Being flush with cash at the start of the school year can be deceiving. A full bank account from your summer job, along with scholarship money and payments from an RESP – it can all look good. Many students hope this money will somehow stretch the entire school year. But without budgeting, that money can disappear quickly; often within the first semester.
A far better strategy is to follow a financial road map. Similar to driving a car, you need to know when and where the gas is coming from (the money) and where the toll booths are along the way (your expenses). Plan this ahead of time and you increase the certainty that you will make it to your destination (end of school) without detours and delays. Here’s how to get started:
1. Map your spending
Using a simple spreadsheet set up columns for each month – one for expenses and one for resources. Alternatively, use apps such as AndroMoney, Spending Tracker or Monefy (all available free on Android, Spending Tracker is free, AndroMoney and Monefy for fee on iOS, only).
2. List your expenses for the school year
Track your monthly expenses such as rent, utilities, food, entertainment and transportation costs. And be sure to account for infrequent or one time expenses such as books, supplies, clothing, a return flight home for Christmas, and a year-end flight.
3. List the cash flowing in
Ensure you map out summer earnings, scholarships and grants, student loans at the start of the year. Also earmark that maturing GIC in November, the quarterly GST credit, or a cheque from grandma in December.
4. Look for shortfalls
Once you’ve listed all of your expenses and all incoming cash, total each of them up by individual month. Compare the two. Is there a shortage of cash during certain months?
5. Figure out how you can make each month balance
Decrease some expenses (such as your entertainment budget), and can you bike or use the bus to cut transportation costs? Or perhaps you can increase your resources by working 8 hours a week on campus and applying for additional bursaries? This approach is far better than realizing you are flat broke in February and having to scramble for money. Working 20-30 hours a week the last few months of school, at the very end of term when projects are due and exams are approaching (or making the mistake of having to take out cash advances on your credit card) would be worse.
For more student finance advice, read 5 back to school savings tips.
And now for a fun disclaimer: