In an earlier article, Manishree Gupta shared her interesting career change story. If you haven’t read it, here’s the link – How I changed my career from Physiotherapy to Financial Planning
In this post, Manishree puts on her financial planner’s hat and shares tips with students on how to cultivate money management skills at an early age.
How middle class students can manage money in college
by Manishree Gupta
So, you must have heard of the ever famous book, ‘Rich Dad, Poor Dad’ by Robert Kiyosaki. Possibly read it as well. In the fortunate case of the latter, you are aware that money, although limited in quantity, can be ‘managed’ in a ‘skilled’ manner. Lose no heart, if you don’t write Ambani or Birla as your last name. Me neither! It is all about optimization. Agreed, it is easier to cry on a BMW than a bicycle, but while we can afford a bicycle, let’s make the two wheeler ride worthwhile while we go on buying our own BMWs!
1. Incorporating financial discipline
Ok, let’s face it! Without discipline, nothing comes easy. If you want to have good grades, you need to study for your exams. Adopt this very famous equation by the self-made billionaire, Warren Buffet for your personal finances:
Income – Investments = Expenses
And not the other way round! Assuming you do get a small pay check each month which sounds like ‘pocket money’ – treat it as your income, and not as ‘blow away money’. There are parents who don’t keep a count and there are no rigid rules to this EMI from their wallet. Whenever the child demands anything, it is given, with a ‘No Questions Asked’ policy, similar to the returns policy many of the online shopping sites have!
While I am not suggesting it is outright wrong, but yes, keeping a tab on the Hows and Whys definitely helps. Inculcating financial discipline during the formative years of your kids would be much better, no matter you can easily afford all of these expenses. If you are a parent reading this, there are classes for kids as young as 5 years on personal finance.
And if you are a student, please remember to not look at it as just another ‘gyaan’. This is something which would not be ‘taught’ in any of your degrees. 5-6 years in your career, you might realize the importance of budgeting or at least tracking your expenses.
2. Money saved is money earned
Treat your pocket money as your income, and start saving a small portion of it on a monthly basis. No matter how small your income is or how stingy you feel your parents are, it always helps.
I know of a friend who was least affected by demonetization – she used to save all the loose change in her wallet at the end of the day and she broke her piggy bank when her stock of 500s and 1,000s was not rendered as legal tender by PM Modi. She got almost 13,000 in denominations of 100s, 50s, 20s and 10s. Save for a rainy day, even if you don’t live near Mawsynram near CherrapunjiJ It is called ‘emergency fund’ for a reason, after all!
Older and/or financially savvy students can have automated SIPs (Systematic Investment Plans) debited from their accounts, and these SIPs can be as low as Rs. 500/month.If money comes in your hand, you would spend it somewhere or the other – or even lose it! So, invest it proactively in a short term debt fund or a Recurring Deposit at your bank.
Finance students or those with a knack of it can play with the stock market – first on a virtual simulator website and then with actual money. No risky dabbles here, and no short term speculations please! Tread this territory very carefully – better stay away and invest in a balanced fund first even if you are highly intrigued by this.
Maintaining and more importantly, following a budget comes in as another trick in the pan. There are so many money management apps which would even automate it for you, like if you swipe your card at Domino’s, the app would read the message and classify this expense as ‘Dining Out’ on its own. Once in a while you can of course have a cheat day (as in semi-luxury dining and health wise, both ways), provided that one time spend does not derail your entire discipline.
* Which brings me to another point, try and eat right. Exercise and keep fit. These years are the best to inculcate these healthy habits, later is not better. The more you delay this, the more struggle it would be in future. It is not a good idea to have health, lose it and then try to gain it back as compared to maintaining your health right from scratch.
3. Staying away from Credit
Even if you count yourself as lucky and have your name embossed credit card via your parent’s account/credit history, assume responsibility. You would be surprised to know that many grown-up kids still feel that swiping a card and spending money are two separate things.
Please understand that it also needs to be paid off, with real hard earned money. If you are sure of the purchase and that it would not be a financial burden for your parents to pay it off, discuss with your parents first and then swipe it. May be having a conversation beforehand as to how much you can swipe it for without their nod is not a bad idea.
