If you have a son or daughter, perhaps a niece or nephew heading off to university this month, here’s a great article to share with them from Practical Money Skills.
Making the transition from living at home where someone else buys groceries and pays essential bills to living on your own is a big step. How much can you afford to spend on groceries in a week? Are you going to need to work extra hours to pay for all of your books?
Create a Budget
This first step in financial planning will help you answer these questions and is absolutely essential in managing your personal finances.
- Write it down
Determining all of your expenses to find out where your money is going is the first step. Pull out your credit card bills and bank statements from past years as guides to your spending habits. Then estimate how much your new bills will be. Be sure to include expenses for entertainment, clothing and any other major expense category that you may encounter now that you’re living on your own. Include some money for savings. It may take several months to fine-tune your budget to match your exact spending habits.
- Estimate Your Monthly Income
Don’t include potential income — only income you are sure to receive. For example, don’t assume your parents will send you money if they have not agreed to do so.
- Expenses vs Income
Do you have more going out than you have coming in? If so, you need to cut expenses. Entertainment bills are easy to trim; fixed costs such as utilities and housing are harder. Keep trimming until you have enough to cover your expenses. If you get paid hourly at a job, determine whether you can work more hours each week. You’ll have to balance learning and earning: but be careful not to let your grades slip because you’re working too much.
Working in School
If you don’t have to work your way through school, thank your lucky stars every day of your educational career. If you’re not so lucky, you’ve got some decisions to make.
- Amount of work
First, you need to consider how much you can work. Decide how much time you need to go to classes and study, how much time you need to sleep and add in some extra time to relax. What’s left over is what you can work.
If you can’t seem to balance all that you need to do — working enough to pay for school while still finding the time to study — consider alternating semesters. Work for a semester to save for school, then go to school the next semester. It will obviously increase the duration of your life as a student, but it will benefit you in the long run with better grades and less debt.
- The Hours
You’ll need to make your work and class schedule fit together. If you find a job during the day, make sure the classes you need to take are available in the evening. You may need a job with flexible hours to allow you to attend class and study for large chunks of time.
- The Pay
Better-paying jobs usually come with sacrifice. You may need to work late hours. Or early hours. Or you may have to give up your weekends. But never sacrifice study time in favour of employment income, no matter how enticing. After all, what good is working to pay your tuition and then flunking out?
- How to Find a Job
The best job-referral source might be staring at you across the dinner table every night: your friends or family. Campus bulletins and career centres are often good outlets for job leads. Try a temp agency and let someone else find you a job. Look at online job posting websites, such as Monster.ca. Scour the classifieds section of the newspapers, particularly if your school produces its own. Or you could drop in on stores you frequent to see if they’re hiring (an employee discount at your favourite retailer is a nice perk). And if you’re keen to find work in the field you’re studying, ask your professors and faculty for ideas.
Managing Your Budget
Balancing your course load, work life and free time is not the only thing you need to pay attention to at university. You need to manage the budget you determined before arriving on campus. Things you need take care of immediately include:
The first step is to open a bank account that you use to pay your expenses and deposit your income. Without one, you’ll have to carry all of your cash around with you or stuff it under your mattress, neither of which is a sound financial strategy. Bank accounts also help you track how much money you have.
So what type of account do you need? That depends on your situation.
- Savings account – A savings account isn’t the only account you’ll need. But it is an essential part of short- and long-term financial planning. A savings account is an easy way to start accumulating some financial reserves. You won’t earn much interest in one of these, but the money is readily available in case of a financial crisis. And it’s safer than under your mattress. While a savings account is just as accessible from an ATM as any other account, you might consider designating this a “hands-off” store of funds.When selecting your savings account, ask the bank whether there is a minimum balance requirement or monthly fees. Paying large monthly fees is the opposite of saving money.
- Chequing account – Your chequing account will be your workhorse. You’ll make deposits that are intended to cover the costs of your daily expenses. You will typically be able to write cheques, withdraw money from an ATM and use a debit card with a chequing account.Keep a record of all your transactions so that you know exactly how much money you have in your account. Banks can charge as much as $30 if you bounce a cheque.You will receive a monthly statement that lists all of your transactions as well as your ending balance. Make sure your monthly statement matches your own list of transactions. You may catch mistakes that you made in recording your spending, or even a bank mistake. Click here for a detailed description of how to read your bank statement and reconcile your chequing account.
Article used with permission from Practical Money Skills Canada
This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.