There are a lot of things about university life to worry about, such as navigating a new environment, figuring out a demanding and unfamiliar education system, making new friends, and the daunting task of fending for yourself. However, there’s one thing that most students don’t always devote a lot of time and brain space to, and that is financial preparedness.
Admittedly, the phrase rarely evokes much more than a bored yawn or low-level panic that is easily swatted away, but it’s a relevant topic for everyone, and unfortunately, underappreciated among students. The cost of higher education can be staggering, and it’s only going to go up as basic undergraduate degrees become the norm.
In the the UK and the U.S. (which are ranked as the top two countries in the world for university education), the average cost of tertiary education hovers around US$33,215 per year in the U.S., whilst in the UK it’s closer to US$11,380 per year for residents and US$12,300 for international students – and that’s not counting living costs, which can vary wildly depending on location.
Can we have an all-around yikes!?
We know – it’s not really what you want to have to think about when you’re about to embark on a grand university adventure, but it’s an important one to consider not just before university, but throughout life. Financial preparedness can pave the way to not just a good retirement, but it will give you the freedom to take career risks, help you navigate emergencies, weather unpredictable economic storms, or just give you peace of mind.
The degree of financial preparedness varies from person to person, but most financial planners agree that if you have a good nest egg squirreled away and a sound, reasonable budget, you’re already more than halfway there. Now, most likely if you’re a student, you won’t be able to start big because you aren’t earning a basic income, but no fear! The idea is that you want to start laying the groundwork for the future, and a little bit here and there goes a long way.
So, here’s the number one question: how do you get to where you wanna get going?
1. Get to know yourself
Sort of like how you want to get to know that special someone before you really commit, you have to do a little digging and find the bits that really make a person tick. The same goes for your financial situation and habits. Write down how much you can realistically expect to spend and your actual costs and track them.
You can write them down in a small notebook, or log them into one of hundreds of finance apps that exist out there – for example, Dollarbird, Mint, and Penny are free to use and will send you reminders. How doesn’t matter, but that you do it at all. This information can be a powerful way of understanding where exactly your money goes, and making changes to your habits that can help you reduce costs. At whatever stage of life you’re in, getting to know your spending habits can go a long way to helping you become more financially prepared.
Often, when you’re in denial about your financial situation, it can stop you from seeing through the mess and finding a way through. To help ease you on your way, check out these two YouTube videos, featuring Rosianna and Chelsea, who share their experiences with financial problems and how they got through them.
2. Budget, budget, budget
Got to know yourself a bit better? Great! Now, put a plan together. If you have a lump sum of money, spread it across a length of time, like you’re giving yourself an income. Add in anything you may earn from a part-time job. Once you’ve got your “income” sorted, figure out your baseline costs such as food, travel and housing, and deduct those costs from your income so you have what’s known as “disposable income”, i.e. whatever money you can afford to spend outside the basics. This is the money you’re allowed to play with: you can spend it on clothes, entertainment, or holidays.
At the end of the day, it’s what you do with this money that really determines your spending habits. Maybe consider putting some of it towards your savings, or invest some of it. Great websites such as Investopedia can offer you some tips on how to make money work for you. At the end of the day, it’s all about choices – so make good ones.
3. Get educated
For a lot of people, personal finance can just be an huge unknowable mess that looms over you like a tsunami waiting to happen, and all you want to do is hide.
First: don’t panic! As we said before, everyone has to start somewhere. Next, you need to get some learning done. Out there in the vast, boundless landscape of the internet, umpteenth bloggers and financial planners offer useful, free advice for anyone needing a good tip now and then. There are staples such as Money Saving Expert and This Is Money. Even Oprah dishes out financial advice every so often.
For students and young adults, the Financial Diet is a fantastic resource – they offer lots of tips about how to save money and cut costs, and share the stories of normal people facing financial struggles. These sites can teach you the basics of budgeting, how to find the perfect side hustle, what “lifestyle inflation” is, and offer a hundred explanations on the importance of personal credit. In short: chill out, help is on the way.
4. Make good choices
Among the many things you’ll learn at university, you’ll have to learn to make good choices and live within your means. Recently, The Atlantic ran a series on student loans, and one of their readers, Kristen, made the point that debt and the financial realities that students face all boil down to the choices they made. Kristen writes: “The pressure to live the dream is what pushes a lot of students into signing up for debt they don’t even understand …They chose not to start early and work in high school or delay school by a year to save up more money.”
Now, while not everyone will have a similar situation to Kristen, the fact remains that we all make choices when it comes to personal finance. Students need to understand that they have to be reasonable when it comes to their futures, and face that certain options may not be open to them. So pick the ones that are. You may not be able to afford a top-tier for-profit college in New York City now, but a local university may offer a similar course for a fraction of the price. Have you checked if your school offers scholarships or bursaries? Can you handle a part-time course? Being realistic with your situation and the options open to you is a big part of preparing for your financial future.
5. Start now
Why wait to get started? The most valuable asset that you have at your disposal to take control of your financial future is staring right there in the mirror. As a young person at the beginning of your life, you are in the prime position to start preparing. Open a savings account and dump everything you can afford to into it. Begin a savings habit – do you get an allowance from your parents? Put half of it away, if you can. Get a summer job or a part-time one to supplement any maintenance loans you might have so you can have a little something for that unpredictable rainy day while not scrimping on a nutritious diet.
Financial preparedness is a lifelong project you can work at, not something that should keep you up at night. It can be as simple as breathing, an integral part of your life. By taking some small but impactful steps, student life doesn’t have to be characterised by anxiety and shoestring budgets – but we think it bears repeating: don’t panic.