Taking Control of your Finances
By: Rachel Marinko
My grandparents didn’t have much to raise a family on. Married in college with three kids following shortly after, my grandpa was a full-time church worker and my grandma was a stay-at-home mom. My mom used to tell me that when they went out to eat, a rare occasion, they would go to McDonalds and the kids would each get half a burger. Yet, my mom said, they lacked for nothing they needed, and my mom and her siblings were even able to go to college. How were they able to get by? The Envelope System.
Tucked away in the home office sat envelopes with different labels: groceries, bills, savings, emergencies. A certain percentage of grandpa’s paycheck went into each envelope, and when it was gone, it was gone until the next paycheck – no cheating and sneaking dollars from one envelope to another.
Personal finances can seem overwhelmingly complicated, but they don’t have to be. My grandparents owned a home, raised a family, sent their kids to college, and eventually took their grandkids on vacations, all by simply using envelopes. Today we have more financial tools at our disposal to take advantage of, but they are meant to aid us, not overwhelm us. The question for a lot of college students I’ve talked to is: Where do I start? I’m not an expert on finances by any standard, so I asked my dad, a former financial consultant, what tips he would give a college student about finances. The following are his main tips for college students who want to take their finances into their own hands.
My dad’s main advice is to find a trusted source and learn the basics. Being able to make informed decisions for yourself is more than half the battle of becoming financially successful. He suggests Dave Ramsey as a good place to start; his website (ramseysolutions.com) has a multitude of free articles and resources, and he even offers a whole course on finances if you choose to take it that far.
If you’re anything like me, you may be wondering at this point what the basics even are. Here’s my dad’s starter list of basics to learn about:
• The difference between saving and investing
• Budgeting
• Insurance (insurance is not an investment; it’s a guard against
major financial losses)
• Credit cards and credit scores
• Your personal financial statement (assets, liabilities, and net worth)
• The tax differences between a Roth IRA and traditional IRA.
Do some reading on each of these topics and know how they are relevant to you! People will have lots of different tips on each topic, but if you know what these things are, you’ll be able to sift through all the advice out there and make a good decision for your own financial situation.
After financial literacy, my dad’s next tip is to create a budget and track expenses. As a college student without a full-time job, it may be hard to predict your income and set a firm budget. The main point here is to track your spending. If you use a debit card, write down all your purchases immediately so you see how much is coming out of your account as you spend it. (This can be as easy as using the Notes app on your phone.) If you choose to use a credit card, never spend more than you earn, and always pay off your credit card bill in full at the end of the month. While this may seem basic, simply knowing how much you spend and seeing it come out of your account will help you make more conscious spending decisions.
My dad’s final piece of advice is about saving and investing. He suggests creating several different bank accounts to divide your earnings into, similar to my grandparents’ envelope system. Have an account for expenses, investing, savings, and emergencies, and divide your earnings into each account, only using the money from each account for its designated purpose. You can have as many accounts as you want; the point is to take self-discipline out of the equation and simplify your spending habits. My dad would like me to emphasize the point that you need to have an emergency account and that your emergency account should be different than your savings account. As for investing – he suggests investing 10% of your earnings for the future. There could be an entire article written on investing, but trust me when I say it will pay off in the future. (Check out Dave Ramsey’s investment calculator if you don’t believe me.)
Much more can be said on the topic of personal finances, but hopefully, this article will give you some places to start. Keep it simple while you learn the basics, and then go from there. No matter where you start, the most important thing to do is just start! Many people stall waiting for the perfect investment, the perfect timing, the perfect income level. In reality, the perfect time to start is now! I can guarantee you’ll be more confident and even have more fun if you decide to take control of your finances today.
