How to manage personal finance as a student

Learning personal finance is fun. Budgeting, cash flows, investments etc. are areas which you will find interesting when working with numbers. Make this learning a regular feature to ensure that you start your career on sound footing

Jitendra PS Solanki

College life is most memorable for most people. Long study hours, time spent with friends, dreams of a bright future—these are days people remember with nostalgia. Whether you live in campus or at home, there is a sense of self-dependence which develops as one starts taking decisions oneself.

However, this period also brings a lot of challenges, especially about finances. There is a lot of peer pressure; for instance, your friends and room partners in hostel may be very rich. This may tempt you to follow them, despite your financial constraints. Spendthrift behavior can jeopardize your financial well-being. Hence, managing personal finance becomes a highly important aspect, even when you are a student.

Here are few steps which you should follow in your college days:

1. Budgeting: As a student one receives money from various sources for meeting the expenses—from parents, scholarships and often part-time jobs. The expenditures include college fees, socializing, books, commuting, education loan, etc. Most of the time students do not plan on these expenses if they have an easy source of money. But budgeting is necessary to put a limit on expenditure, especially impulsive spending. It also keeps one informed whenever one exceeds the spending limit. The best option is to budget on a monthly basis.

Here is a snapshot of a budget:

A budget like this is very helpful. It guards you against unnecessary expenses and informs you about savings.

2. Identify goals: Goals are aspirations which you want to achieve in life. They can be small like buying a new mobile phone or bike, or big when you want to purchase a new house. It will be a big relief to your parents if you use your savings to buy something that you need. You should draw a list of such objectives. This list will also help you to differentiate between your needs and wants.

3. Learn to build a contingency fund: Most of the time, your parents do that for you. Even after starting your career, their support is available. But emergencies can arise even during college days. There can be small requirements like funds required for college events which you did not account for, study tours, health problems, etc. It is a prudent to start contributing small amounts from your savings so that a small emergency fund can be built. This habit will also help you in your career.

4. Learn about investing: It is better to start early. Avoid the get-rich-quick temptation and quirky plans to attain such goals. Learn about the various aspects of investments like risk, return, selection and monitoring. It may not be part of your curriculum, one can learn about investing from magazines and newsletters focused on personal finance, the Internet, etc. Professional experts also now give a helping hand to students to learn about the basics of personal finance. Utilize what you think is most approachable to you.

5. Start investing: Once you start saving, it’s important to utilize the money efficiently. Even risky, volatile investment bears fruits in the long term; the earlier you start, the better it is for you. You might have heard about the power of compounding, equity market, systematic investment plan or SIP, etc. Through regular contributions, you can plan for the long term. Start investing through SIPs now.

After earmarking some funds for smaller emergencies, contribute some amount from the remaining towards investing. There are options for contributing monthly, quarterly or half-yearly.

6. Learn about loans: Some students may start sharing loan liabilities with their parents as they start their career. This liability can run for three-four years which is a good enough time. It can be a huge burden if it rises suddenly. So, make yourself aware of loan liabilities during your college days. Learn how education loan works and what it requires to keep your credit healthy. If you are able to save for such liabilities, it can be a boon for your finances. Although the parents will be there to help you, building a small emergency fund can be a good source for avoiding any default on EMIs.

7. Avoid debt: There may be credit cards from your parents for an emergency. But a free credit always results in impulsive buying, especially when you do not have to bear the burden. Once you get used to such a situation, living life on credit can become part of lifestyle. But any such behavior can lead to problems of debt in the early years of your career. So, ensure your credit purchases are in control.

8. Take professional help: Professionals are now giving help to students and youngsters. Their objective is to let you control your personal finance by learning more about it. As a student, you can always take help a financial professional, if required. Involve yourself in conversation to resolve your queries and attend seminars/lectures within your reach. For some you may have to pay a small fee which will be worth if it helps you in increasing your awareness.

A lot of entrepreneurs begin their journey right from their college days. Learning personal finance is also a fun. Budgeting, cash flows, investments, etc., are areas which you will find interesting when working with numbers. Make this learning a regular feature to ensure that you start your career with a good knowledge on personal finance.