Saving is the most difficult thing to do for a college student. We are constantly faced with peer pressure and societal expectations to spend money. We always have a fear of missing out (FOMO) and feel that we need to spend money in order to keep up with our friends or keep the people around us happy. It is extremely difficult for us to say “no” to coffee or dinner with a friend. Saving does not mean we can not enjoy certain things or have fun or can not go out. We can still do these activities as long as we set a budget and pay ourselves first. By implementing a few suggestions in this blog and future ones I will show you how you can save money while still doing all of your favourite things.
- Why Should I Save?
- Planning for Expenses
- Being Guilt-Free
Why Should I Save?
For most, saving feels useless without a purpose. While we can wait to win the lottery or gamble and become rich in an instant, the chances are very unlikely. Therefore, it is our responsibility to ensure we take the proper steps to become financially stable.
The reason most young people run through all their money every month is that saving feels useless.
“The money is there, why can’t I spend it”
It can also be extremely tempting when you see the money in your account. That new shirt is only $40, that dinner will only cost me $15. Those numbers quickly add up and before you know it you are spending far too much.
The key to a successful saving strategy/plan is to make it difficult for yourself to access that money. Here’s a good first step to achieve that, have a separate account, and second, develop an emergency fund. We could talk about what banks offer good accounts and what percentage of your income you should be putting away but just know that anything is better than nothing. An emergency fund will help you be ready for job loss or an unexpected emergency. An emergency fund is not the same as your savings. This is for emergencies only.
GOING ON A TRIP IS NOT AN EMERGENCY.
Having an emergency fund will relieve some of the stress if your car breaks down because you don’t have to worry about finding money to pay for it to be fixed. You also don’t have to go into the D-word, debt. A rule of thumb for your emergency fund is 3 to 6 months of living expenses but $1,000 would be a good place to start. You should also consider potential expenses when creating your emergency fund. Will I have to fly home from university? Is my car in good working condition? Keeping these in mind will help tailor your emergency budget to your needs. Finally, make it difficult to be able to see and spend that money.
It is important to have a purpose behind saving. Maybe you want to go on a trip, buy a car or make any sort of big purchase. As long as you have a goal you will be motivated to keep saving. Not spending $5 on a coffee won’t make you rich, but that $5 is $5 that you are taking away from your fund to go to Europe. That $20 you spend on clothing is $20 not going towards your next car. Having goals will make it that much more exciting when you reach those targets of $1,000, $5,000, and beyond.
Planning for Expenses
Planning for your future expenses can be one of the most beneficial things in your saving journey. You should review your bank statements (given you make most of your purchases on a debit or credit card) to identify your major expenses. There are two types of expenses; fixed expenses and variable expenses.
Your fixed expenses are your recurring bills such as your cell phone bill, car payments, rent, etc. These are the easiest expenses to set aside money for. As long as you’re making enough money to cover your expenses these should be the easiest ones to plan for.
Your fixed expenses can also include birthdays, weddings, or Christmas gifts. You know that every year you’ll have to buy gifts at Christmas, therefore, you should be setting money aside every month so when Christmas comes around you don’t overspend or have to find money to buy gifts.
Variable expenses are the costs that can change depending on your expenditure per month such as groceries, or gas. These are difficult to budget for because they can change so frequently. We should try to make these expenses as predictable as possible and treat them as if they are fixed. We should take the average of our variable expenses for the year and factor that into your budget.
You have to have self-control and when you have used up your money within the budget you are done for the month. When you spend less than your budget transfer the extra money to save for your big goals.
Setting aside money for savings is just the first step in financial stability. In another blog, we will also talk about setting aside money for investing, paying off debt, etc. Saving is the all-important first step into managing your finances properly.
Once you have set your money aside for saving, your expenses, and investing the money left in your bank account can be used for “guilt-free spending”. Whatever money is left over can be used to buy whatever you want. You have paid yourself first and now you are free to make your own decisions on where to allocate your money.
If you want to buy a coffee every morning or buy that brand new shirt you want the price should have no effect on whether or not you make the purchase. I would even encourage you to make these ‘guilt-free’ purchases. After all, I do love to splurge on shoes from time to time.
Saving with a purpose will help you achieve your financial goals, reduce stress and allow you to feel guilt-free when making your consumer purchases.
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