There are certain expectations that come with life and one is the ability to manage personal finances a little better than your peers. Surely someone studying finance should know how to balance their own books better than a history, engineering or drama student?
Well, when it comes to money management, book smarts don’t always translate into street smarts. Those opting for an undergraduate major in finance are just as capable of running into a personal budget crisis as anyone else. If you’re thinking of choosing finance course or already belong to this group, here are a few ways you can apply your macro knowledge on a micro scale.
Determine Your Income
As your finance professors will teach you, an income statement is one of the essential tools for determining a company’s financial health. There’s no reason you can’t apply this to your own life. Keep track of all your incoming funds – your monthly salary from that part-time pub gig, money from mum and dad, etc. – and balance that with your monthly outgoings.
What you’re left with after subtracting rent, food costs, loan payments and all other bills is what you have available for spending or saving. Spend on items that you consider a worthy investment (i.e. a bicycle that will reduce your daily transport costs). Otherwise, save, save, save!
Make Necessary Budget Cuts, Spend Efficiently
If the results of your income assessment are less than encouraging, look for areas where you can reduce your spending. As a student whose primary job is studying, looking for ways to earn more can be difficult. However, you should be able to find ways to cut back on costs.
In addition to cutting back, it’s important to look at ways you can spend more efficiently. Take advantage of student discounts. Refinance student loans if you can. Sign-up for a student bank account that offers thousands of pounds worth of interest-free overdraft. Some banks may even throw in a free student transport cards and other incentives if you choose to open a student account with them.
Keep Tabs on Cash Flow
Ah, cash flow – the downfall of so many new businesses. You’ve probably read through plenty of case studies showcasing the importance of cash flow for companies, but it’s also an essential part of your personal finances.
The best way to ensure you don’t run into trouble between pay cheques is to keep a certain base amount of money in your account at all times. Build up a savings so that unexpected expenditures don’t leave you dipping into negative figures.
It doesn’t take long to realise that the principles of finance are far easier studied than done. However, there’s no better way to understand the basics than to learn from your own experience. Good luck!