Stepping into independence can be made easier with these tips to help improve your financial foundation.

Personal financial planning is usually the last thing on your mind as a college student. However, the financial decisions you make in college can have a long-term impact on your life.

Being broke throughout college can be a part of the experience, but the most financially savvy students use it to their advantage by developing money habits that will serve them well for the rest of their lives. College is an excellent time to learn how to budget. Even if you get your dream job, you’ll need to budget carefully and live within your means. As a result, college is an excellent time to learn how to manage your funds.

#1. Design Your Budget and Stick to It

Budgeting is the most effective first step to manage your money wisely. Set financial goals for yourself, such as paying off student loans, saving for a simple holiday, or even spending less money on bubble tea, and then utilise your budget to help you reach them.

The most important tool in budgeting is expense tracking. First, determine the general categories for the expenses you expect to incur, for example, food, groceries, rent, petrol/transport, savings, and a weekly small treat. Customize the categories according to your needs. Be aware that not everyone must follow the same rules as we all have different needs. Next, track your every expense.

For more information on budgeting, this useful article is an excellent reference point.

By tracking your expenses, you have a better idea as to where your money is going and how much you really need.

#2. Debt Management – Thoughts Before Getting an Education Loan

An education loan is not free money.

Student loans are a wonderful advantage helping many young people receive their education using borrowed money. In a sense, it’s a good investment as well as your earning power once you graduate will typically be much better the higher your education level and therefore more easily help you repay the loan while giving you a lifestyle advantage.

If you must borrow, be sure you do so carefully and responsibly. The most important thing to keep in mind is that you will be responsible for repaying this debt once you graduate. Your repayments will help other underprivileged future students gain education assistance as well.

Look for scholarships, grants, and work-study programs that don’t require repayment to reduce your borrowing. Start with federal loans rather than private loans if you need to borrow. Interest rates on federal loans are lower, and forgiveness provisions are more liberal. Student loans have lower interest rates than credit cards, and you don’t have to start repaying until after you graduate.

At the same time, think also about the qualifications you are seeking. Is the qualification in demand right now? How’s the job market for it? How high is the pay? Will the pay be sufficient for my living expenses and repaying my debts?

Following your passion is one thing, the reality of life is that money is still a necessity so do thoroughly think through your plans.

#3. Get Insured

Yes, you do need insurance, and it isn’t just for the elderly.

Start with medical insurance. When you are sick and away from home, the last thing you want to be burdened with is whether you can afford healthcare. Although you are unlikely to have large medical bills, hospitalization can be financially disastrous for you and your parents if the unexpected happens. You may continue on your parents’ health insurance (if they have any) until you turn 26 thanks to the Affordable Care Act.

Nowadays, some educational institutions also provide health insurance packages for students. The prices are usually reasonable although the coverage may not be very generous. Pick a plan that makes sense for you. That way, if you fall sick, you can immediately seek treatment at a panel clinic or hospital without worrying about how to pay or what to do.

If you have your own transport, you will also need auto insurance as it is a legal requirement. Young drivers are seen as high-risk by insurance providers, therefore premiums can be high. Compare prices to find the best deal. You might be able to qualify for reductions if you use your parents’ coverage.

#4. Emergency Fund & Investment Fund

When you design your budget, intentionally set aside a small sum of money on a regular basis, be it weekly or monthly. Accumulate this money and use it for 2 things.

First is to have an emergency fund. This is your backup cash reserve in case something unexpected occurs, for example, your car gets damaged, someone broke your bedroom window, etc. You can park this cash in your savings account where you can quickly withdraw if needed.

Second is to build up an investment fund. Invest this cash in order to grow it even if it is a small sum. Look for investment options which have higher returns than a savings account. Beware of scams (if it sounds too good to be true, it likely isn’t a good option). A word of caution is to also avoid legitimate investment options which take up a lot of your time (don’t spend your studying time obsessing over the share market or building an MLM network, for example). You may want to begin by exploring Fixed Deposits and ASN/ASB, for example.

#5. Earning Money

Earning a wage gives you power, but it also forces you to consider a slew of new financial and legal responsibilities. Whether it’s your first paid internship, a part-time job to supplement your income while in college, or a work-study program, you need to understand your rights and obligations as a worker. You should have these rights as an employee.

  • Fair pay – Malaysia’s minimum wage is currently set at RM1,200 per month in 2021. Employers are permitted to offer unpaid internships. ages must be paid within seven days of the date of “pay day.” Employers are required to make statutory deductions in addition to paying wages, regardless of the conditions of the contract. Employers must also contribute to their employees’ EPF and SOCSO accounts in addition to making these deductions.
  • Discrimination-free workplace – Employers are prohibited from discriminating against employees based on their age, ethnicity, religion, or gender under federal law.

Read all contracts before you sign anything.

#6. Financial Discipline to Avoid Lifestyle Creep

It’s tempting to ask your parents for help if you blow your budget halfway through the semester, but learning financial responsibility is a vital part of growing up.

Take good care to review your budget regularly and always track your expenses. Every day, we are bombarded with advertisements, and online businesses that make spending money easier than ever. Financial peer pressure also exists when your friends cajole you to spend beyond your means to match them. Learn to stand up for yourself and say no.

When your budgeting is effective or when you start making money, continue to apply financial discipline. You may suddenly find yourself having lots more ready money than you ever expected. This doesn’t mean you should spend, spend, spend. Assess your wants and needs instead. If it is necessary, you can allow yourself a slight increase in your spending budget. On the most part, stay aware of your spending and live within your means to avoid lifestyle creep.

Conclusion

Being in college or university is a phase where many transition from child to adult. Stay vigilant and cultivate good habits that you want to carry with you in the long-term. It’s okay to make mistakes provided you learn from them. Address mistakes when they are very small and don’t let them snowball on you. When you need help, seek advice from a trusted, responsible, and knowledgeable adult who has your best interest in mind.

 

What other tips do you have for college students?

 

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