On the Money
Up your financial savvy to make every dollar count and save big.
By Katie Kretschmer, graduate, Columbia University
When you’re a student, money is always tight. As with a lot of young adults, college may be the first time you are responsible for all your expenses. Even if your parents are helping you out, if you’re like most students, you are just about breaking even. If you’re just scraping it together at the end of the month, or are constantly depriving yourself of any “fun” expenditures, you may be making ends meet, but you probably can do it better. Here’s how to make the most of the money you have.
Allocating Resources
A budget may sound boring, but try to think of it as an organizer rather than a form of house arrest. When you create a budget, you are basically divvying up your income into piles to pay for the things you need (rent, electricity, food, etc.) and the things you want (movie tickets, dinners out, etc.).
“You need to be very honest about your absolute needs—expenses you must cover—and your wants,” says Farnoosh Torabi, personal finance expert and author of You’re So Money, a book of financial advice for 20-somethings that offers plenty of good advice for college students. “When you consider your wants, don’t think only about a cute pair of shoes or tickets to a hot concert,” Torabi says. “If you want to spend a semester abroad, think about putting aside some extra spending money for the trip. What’s the point of studying in Paris if you don’t have the money to eat out a few times or take a trip out of the city?”
One way to do this is to make savings one of your fixed expenses. Even if it’s only $5 that you “pay yourself” every month, putting it in a savings account—not a cigar box—will earn a little interest and help it grow faster.
If you need help creating a budget, first see if your school offers any free programs for students. To start, the Globe and Mail’s GlobeCampus Student Budget Calculator helps student understand their expenses and income. CLICK HERE. [embed: http://www.globecampus.ca/money-finder/financial-calculators/student-budget/]
By using your bank account to save money and using only cash to pay for purchases, you may find it easier to keep within your set budget. “I only spend money on necessary things,” says Michele Watier, a third-year student at the University of Windsor in Ontario. “I try to budget myself each week by deciding on how much money I will spend. I also try not to take a lot of money out of my bank account, so I will not be tempted to spend what is in my wallet.”
But, everyone needs to find what works for them. Natasha Gilmore, a second-year student at Memorial University in St. John’s, Newfoundland, puts all her small change in a jar. “After a month or two, there’s enough to have some fun,” she says.
Shop Smart
There’s a piece of plastic in every student’s wallet that can really help your money go farther. Your student ID is a VIP pass to discounts and free stuff. Take advantage of it now, because the next time you’ll have access to similar discounts is when you are a senior citizen.
In addition to deals on campus and around school, it can get you breaks on major purchases: HP and Apple both offer student discounts, for example. It can also get you savings on movies, museum admissions, and all kinds of events—even some forms of travel. Via Rail offers a student discounts, for example.
You can get good discounts from students, too: Some beauty schools and salon chains offer discounted prices if you let their students cut your hair.
And don’t forget loyalty programs and cards. “I use my Air Miles to cash in for cheap entry movie tickets and I use my SPC Card for hair cut discounts,” says Laurel Gallant, a second-year student at SAIT Polytechnic in Calgary Alberta. CLICK HERE for information on the SPC Card.
You can also take advantage of all kinds of deals through websites, such as Groupon. But remember that it’s not a deal just because it’s cheap. Coupons are great, but only if they’re for items you need or would buy anyway. Sometimes it makes more sense to take advantage of the reduced-price produce section at the local supermarket to get good deals on fresh fruits and vegetables. Coupons are often for name-brand foods.
There are plenty of other ways to save money: buy used textbooks, bring your lunch, walk or ride your bike instead of driving, cut back or cut out expensive habits like fancy coffees or smoking. The trick is to have the discipline to do it. If you need ideas, check out this list: CLICK HERE.
Credit & Debit: Using it Wisely
Anthony Pizzano, a second-year student at the University of Windsor, uses his credit card in order to build up good credit. But, he says he doesn’t overspend on his card and he doesn’t carry a balance. “My advice is just to be careful with it,” he says. “Try not to use it every day so that you don’t receive a bill of $500 at the end of the month because if you don’t pay it off, then you’ll get charged 19.5% interest on that $500.” If, like Pizzano, you pay your card off in full every month, having a credit card is an excellent way to start establishing good credit.
Stephanie Baker, a second-year student at Cambrian College in Sudbury, Ontario, uses her credit card to pay for everything, but she warns people who have trouble managing their money. “If they have trouble keeping cash in their pocket, a credit card probably isn’t a good choice for them,” she says. “It’s easy to spend more than what you have, so if you have that problem, you should stick to [a] debit [card].”
In Canada, financial institutions may only pitch credit cards to students who are legal age in that particular province. If you think you are ready to handle credit responsibly, shop around. Look for a low interest rate and no annual fee. While earning miles and other rewards can be great, remember that points are usually given on a one-to-one ratio with dollars spent, so after your initial couple thousand free miles for signing up, you’ll have to spend many thousands to earn a free trip. Also, watch out for credit card offers from stores—they can have great introductory offers but high-interest rates later on. To learn access the Credit Card Selector Tool , CLICK HERE.
You may not be able to increase your income—college is your main job for now—but knowing how to manage your money can help you handle your finances and pay back your loans more quickly when you finish.
KATIE KRETSCHMER IS A GRADUATE OF COLUMBIA UNIVERSITY AND A FREELANCE WRITER LIVING IN NEW YORK CITY.
Find Out More
Click to access some great money management tips (including how to manage student loans) from CanLearn.ca.
Avoid Fees
One easy place to cut spending is on bank fees. “Start by knowing your bank’s rules for ATM use and overdrafts,” says Torabi. “Visit their website and find out the ATMs you can use without a fee, and locate the machines that are near the places you go most—the gym, the dorm, the library, work. Most banks have an app you can download to find the fee-free machine nearest you.” She also recommends knowing what stores will give you cash back for free when you aren’t near a network ATM. Pay credit card and other bills on time to avoid late fees on top of interest.
To avoid overdraft fees, Torabi advises opting out of overdraft protection at the bank. “It seems counterintuitive, but all overdraft protection really protects you from is the embarrassment of having your transaction denied. And it allows your bank to charge you a variety of fees without notifying you that you’re overdrawn.” Instead, see if you bank offers free alerts sent to your e-mail or phone when your balance reaches or goes below a certain amount. (Just be aware your cell phone service provider may charge you for the message, depending on your plan.)
Torabi says one of the best habits you can develop is to check your bank balance every morning. “You check your e-mail every morning; it’s just as easy.” Knowing your actual balance can help keep your spending in line. If you just don’t trust yourself not to splurge, leave your cards at home.
Shopping for Services
If you’re attending a school that’s far from home, you may need to choose a new bank—one that has more local ATMs, for example. Check out your options and consider things like minimum balance requirements and fee structures. Bill Pratt, a former credit card executive and author of Extra Credit: The 7 Things Every College Student Needs to Know About Credit Debt & Ca$h, says it’s smart to find a bank with a local branch and hours that are convenient for you, because sometimes it’s easier and faster to get answers from a real person (and listening to “hold music” is a poor use of your cellular minutes). For some of his guidelines for choosing a bank, CLICK HERE.
You may also find yourself shopping for a variety of services—cell phone, cable, Internet—that often offer tempting deals and packages. Put the analytical thinking skills you are learning in college to a “real world” use: Look at each deal carefully, and ask yourself what your needs really are (as with your budget, be brutally honest with yourself about needs versus wants). While the bundled package with free premium channels may be a great deal, think about what you are paying for. If you don’t use a land line you may be better off just paying for a really good Internet connection and streaming your favourite shows on your laptop.
