Millennials are among the poorest generation of Americans, owning just 5.6% of American wealth compared to 28.6% of Generation X, according to The Federal Reserve. Around 40% of Americans have less than $300 in savings, according to GoBanking. With college students being stereotypically broke, it’s important that we develop a sense of fiscal responsibility.
The first thing every college student should do is create a monthly budget and stick to it. Every budget should have a set hierarchy, including bills, rent, student loan payments, groceries and any other unavoidable expenses. But, once you have your necessities set aside, feel free to spend whatever money you have left as you please.
“The principle behind having a monthly budget is simple: Each month, more money must come in than goes out,” wrote Cary Siegel in his financial advice book “Why Didn’t They Teach Me This In School?”
If you’re a student who works all summer and uses that income to live during the school year, having a budget is incredibly important. By limiting your funds, you greatly reduce your risk of running out of money before the academic year ends.
Another important thing to do while in college is to build up a savings account. Every month, plan to deposit a certain amount of your paycheck in a savings account. 10% is a healthy number to start with, but if you can’t afford to do so, any amount will do. As long as you are slowly building a fund to use post-graduation, it’s a healthy move.
With the holidays resulting in a barrage of expenses for traveling home and getting gifts for loved ones, one healthy experiment to try out is to drastically limit your expenses for a whole month. For the entirety of January, only spend money on the essentials and try to avoid any unnecessary spending.
“This sounds like a strange way to live, but it works,” Siegel writes. “It works because it shows you how difficult (or easy) it is to do so.”
As someone who tried this method earlier this year, it’s amazing how well it offsets the expenses of the holiday season. It shows how little you need. I don’t need to go out to eat twice a week or get popcorn at the movies. It’s a luxury.
It’s also important to make sure that your financial goals are realistic. Whether it’s setting up a budget or working on your savings, it’s okay to start small and build up toward something better. It can be hard figuring out financial responsibility, especially if you’ve only been living on your own for a little while.
Here are a few other financial tips to start living by:
If you have a healthy relationship with your parents, stay on their insurance plan until you are 26 years old.
Don’t eat out too often; it’s much too expensive compared to grocery shopping.
Drive your car until it drops or until it proves to be too much of a financial liability.
Cut any unnecessary costs that don’t benefit you. Streaming services you don’t use, and subscriptions you can live without are potential liabilities.