5 tips to keep your student finances on track this autumn
3 MIN READ
‘The cost of a 3rd level education can range between €6,000 and €12,000 a year, depending on whether you live at home or away from home,’ says Frank Conway, financial adviser and founder of MoneyWhizz.
For students starting college this autumn, managing money can be daunting. But developing good money habits now can help build good money habits for life. Here are Frank’s five practical tips for staying on top of your money as you head off to 3rd level education.
1 Create a budget in a lunchtime
The big budget plan
60-90 minutes is enough time to create a simple budget.
- Work out how much money you will have coming in each week, month and term. Remember, if you are earning, income tax will reduce the amount you take home.
- List all of the essential items for college life and their cost. This includes rent, gas, electricity, broadband, food, course fees, books, and transport etc.
- Next, list out all the non-essential expenses using your last 3 months of bank statements and receipts to guide you.
- Subtract your essential costs from your total income (include gifts, grants, loans, part-time income). How much is left?
- Finally, take away your non-essential costs. Now, what’s left?
‘If your ongoing essential costs plus your non-essential costs are higher than your income, you’re heading for financial trouble,’ says Frank. ‘The solution is stark but simple; unless you can increase your income, you must cut back on spending. Start by reducing the non-essential costs, first.’
2 Invest 30 minutes a week in your student finances
What you said in your budget v. what you really spend
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. 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,’ Frank says.
3 Learn when you go off track
How did a money challenge affect you?
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 but it takes a bit more reflection to understand the underlying patterns. Attitudes to money are often shaped by our upbringing and our emotions.
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. ‘Questioning your personal relationship with money is an important first step in taking back control,’ says Frank.
4 Protect your most important profile
You are how you borrow
Credit and loans are useful because we don’t always have enough money put by to meet a sudden, 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, as most people know, it’s best to pay off credit card debt, in full, each month in order to avoid interest charges.
If you know you won’t be able to pay it off in full, set yourself a fixed number of months, instead – 3 months, 6 months, 9 months – to pay it off over and stick to this term. The most expensive option is to pay only the ‘minimum payment’ each month.
‘Car loans, credit cards, overdrafts, student loans and other credit agreements are reported to the Central Credit Register and the Irish Credit Bureau which form your ‘credit profile’; this is your most important profile and is used to assess how well you manage credit,’ says Frank. ‘It’s important to pay on time as a poor personal credit profile may limit your access to future credit.’
5 Set your money goals
What do you want to achieve with your money?
Simply surviving the financial demands of 3rd level education might seem like a big enough challenge, right now, but remember to take time to plan longer term goals. Maybe you want to travel abroad for a while next summer or maybe you want build up the deposit for a car.
- 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.
‘Building a saving habit reduces your reliance on loans and credit cards,’ says Frank. ‘Making it cheaper to achieve your goals.’
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Views expressed are Frank Conway’s own and not necessarily the views of Bank of Ireland.