It’s an exciting time! You’re off to school and onto the next chapter of your life. A bunch of things are about to change:
- You’re officially an adult (and no longer dependent on your parents).
- Responsibility for your finances now shifts to you.
- You’re about to spend a lot of money.
This is the financial equivalent of never learning how to swim, and then being thrown into the deep end of the pool. So let me toss you a few life preservers as you get started.
#1: You are poor.
Congratulations, you have entered “The Broke” phase of your life.
Your parents have been covering expenses for a while, and hey it was a blast grocery shopping with them and throwing whatever you wanted in the cart. But they are further along in their careers and make more money than you do. It will take you years to be able to afford the lifestyle your parents can afford.
It’s not as bad as it sounds. The scarcity you’re feeling will help clarify what’s really important to you. But your spending will need to slow down and become much more intentional.
#2: Develop good habits now and they will follow you for years. Develop bad habits now and you guessed it, they will follow you for years.
The decisions you make about your finances at this point in your life will follow you for years. If you borrow tens of thousands of dollars to pay for school, you will need to pay that back at some point.
You will be deciding how to handle your day to day expenses. The method you put in place will likely be yours for years. And let me be clear—not making a conscious decision about how you’ll handle your money is still a decision. Every single person who manages their own money has a method for doing that.
Just to name a few:
- There’s the “Living on Credit” Method. Expenses come up that you didn’t anticipate, so you’re “forced” to charge a bunch of stuff on the credit card. You intend to pay it in full, or at least tell yourself that you do. You get the bill and pay what you can. Debt grows.
- Then of course the The “Why Bother” Method. You think you don’t make enough money to budget. You tell yourself that when you earn more, then you’ll start budgeting. You already know there’s not enough, so you can’t be bothered. But by checking out completely, you’ve eliminated the greatest weapon you have—awareness.
- There’s the terrifying “Cross My Fingers” Method. You never check on the state of your finances because you’re afraid to look. You write checks and hope that there’s enough money in the bank. Sometimes there’s not and you overdraft. Or, you use your credit card hoping you haven’t reached your credit limit. Stressful and scary, to say the least.
- Don’t forget the “No Method” Method. Bills come in. You ignore them as they pile up around you. You put out financial “fires” as they crop up. Eventually, you’re getting burned by unexpected expenses and smoked out by the stress.
Not making a conscious decision about how you’ll handle your money is still a decision.
You WILL be managing money. Be purposeful about it, be intentional. I personally favor the YNAB Method. Learn these Rules and let them guide you. And by the way, we offer a free year of YNAB for students. You should totally take advantage of that.
#3: Debt is not your only option.
The prevailing message is you HAVE to borrow for school. And with the rising cost of school today there may be some truth to that, but it’s not as black and white as it seems.
- Not all schools cost the same. You can minimize tuition by shopping around a bit and think about completing your general education requirements at a lower cost school.
- YNAB’s second rule, Embrace Your True Expenses can help you save up money for school, lowering the amount you need to borrow.
- You have earning power. Work as much as you can to help cover the cost of school.
#4: Money is about your priorities more than anything else.
You will spend money almost every day of your life. Money that you worked hard for. Make sure you spend it on the things that matter most to you and to spend it wisely.
Sit down with a pen and paper and answer the question: “What are my priorities?”. This will clarify your thinking and you can refer back to it as things change in your life.
#5 Track your spending.
Along with the Rules, YNAB will help you track your spending, and in tracking lies the secret sauce to controlling your money—awareness. What we measure improves. So make sure you’re paying attention to your spending. Don’t let money escape without being really intentional about what it will do.
#6 Budget to take control.
Budgeting gives you a way to be intentional with your money. Give each and every dollar a job. Ask yourself: “What do I want my money to do for me?” It can help you save for non monthly expenses, and adapt and adjust as life throws you curveballs.
It’s not about restriction—though it can help you see where to cut–it’s about making sure your spending is inline with your true goals in life.
Your Next Step
Budgeting is not restrictive. You won’t be spending less, you’ll be spending right. So what do you have to lose? Except all that debt and stress?