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Personal Finance For Students

“Starving student”: We know the term all too well. Whether we view it as a challenge or opportunity, the university often marks the first opportunity to manage one's financial circumstances. In light of a quickly approaching holiday season and the spirit of financial literacy month, we’ve prepared 5 topics to help you survive and thrive financially.

1. Make a Budget

2. Navigating Debt and Credit Card

3. Investing

4. Keeping Consumption in Check

5. Mistakes to Avoid

1. Make a Budget

This one is easier said than done.

If you’re stressed about your finances, it is likely a result of two key factors:

A) your expenses exceed or are dangerously near your income

B) you have a high degree of uncertainty around where the money is going.

In the former case, it is crucial to acknowledge your current financial situation in the greater context. This student situation is temporary, and regardless of the uncertainty that lies ahead, you will soon be in a chapter of life with far higher earning potential. If you’ve experienced the latter, you’re likely too familiar with the self-perpetuating nature of this stress.

While you avoid revisiting spending patterns to evade encountering the unpleasant, the clarity you desire can only be achieved by looking at the numbers head-on.

Building a budget from scratch can be daunting. Rather than building a custom spreadsheet from scratch, we recommend checking out the Monthly Budget Template from Google Sheets or Microsoft Excel. If you prefer to use your phone, we recommend the app EveryDollar.

When it comes to budgeting, it’s often not the planning but rather the tracking that is the most difficult. On this note, we would recommend against using any automated financial data aggregators that categorize spending for you. Tracking manually is an essential component of the psychological process and will help you be more in touch with your financial self in the long term.

2. Navigating Debt and Credit Cards

With consumption shifting largely toward digital and recurring transactions in recent years, it’s almost imperative that you have a credit card. While this can present an opportunity to build credit and secure loans such as mortgages more easily in the future, it is often the case that your credit card use as a student will in fact have the opposite effect. The first step to being a successful credit card user is choosing the right card for you, as your choice of card can mean a significant difference in future cash back, travel rewards, and other perks. Such a difference in fact that “churning”–the practice strategically taking advantage of card benefits and application incentives by regularly swapping cards–has become a side-hustle among millennials.

Regardless of your credit card choice, it is important that payments are made regularly and in full.

One of the most significant benefits of using credit cards is the accumulation of records necessary for building credit. If not handled carefully however, this benefit can quickly turn into a burden. To ensure convenience of viewing and managing your credit card(s), make sure you have bank accounts with the same provider, and set up online banking.

From here, you can easily schedule transfers on regular intervals to make sure your payments are always made in time. If you use your card primarily for paying online subscriptions, add them up and make a scheduled payment equal to that amount. Last but not least, never use your credit card for purchases you cannot afford to make. Whatever it is, it can most likely wait, and you will be able to enjoy it more if it doesn’t put you in debt.

In the general sense, debt has become a regular part of economic activity for consumers, businesses, and governments. At times, it can feel impossible to live what is considered to be a “reasonable” lifestyle debt-free.

To further explore debt, it is useful to distinguish between consumer debt and strategic debt (also referred to as leverage).

Consumer debt comes in the form of credit cards, car loans, and lines of credit. Because money isn’t being borrowed in relation to the purchase of assets, lenders will use your credit score along with other factors such as income to determine the terms. Because of the inherently higher level of risk for lenders, consumer debt carries high interest rates. Aside from building credit for future access to more constructive forms of debt, there is almost no reason to carry consumer debt.

On the other hand, leveraging is when debt is used to finance the purchase of appreciating assets such as real estate, and can be highly beneficial for building wealth in a more efficient way than simply saving and investing the old-fashioned way. Aside from mortgages, use of leverage should be reserved strictly for advanced investors with a sophisticated understanding of risk.

