- Identify how you are spending your money and what optional expenditures you can cut back on.
- Develop a positive attitude for spending less while still enjoying a full college experience.
- Create and manage a workable budget by tracking expenditures to reach your financial goals.
- Recognize if you are getting in financial trouble and know what to do about it.
- List the benefits of saving money even while in college.
Where Does the Money Go?
Most people aren’t really sure where a lot of their money goes. Take this survey to see how much you remember about how you have spent money recently.
Do your best to remember how much you have spent in the last thirty days in each of the following categories:
|Category||Amount in Dollars (Per Month)|
|Coffee, soft drinks, bottled water|
|Movies, music concerts, sports events, night life|
|Fast food lunches, snacks, gum, candy, cookies, and so on|
|Social dining out with friends (lunch, dinner)|
|Music, DVDs, other personal entertainment|
|Ringtones and mobile phone applications|
|Bank account fees, ATM withdrawal fees|
|Credit card finance charges|
|Cigarettes, smokeless tobacco|
|Beer, wine, liquor purchased in stores|
|Beer, wine, liquor purchased in restaurants and bars|
|Gadgets, video or computer games, and so on|
|Travel, day trips|
Now be honest with yourself: is this really all you spent on these items? Most of us forget small, daily kinds of purchases or underestimate how much we spend on them—especially when we pay with cash.
You’ll notice also that this list does not include essential spending for things like room and board or an apartment and groceries, utilities, college tuition and books, and so on. The greatest potential for cutting back on spending is in the area of optional things.
Spending on Essentials, Spending on Optionals
More people get into financial trouble because they’re spending too much than because they’re making (or receiving) too little. While spending may seem a simple matter—“I need to buy this, I’d like to buy that”—it’s actually very complex. America is a consumer society, and we’re deluged by advertisements promising that we’ll be happier, more successful, better liked by more people, sexier, and everything else if only we buy this. Companies have spent billions of dollars researching how to manipulate our buying behavior. No wonder it’s so tough to resist these pressures!
Why does a person feel compelled to buy fast food for lunch, or a new CD with a song they just heard on the radio, or a new video game a friend says is so good, or a new article of clothing? We owe it to ourselves to try to understand our own attitudes about money and spending. Here’s a good place to start:
- Having money or not having money doesn’t define who you are. Your real friends will think no less of you if you make your own lunch and eat it between classes or take the bus to campus rather than drive a new car. You are valued more by others for who you are as a person, not for what things you have.
- You don’t have to spend as much as your friends to be one of the group. Some people always have more money than others and spend more. Resist any feeling that your friends who are big spenders are the norm. Don’t feel you have to go along with whatever expensive activities they propose just so you fit in.
- A positive attitude leads to success. Learn to relax and not get stressed out about money. If you need to make changes in how you spend money, view this as an exciting accomplishment, not a depressing fact. Feel good about staying on a budget and being smart about how you spend your money.
- Be realistic about what you can accomplish. Most students have financial problems, and they don’t just go away by waving a magic wand of good intentions. If your budget reveals you don’t have enough money even while working and carefully controlling your spending, you may still need a student loan or larger changes in your lifestyle to get by. That’s OK—there are ways to deal with that. But if you unrealistically set your sights so high about spending less and saving a lot, you may become depressed or discouraged if you don’t meet your goals.
Before you can make an effective budget, you need to look at what you’re spending money on now and consider what’s essential and what’s optional. Essential costs are the big things:
- Room and board or rent/mortgage, utilities, and groceries
- College tuition, fees, textbooks, supplies
- Insurance (health insurance, car insurance, etc.)
- Dependent care if needed
- Essential personal items (some clothing, hygiene items, etc.)
These things are sometimes called fixed costs, but that term can be misleading. If you have the option to move to a less expensive apartment that is smaller or a few blocks farther away, you can partly control that cost, so it’s not really “fixed.” Still, for most people, the real savings come from spending less on optional things.
Look back at the amounts you wrote in the earlier exercise “Where Does the Money Go?” These things are “optional” expenses—you can spend more or less on them as you choose. Most people spend by habit, not really thinking about where their money goes or how quickly their spending adds up. If you knew you were spending more than a thousand dollars a year on coffee you buy every day between classes, would that make you think twice? Or another thousand on fast food lunches rather than taking a couple minutes in the morning to make your lunch? When people actually start paying attention to where their money goes, most are shocked to see how the totals grow. If you can save a few thousand dollars a year by cutting back on just the little things, how far would that go to making you feel much better about your finances?
Following are some general principles for learning to spend less. The “Tips for Success” then lists specific ways you can try to follow these principles in your daily life. Remember, spending money doesn’t define who you are!
- Be aware of what you’re spending. Carry a small notebook and write down everything—everything—you spend for a month. You’ll see your habits and be able to make a better budget to take control.
- Look for alternatives. If you buy a lot of bottled water, for example, you may feel healthier than people who drink soft drinks or coffee, but you may be spending hundreds of dollars a year on something that is virtually free! Carry your own refillable water bottle and save the money.
- Plan ahead to avoid impulse spending. If you have a healthy snack in your backpack, it’s much easier to not put a dollar in a vending machine when you’re hungry on the way to class. Make a list before going grocery shopping and stick to it. Shopping without a list usually results in buying all sorts of unneeded (and expensive) things that catch your eye in the store.
- Be smart. Shop around, compare prices, and buy in bulk. Stopping to think a minute before spending is often all it takes.
Tips for Success: Spending Less
- Make your own lunches and snacks.
- Read newspapers and magazines online or in the library.
- Cancel cable television and watch programs online for free.
- Use free campus and local Wi-Fi spots and cancel your home high-speed Internet connection.
- Buy generic products instead of name brands.
- Shop at thrift stores and yard sales.
- Pay with cash instead of a credit card.
- Cancel your health club membership and use a free facility on campus.
- Compare prices online.
- Avoid ATM fees by finding a machine on your card’s network (or change banks); avoid checking account monthly fees by finding a bank with free checking.
- Get cash from an ATM in small amounts so you never feel “rich.”
- With larger purchases, postpone buying for a couple days (you may find you don’t “need” it after all).
- Look for free fun instead of movies and concerts—most colleges have frequent free events.
- If you pay your own utility bills, make it a habit to conserve: don’t leave lights burning or your computer on all night.
- Use good study skills to avoid failing a class—paying to retake a course is one of the quickest ways to get in financial trouble!