Another point, no ambitious purchases on EMIs please! – Not even at 0%. There was a reason why our ex RBI chief Mr.RaghuramRajandidn’t find this too appealing. It is a bad idea to go this route, and almost always 0% is a marketing gimmick.
You want the latest iPhone, go to Step # 1, save for it systematically and buy it. Not first buy it, miss your EMI payment, and then keep on rolling your debt to one card or the other. It just degrades your credit history, you end up paying even more as interest and are then stuck in the debt trap. Of course if you have the self-control to not swipe cards more than you can afford, by all means, Go for it!
4. Not following the rat race
‘Coz even if you win it, you will still be a rat!
Differentiate between wants and needs – Fixed and discretionary spending as they say in the world of financial planning! Food is a need, going to college in a chauffeur driven Audi is a want. You are not straight out of Karan Johar’s ‘Student of the Year’! There is a reason why every movie starts with ‘This is a work of fiction…’
Similarly, with food, dining at Le Meridien at every month anniversary of your ‘love’ which changes every 2 months is a want. You get the drift?
Another footnote here, which is not going to go down very well with you, but will say it anyway J – Focus on your education as much as your love interest(s), if not more! 😉
In the words of Durjoy Dutta:
Love makes the world go round. But money buys the tickets.
Enough said, and easier said than done for a majority of homo sapiens!
Coming back on track – if you are on an education loan, then it is a good type of credit – It helps you gain that coveted degree which would be the base for your career and in some probability, the interest that you pay on this loan once you start earning would be tax deductible. Start paying it off from your first salary. Deferring it involves more charges!
5. Increase your skills, and earn some extra money!
Taking tuition classes for your juniors for an hour or two per day is a good idea, provided it doesn’t impact your own studies. This increases knowledge base manyfold — you would be much more confident in competitive exams later in your career. Even if you have decided that you are not going to study further, then also this is a good idea. Managing even 2 students for an hour daily would teach you much more than you would teach them. Have seen this very closely with both my siblings.
If you are studying abroad, working part time is a very nice idea, even if you don’t need the extra cash. The trend is catching up even in India now a days. This is extremely good for skills which would really help once you are in job full time. You would have an edge over all your ‘fresh out of college’ colleagues. Don’t go by the designation of this part time jig though.
Focus on learning at this stage and the money would follow. Freelancing or interning or volunteering to learn new skills is a super positive idea, which teaches you a lot. Talking from personal experience, a 10 day volunteering at the XIX Commonwealth Games 2010 in Delhi still features as amongst the best experiences of all time in my career.
Almost everyone deterred me to not go for it as it was not a ‘paying’ jig – but not everything is done with the sole purpose of a pay check. The contributions at an international level, however small and the exposure to such a wide variety of athletes, support staff, media and colleagues still gives me goose bumps. Whatever you choose to do – align it with the bigger picture and you would never be disappointed!
6. Think Smart
Focusing on quality (of notes/study material) over quantity goes a long way! You anyway can’t (and in all probability won’t)study all your syllabus, word by word! If last year’s syllabi can be had from a senior/old books and nothing has changed drastically, no point in spending almost 40% extra to buy new books which you would anyway open a day before the exam!
Save trees! Rent them for the semester if possible. Check such deals online. Some universities offer the entire book fleet from their libraries, at a very less cost. Opt for this arrangement, if possible (And, return/reissue these books timely to avoid late fee and other charges).
7. Time saved is time earned
Try travelling in public transport if that is feasible for you. By all means, safety must not be compromised. If you are living away from your hometown for studies, try living as close to your educational institution as you can. Live with your batch mates and split the bills!
In this age of free coupons, cashbacks and instant deals,keep an eye on the discounts offered by anyone and everyone which you can benefit from, be it an app or website or a shop. Many shops and transport services offer a student discount.
If all this sounds too simplistic and too common sensical to you, it indeed is. The idea of this article is not to implement a magic wand or tell something which you weren’t aware.Relax, start with inculcating one habit at a time and you should be good.
Lastly, don’t buy Armani if you can only afford Van Heusen right now. And then mess up your other important expenses. Stay positive and motivated with your common sense mode ON, continue working hard for your dreams until you make them come true!
May the force be with you!
The writer can be reached on Facebook and LinkedIn.