Never Run Out Of Money Again
Author: Seungjoon (Sean) Hwang
College: Kelley School of Business - IU
Financial literacy doesn’t only apply to major decisions, such as making smart investments or learning to trade on the stock market. In fact, in the case of high school or college students, who have access to a relatively lower amount of money, it can also apply to making smart financial decisions in everyday life and finding ways to cut down unnecessary costs.
One such way is tracking your spending in-depth on a weekly basis. While this is a good habit to have regardless of age, doing so can help you find spending habits and ways to cut down on certain things that may be unnecessary, especially in the case of students.?
Another way is to set a monthly budget for yourself and utilize some way of keeping track of how much you spend on what. For example, if I grant myself a budget of $250 per month excluding rent, I can use estimates on how much food, transportation, and other costs will be. Within the categories you create, you can also break them down into even more specific categories.
Example
Estimates:
Referring back to the $250 per month, the above expenditure leaves you with $50 of buffer, which you would ideally save for future use, but can also use as an emergency fund if some of your spending exceeds your estimates.
Now, we'll go more in-depth regarding specific methods and how that money can be spent.
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Thinking Long-Term
Continuing off of creating a monthly budget, one major expenditure for students, especially college students, is spending money on groceries and other food items. As a current college student myself, one method that has worked for me is looking at the per-item cost of various items.
For example, if we look at eggs, we can find the cost per egg, and see which brand is cheaper. If we have a carton of 12 eggs for $4.19, meaning each egg costs about 35 cents. A cheaper brand might have 15 eggs for $4.50, meaning each egg is 30 cents. While the upfront cost might be more expensive, the cost per egg is lower, and in the long run, it’ll help you save money. Applying this logic to other items can slowly but surely allow you to save more money and build up your savings.
Savings Accounts
Once you have accumulated some savings over a couple of months, you can open a savings account. While the returns are not too high compared to other investment options, it’s a good starting point for you to build healthy financial habits while being able to collect interest on your savings.
Investing with Little Money
After a while, if you want to start looking at other ways to invest, one way that is accessible to individuals with lower amounts of financial capital is investing in fractional shares. As denoted in the name, fractional shares allow you to own a fraction of a share by paying a smaller amount of money for the corresponding fraction of one whole share. Some advantages include how it doesn’t take as much money to get started compared to trying to buy whole stocks, along with the fact that you can build up to whole stocks. However, there are drawbacks as well, including some limitations on trading, lower numerical returns, and the fact that not every company offers fractional shares.
Building up capital doesn’t just start with smart investment decisions and spending hundreds or even thousands of dollars in stocks. Rather, it starts with healthy financial habits and saving money to build up capital.
Track Your Expenses This Semester