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Student Financial Success
An Introduction to the Basics
The cost of college is rising and student debt levels are at all-time highs. However, many students do not know how to keep up with the changing financial environment. The good news is that students’ financial options are increasing. Southeastern Louisiana University and the Center for Student Excellence want to help you face these challenges and understand basic personal financial management.
Creating a budget or spending plan for the first time can be confusing and frustrating. However, it’s particularly important to learn to budget and live within your means. While it may sound daunting, a budget is simply a tool to help you figure out what you have and what you owe. More importantly, a budget keeps you in control of your spending instead of letting your spending control how you live. As you transition from dependence to independence, understand that at first, your expectations about living and college expenses may be a bit unrealistic. But don’t despair. Here are some helpful hints for preparing a realistic spending plan that you can live with.
Distinguish Needs from Wants
One of the first things that will help you in your quest for financial success is to learn to distinguish between needs and wants. It’s not always easy. Needs are those things you require or need to live. Some examples of basic needs include food, air, water, and shelter. Your needs will vary depending on age and lifestyle. Wants are things that you would like to have but may not be necessary to survive. Wants are often those things that make your life more comfortable. Some examples of wants include CDs, DVDs, designer clothes and shoes, and a newer car.
Identify and List Expenses
As you begin preparing your spending plan, think about and make a list of all the expenses you will have. Once you have identified a list of expenses, you need to determine which expenses are fixed and which are flexible. A fixed expense is a set amount of money that must be paid regularly. Fixed expenses are often difficult to change. Some examples of fixed expenses include rent, utilities, car payments, credit card payments, and insurance. A flexible expense is an expense that can be changed. That is, you decide how and when to spend your money. Some examples of flexible expenses include food, entertainment, personal items, and clothing.
Determine Your Income
Income is the amount of money you have available to meet monthly fixed and flexible expenses. It is important to distinguish between gross income and take home pay. Gross income is the amount of money you have before taxes and deductions. Take home pay is the amount of money you actually have available to meet monthly expenses. Take home pay should be used when establishing your monthly spending plan. To calculate your monthly income, add up all your sources of income, such as salary/wages, tips, student loans, interest, and social security.
Live Like a College Student
Many students take longer than they need to in college because they work too many hours. And they work too many hours because they spend too much money on their cars, their cell phones, their clothes, and entertainment. The best money management tip is To Live Like a College Student while you are in college. Think of your college years as a short-term sacrifice for long-term gain. For four years, try to live as cheaply as you can, work less, and devote more time to your studies. Drive an old car instead of a new one. Eat sandwiches and ramen noodles. Live in a less luxurious apartment and share the space with a roommate. You will finish college faster and go on to a higher-paying career path sooner. Scrimping in the short term can actually add many thousands of dollars to your overall earning potential.
Prepare for an Emergency
Saving for the unexpected can help prepare you for an emergency. Initially, it may sound a little strange, but a good rule of thumb is to pay yourself first each month. By making a deposit into your savings account each month, you are preparing for the unexpected, such as the loss of a job or unexpected car repairs. Preparing a realistic spending plan takes time and practice. The tips identified above are guidelines to help you establish a spending plan that meets your values, goals, and available resources.