Navigating Finances in the Professional and College Scene

As an AO student, there will likely come a time in your college life when you will be managing your own expenses and finances. Unfortunately, financial literacy and responsibility can be one of the more challenging parts of being a college student. Many adults don’t learn healthy money management habits until later in life, and for families that have lived on an extremely tight budget, skills like managing debt and saving are not likely things that your family has been able to prepare you for. But few things are more important than learning these skills before you find yourself in a precarious financial position. Developing good spending habits and planning now can save you a lot of headaches when you graduate and begin working.

Create a Budget

One of the most important parts of financial literacy is budgeting. Here’s a simple way to begin to start a budget:

Track your income and expenses: If you aren’t great at this, you can always use an Excel sheet or YNAB (free for all college students) to track every dollar coming in and out. I prefer to record my income from different jobs, scholarships, and other sources.
Categorize your spending: Divide your spending into categories like rent, tuition, groceries, transportation, utilities, and entertainment. This helps you see where your money is and will be going. A good rule of thumb is that 60% of your income should go towards necessities, 20% toward leisure and wants, and 20% toward savings. That can be tricky to do while you are in school, but it may be a good place to start when making a spending plan.
Set spending limits ahead of time: Based on your income and essential expenses, set limits for non-essential spending. Stick to these limits as much as possible to avoid overspending.
Adjust as you see fit: Your budget isn’t always gonna be set in stone. If you find that you’re consistently overspending or underspending in one area, adjust your limits or cut back in another.

Save Money When Possible

Saving money might seem impossible on a tight budget, and I completely understand this, but even small amounts add up. Here are some ways to get started:

Emergency fund: Aim to save $500-$1,000 as a starter emergency fund. Again, this may not always be realistic, but can be very beneficial in times of need. This can cover unexpected expenses like medical bills or car repairs. Don’t know how to go about saving? Make it a part of your monthly budget and set aside $50-100 before doing any other spending or set up your account to automatically round charges and move change into your savings each time you spend.
Don’t be fooled by on-campus credit card companies that sell you on taking out large lines of credit on a card without discussing the interest rates. Pay attention to introductory rate periods, and know exactly how much interest you will be paying back when that period is over. It will go faster than you think and you don’t want to wind up with a large balance that will now cost you a lot more to pay back. If you are considering opening a credit card, look into annual costs, interest rates, benefits, and what you may qualify for. There are many cards that are known to be great ones to have as a first credit card, say for example the Discover Student Card. If this is something you want help navigating, you can always ask an AO staff member!
Take advantage of student discounts: Many places offer discounts for students. Clothing stores, gyms, companies like Apple, etc. all give discounted rates to students, so always ask if there’s a student rate before making purchases!
Use free or low-cost campus resources: Libraries, fitness centers/gyms, and student events can save you money on books, a gym membership, and entertainment that you can then disperse money to elsewhere.

Managing Debt

Student loans and credit cards can quickly become overwhelming. Here’s how to begin managing your debt effectively:

Understand your differing loans (if applicable): Know the interest rates, when they begin, repayment terms, and grace periods for your student loans.
Use credit cards wisely: Credit cards can build your credit score if used responsibly. I know each student’s circumstance is different, but I often say if you are going to open a credit card in college, try your best to use it like it’s a debit card. Meaning, try to only use it to actually build your credit and pay off your charges right away (with money you already have). Ensure you are paying off the balance each month to avoid interest charges and never charge more than you can afford to pay if possible.
Seek help if needed: If you’re struggling or confused by any of these processes, don’t hesitate to reach out to an AO staff member or your school’s financial aid office for advice.

Invest in Your Future

Investing might seem out of reach right now, but starting early can significantly benefit you in the long run. Here’s how you might go about investing:

Educate yourself: Chat with an AO team member or take a LinkedIn Learning course on investing and differing types. This can help to learn the basics and gather a general understanding.
Focus on retirement: This always intimidates young people (myself included) because it seems so far away, but the sooner you begin thinking about it, the better! If your job offers a 401(k) with a match, try to contribute enough to get the full match. Look into the package your work offers with benefits like these, because it can essentially be free money. If not, you might also consider opening an IRA.

Managing your finances as a low-income student can be challenging, but it’s not impossible. By creating a budget, saving, managing debt wisely, and starting to invest, you can take control of your financial future. Remember, the goal is going to be to make progress, not perfection. Every small step you take will not set you up for a more secure and prosperous future. Best of luck!