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21 June 2013
Starting university or your first job comes with responsibility, especially with regards to your finances. Managing your finances is not necessarily something that you are taught how to do when at university or even when you start your first job, but is however a skill that is of the utmost importance to acquire. Thus, with your new found independence as a student or graduate, you need to become smart about managing your money. Today, many universities provide student advisory services, but it is the individuals responsibility to take advantage of the service and gain financial assistance. The following tips from The IDM Group will assist you with keeping on track with your finances, as the monetary behaviours you establish now, will carry you through your adult life.
Budgeting is an invaluable skill to learn from a young age. The sooner one gets into the habit of budgeting effectively on a monthly basis, the easier it will be to keep on track with your finances. A budget will assist you with monitoring where your income and expenses are going, which will enable you to stay within your financial means, as well as plan ahead for upcoming months. A simple budget should include expenses such as rent, groceries, transport costs, clothing, cell phone costs and insurance covers. If your income less all your expenses leaves you with a negative number, you are living beyond your means. It is risky to start relying on debt each month in order to keep your head above the water, and thus, you need to budget properly from a young age. Aim to get on top of your finances and make sure your expenses are less than your income and that you constantly review your budget and stick to it.
It is also vital that you manage your money effectively by setting priorities. Now is the right time to decide what is important to you, what you can go without and where you can cut costs. Do not over indulge and splurge on unnecessary expenses and instead, get into the habit of purchasing what you need and not what you want. Students are privileged with discounts, bursaries and other means to keep costs down. Take advantage of these opportunities and think wisely when spending money. For example, university textbooks will be marked-up in price by bookstores for convenience. As an alternative, purchase textbooks online at a reduced rate and save money. Download a financial planning app on your cell phone to track your spending habits. Mint.com and 6 cents will help you gauge where your money is going and manage your finances. As an undergraduate, try and get a part-time job, but it is advised that during the term you focus on your studies and instead, it would be better to find full-time holiday jobs that will look good on your CV, as well as your bank balance.
As a student, you may think that it is your education and your credentials that determine whether you are an ideal candidate for a particular job; however it is the ability to manage your finances that may determine how you progress in your career. It is becoming more common for employers to conduct credit checks and background investigations to gauge who is best qualified for a particular job. Someone who is able to manage their personal finances carefully and has a good credit score is most likely to be hired over someone who hasn’t, especially if the job specifications are finance related.
As a student, you will be offered student store cards and over draft facilities, which should be carefully thought through before accepting them. A low interest overdraft facility can be useful with regards to helping stretch your money; however it is vital that you monitor the fees and the interest rates and avoid taking on debt at a young age. You could consider opening a credit card in your own name in order to purchase small things such as lunch or dinner, so that you can establish really good credit. The more responsible you are with your money, the less risky you are to not only your future employer, but to the bank. In the future when you wish to purchase items on credit, you will get much lower interest rates on a loan you wish to take out. But remember, you need to pay your bills every month, on time.
In addition to budgeting, prioritising your expenses and living within your means, one of the most important factors to always bare in mind, is planning ahead for your financial future. Whether you are saving for a future goal such as travelling after studying or saving for retirement, the key is to always save 15-20% of your income and to think ahead.
Once you have obtained your first job, getting your first pay check is an exhilarating and thrilling experience that not only elicits feelings of pride, but also the urge to splash out. It is important not become overwhelmed by the euphoria and immediately implement proper money management from day one, to work towards a secure financial future. It is important that you do not spend first and think later.
Similarly to the above mentioned factors, when it comes to your first pay check, implement the following financial behaviour. Determine short, medium and long term financial goals and put together a financial plan enabling you to reach them. Reveal your expenses and spending habits by drawing up a budget. Make sure you are taking care of your needs before your wants. Start saving straight away and it is recommended that a portion of your money goes towards a retirement plan, savings account, investment account, or fixed deposit account. The key is to move money out of your current account to prevent it from being spent.
On a broader scale, in order to help overcome the economic and social challenges South Africa currently faces, make sure that you manage your money effectively and contribute towards wealth generation.