Saving money is never easy, particularly for students. Between classes, assignments, studying, extracurriculars, and trying to maintain some semblance of a social life, finding the time to work can be an incredibly challenging task. Bearing this in mind, it is crucial that you efficiently spend and save whatever funds you manage to get your hands on.
The most important weapon you can carry on your quest for financial freedom is a carefully thought-out budget. A good strategy is to monitor for a week how much you spend, and on what. At this point, you are ready to determine if you need to cut back your spending (or more likely, by how much you need to do so). While it may feel unpleasant to pass up on a rager or stick to having one beer instead of 10, you’ll thank yourself for it later. When everyone else is trying to ease the damage as they’re flooded with debt, you’ll be dancing in the rain.
Once you start to monitor your spending you’ll notice that one of the biggest drains on your bank account is eating out. I get it, cooking is a pain, and eating pasta seven nights in a row makes the food at Ollie’s seem gourmet. That being said, learning how to cook a variety of dishes is an invaluable skill that will save you boatloads of cash. Another tip when it comes to eating thrifty is to stick with value brand products. It’s half the price and at least three quarters the quality, so that’s a blatant net gain right there.
Another vice which should be avoided at all costs is debt. Unfortunately this is not always possible, so if you do find yourself in debt, it is essential that you pay it off before investing. The interest rate on credit cards typically ranges from 20-25 per cent. Being optimistic, you would need to earn a rate of return of at least 20 per cent just to break even. Easy, right? Wrong!
To put this in perspective, Warren Buffett, who is considered by many to be the greatest investor to ever live, has amassed his multi-billion-dollar fortune by achieving an average annual rate of return equal to approximately 20 per cent. What this means is that, unless you plan on dethroning Buffet as the king of finance, investing before paying off your credit card debt is a surefire way to lose money.
The next thing you should do is set aside enough money to cover you until your next paycheque. A wise policy would be to have twice this amount set aside when possible, so you can afford to lose a little of it, which inevitably, you just might.
While all this may seem daunting, graduating from university with a growing mountain of debt will serve as a far more challenging task. All these steps need not be accomplished overnight–the important thing is to get started. The first thing you should do is make a budget, and then you can work on sticking to it one decision at a time. If you manage your finances today, perhaps someday you will have accumulated enough wealth that you won’t have to. Best of luck.
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