Money Matters: How to be Smart with Your Money
Being a college student has its ups and downs. From tuition, to rent, eating out, and fun activities as well, each college student has their own expenses and financial challenges. This article will help relieve some stress in regards to savings and how to properly budget as a college student. In addition, I have interviewed Jessica Drake who gives a candid account on how Hokies can be conscious with their money and how to learn more about Financial Wellness at Virginia Tech.
First off, What is financial wellness? According to Jessica, “Financial wellness is defined as the ability to use one’s knowledge and skills to manage financial resources effectively for a lifetime of financial well-being.” It is also important to note that the effects of financial troubles can be felt in all areas of a person’s life. Understanding one’s spending habits, financial obligations, and saving goals can allow people to learn how to manage their money efficiently and effectively. One of the goals of the financial resources at Hokie Wellness is to give students all of the information needed to feel confident in making decisions for their financial life.
The second question I asked Jessica was: With all the organization you can join at Virginia Tech, why choose Financial Wellness? Jess told me that she decided to join the organization because she enjoys helping people and has a natural curiosity in understanding how money works, how to save, and how to invest. “In my everyday conversations, it was made apparent how little people knew about budgeting and saving. My role at Financial Wellness has given me the opportunity to help other people get the information they need.” As a college student, money may be a sore subject but this dialogue needs to be discussed and become more normalized.
Expenses can pile up and make students feel overwhelmed and stressed. Being able to manage and set priorities is necessary to alleviate the burdens money can bring. Some advice Jessica highlights is to identify all streams of income, fixed expenses like rent, car payment, utilities and variable expenses which can be clothes, food or coffee. The last stream is what debt that you currently owe. First off, attempt to get rid of credit card debt as soon as possible. After all the expenses and income are taken into account, start planning out what you would like to save for the near future. This can include rent (current or planning ahead for moving to a new apartment post-graduation), buying a car, etc. After deciphering what potential larger expenses may be, you can research how much money this future expense may cost and calculate by how many months you would like to have it paid off or saved for. Also, working toward an emergency fund is another important savings priority especially post-college (Note: Depending on your financial situation, it could be wise/necessary to start one immediately). The first question to consider is what number does your bank account dip under that makes you panic? Prioritize saving aggressively and sticking to a strict budget until you hit that number. Then, continue saving until three months of fixed expenses are covered. This will help relieve some stress and allow a solid safety net when surprise expenses arise. The third threshold to achieve would be 6 months’ worth of income. Saving money can be hard as a student if you currently don’t have a job or a limited budget, to begin with, but even the practice of setting aside ten dollars each month, being more thoughtful about purchases, and resisting the urge to transfer money from savings will be beneficial in creating positive habits that will help in the future.
After the fixed expenses and saving plans are figured out, record what is actually saved and spent for a set period of time. This will illustrate how your money is actually being spent compared to how you thought it would be spent. Adjust your budget and behavior according to your goals.
Another question to consider is: What is the best way to start investing? First, figure out what amount of money you are willing to invest and potentially lose. Next, you should open a brokerage account. Research one that will meet your needs and understand what potential fees will be associated with the account. Then, find an industry or market that seems interesting to you. Make sure to do some research and see what direction you would like to go. Starting out, investing can be scary but finding a stable company like Microsoft or Sony who might not have high growth returns but will ultimately not disappear from the market. If you are still unsure, perhaps invest in an ETF or an Exchange Traded Funds that covers variations of the market. ETFs are traded like stocks where the price fluctuates throughout the day and tend to me cost effective and more liquid than mutual funds. Once again, I can’t stress enough how important research is to understand what exactly it is that you are investing in. Seek professional assistance if this is something you are seriously considering.
Risk is another factor that should be put into consideration when starting to invest. As you gain more experience in the markets, you can then start diversifying and building a portfolio. If you feel uncomfortable managing your own money, mutual funds can be a great option as well. Just make sure to fully understand the policies and fees that are associated with the mutual fund you choose.
Budgeting, saving, and investing can all be intense topics for students, let alone all adults. Don’t be intimated to ask for help in this department. Every person is different in their relationship with money but knowing yourself and what you can do to prepare for the future is so important. If you would like to learn more about Financial Wellness, please contact Kevin Sutton at SuttonKL@vt.edu to schedule an appointment to discuss any financial situation/ concerns. Furthermore, CWIB finance majors are also great resources regarding financial or budgeting concerns. They are happy to share their expertise and answer your questions! CWIB is always available and eager to help students to learn about other organizations on campus like Finance wellness, so know that there are many avenues available to you to start being smart with your money.
By: Sarah Viebrock