3. Investing

Investing is an essential activity to combat inflation and maintain the future purchasing power of your savings. While common asset classes include real estate, fixed income, stocks, commodities, and foreign currencies, a broader understanding of investing can be deeply beneficial for you as a student. A good investment is one which delivers high returns in consideration to the risk taken on to achieve those returns. Perhaps the most critical component of making money with investments is allowing time to do the work.

Therefore with few exceptions, the best investment a student can make is in their future earning potential.

While the stock market at times looks lucrative and exciting, major indexes only achieve an average of 7%-10% returns annually. This means that if you were to invest $10,000 today, you would have an approximate $19,672 in 10 years. In contrast, the same $10,000 could be invested in courses, designations, and certifications with the potential to boost your annual earning potential by that amount in a single year! Only when these investments and considerations have been made should students consider exploring other asset classes.

... A little cliché to include a Warren Buffett quote, but I can't disagree!

4. Keeping Spending and Consumption in Check

Whether it's a result of social pressure or our own aspirations to live more comfortably, consumption is a deeply emotional phenomenon. In a world with increasingly intelligent and targeted advertising, a budget is also your first line of defence against being taken advantage of or persuaded. To ensure you are operating within your budget, block off daily or weekly time in your calendar to input and track expenses, and allot yourself dollars for the next tracking period.

If you’re looking at this ad, it’s too late. With holiday season promotions in full swing, it is crucial to plan your consumption in advance.

Keep a list of items you are looking for on an ongoing basis to avoid impulse decisions.

It can also be useful to keep a spending journal, in which you input items you have purchased, its price, and why. This is an ultimate defence against impulse purchases.

Ask yourself the following questions before purchasing anything (even if an item is within your budget):

  • If it’s on sale: Would I purchase this if it was full price?

  • Is this on my list?

  • How long will this item last me?

  • What kind of depreciation can I expect on this item? Is there any possibility of reselling it?

  • How long will this item last me?

  • Is it possible to purchase elsewhere or second hand at a discount?

  • Are you seeking instant gratification? Take a moment to recognize how you feel and if the service/product will really help achieve the result you want

  • Do these help you achieve your goals? Keep your goals in mind before wasting money. Ex/ If you are saving for a trip

  • Do you already have something similar?

5. Mistakes to Avoid

Personal finance isn't simply something one can understand, but rather it must be acted upon daily. Here are some additional mistakes to avoid to ensure your student financial success:

Investing or spending without an emergency fund

Life is full of unforeseeable expenses and events. According to findings in the 2019 Canadian Financial Capability Survey, more than a quarter of Canadians borrow to cover food or daily expenses. To avoid resorting to consumer debt when the unexpected happens, build an emergency fund of 3-6 months of expenses before making large investment commitments.

Using automatic spending trackers and financial aggregators

With beautifully designed dashboard insights and undeniable convenience, services like seem like the obvious way for one to get started with understanding their personal cash flow. The unfortunate fact is that such the convenience and automation keeps you at arms length from where your money is really going. Contrarily, while it takes a bit more time, manual input and calculation of your expenses in a system such as the templates linked above forces you to reflect and gain a deeper understanding of your habits.

Not checking credit card statements or similar documents

Checking credit card statements is a quick task that can save you from overspending on subscriptions you’ve forgotten about, defend you from fraudulent transactions, and help you see at a glance how spending decisions add up.

Not taking advantage of financial resources for students

As students, we have access to a disproportionately vast array of opportunities for financial support, particularly when it comes to investing in ourselves. Make sure to look into and exhaust all available scholarships, grants, and bursaries for studies long before googling Tesla’s stock price.

Author: Alex Doonanco

Editor: Zi Yuan, Sophie Nie

Having trouble adapting to school online? Worried about exams? Read our blog debunking 5 Misconceptions About Studying in University.

What to explore more? Here are some recommended resources for you to check out👇👇

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About the Author

Alex Doonanco

English Marketing Department Associate at UBC BizChina, President at UBC Trading Group.

A fourth-year student studying Economics, Philosophy and Chinese Language.

Follow Alex here: LinkedIn |Instagram


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