bit daunting.
In 2014, a global survey** found that just 55% of Irish people were financially literate compared to 66% in Germany, 67% in the UK and 71% in Sweden.
The questions asked in the survey covered risk, diversification, numeracy and compound interest.
Here’s the numeracy question:
Suppose you need to borrow 100 US dollars. Which is the lower amount to pay back: 105 US dollars or 100 US dollars plus three percent?
(The answer is at the bottom of this article.)
But developing good money habits isn’t impossible and can increase your financial wellbeing.
So why not start now?
Here are 5 practical tips for staying on top of your money as you head off to 3rd level education or head back.
1 Create a budget in a lunchtime
60 minutes is enough time to create a first draft budget.
- Work out how much money you will have coming in each week, month and term.
- List all of the essential items for college life and how much they cost – rent, gas, electricity, broadband, food, course fees, books, and transport etc.
- Next, write down all the non-essential expenses using your last 3 months’ of bank statements and receipts to guide you.
- Take away your essential costs from your total income – how much is left?
- Finally, take away your non-essential costs.
- Now, what’s left?
If you are spending more than your income then you need to take action.
Start by reducing your inessential costs and/or increasing your income where possible.
2 Invest 30 minutes a week in your student finances
Your budget gives you the big picture.
But it’s also important to check in along the way to make sure there are no surprises throughout the term.
For example, what happens if you don’t get that gift, loan or grant payment you were expecting?
- Set aside 30 minutes, once a week, to check receipts and statements and track your spending
- Find out if your income and expenses have gone off track so you can adjust.
You might need to go back and adjust the budget you created in step 1, above, to make it more realistic.
3 Learn when you go off track
If and when your budget does off track, don’t just ask yourself how ask yourself why.
A glance at a bank statement will tell you what you spent your money on and how much you went over budget but it takes a bit more reflection to understand the underlying patterns.
It’s not all about logic.
Attitudes to money are often shaped by our upbringing, experience and emotions.
For some, no matter how much money they have it always seems scarce and has to be held onto tightly.
Others, no matter how little money they have, always feel that money is abundant and will always be available.
Remember, it’s not the amount of income that really matters, it’s how well you manage it.
This applies equally to budgeting, saving, spending and investing.
Examining how you feel about money can help you to take more control over the money you have.
4 Protect your most important profile
Credit and loans are useful because we don’t always have enough money put available to pay for a large expense.
But it’s helpful to understand how they work to make sure they don’t end up costing you more than you expect.
In particular, it’s best to pay off credit card debt, in full, each month in order to avoid interest charges.
The most expensive option is to pay only the ‘minimum payment’ each month.
If you know you won’t be able to pay it off in full, setyourself a fixed number of months, instead – 3 months, 6 months, 9 months – to pay it off over and stick to this term.
Missing payments or failing to pay off a loan in full can affect your credit rating.
If you often miss repayments or fail to pay off credit in full, your credit rating will suffer and you may find it harder to get credit, in future.
Here’s a post about where to find your credit rating and how to improve it.
5 Set your money goals
Simply surviving the financial demands of 3rd level education might seem like a big enough challenge, right now, but remember to take some time to plan longer term goals.
You might simply want to stay on to do a postgraduate degree like Louise Cooney who describes her experience here.
- Choose your money goal
- Write down the date you want to achieve your goal by and how much you think you will need
- Start as early as you can even if you can only afford to save a little
- Set up a direct debit to take the money directly from your account so that saving becomes automatic
- Track your saving to make sure you are on target.
Answer: 100 US dollars plus 3%
Terms and conditions apply.
* Global finance literacy survey by Standard & Poor’s Ratings Services (2014).
**Clicking on this link brings you to a third-party website. Bank of Ireland is not responsible for content on this website.