Fundamentally, there are only two ways of dealing with a budget shortfall:
Increasing awareness of spending patterns can help students exercise restraint. So, the first step is to create a descriptive budget by tracking spending patterns. Record every expense, no matter how small, by asking for a receipt or recording the expense in a memo pad. Each evening, transcribe the receipts into a money management tool like Quicken, or Mint.com. One can also transcribe the receipts into a spreadsheet. Label each expense as mandatory (a need) or discretionary (a want). Also group the expenses into broad categories, such as food, clothing, housing, utilities, medical care, transportation, taxes, insurance, education, loans, savings, eating out and entertainment.
Be realistic about whether the expense is really necessary. A mandatory expense is one where the consumer would die or go to jail if he or she didn’t spend the money. Mobile phones and cable TV are luxuries, not necessities.
At the end of the month, calculate the totals for each label and category. Just being aware of how much is being spent in each category will influence future spending. It will also help identify areas where spending is high enough for there to be potential savings.
The most effective way of cutting spending is to focus first on the largest expenses and on recurring expenses. These include the following expenses:
Try to find ways to substitute free for fee. For example, borrow books from the library instead of buying them from the bookstore. Walk, jog or bike instead of paying for a gym membership. Check out the campus athletic facilities.
Before buying a big-ticket item like an appliance, always comparative shop for the product before making a purchase. Use web sites such as: CamelCamelCamel or ShopSavvy. Ask the store manager for a 10% discount. Most managers have the authority to grant small discounts and a 10% discount is not so high that they’ll immediately say “No.” If they do say “No,” walk out of the store.
Improving money management can also save money. Pay off high interest-rate loans first, such as credit cards. Don’t carry a balance on credit cards and switch to no-annual-fee credit cards. Switch checking accounts to free checking with no ATM or debit card fees. Refinance mortgages at a lower interest rate. Empty pocket change into a spare change jar every day and save it.
Sell excess belongings on eBay or Craigslist, especially items that haven’t been used in a year or more. This can yield some cash to pay off debt or pay for energy efficiency improvements.
Work a part-time job in the evenings and weekends; not only will this yield more income to pay back student loans, but less time will be available to spend money.
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