Whether we like it or not, money is a significant component of our lives. As such, good finance and budgeting skills are essential to success. Ideally, you would want to start as early as possible so you’ll have more time to build on the knowledge that you have. Arguably, the best time to learn about finance and budgeting is during your college years. This period is often defined as a critical development stage of our lives, and it’s when we truly build the foundation for our adulthood. Usually, it’s also a time when you get to have some money to your name, and so you are challenged to be wise as regards the way you deal with it.
This guide will take you through some of the key finance and budgeting strategies that you need to master as early as college. This includes budgeting plans, investment strategies, setting contingency funds, and opening a business account, such as a Chase business account. Hopefully, by the end of this article, you’ll be a little bit wiser when it comes to how you deal with money.
Budgeting is the process of allocating money for certain purposes. It is the most basic strategy as regards handling money, and it is often the most effective. When it comes to budgeting, it is important to first identify the areas or purposes where you intend to allocate your money. This typically includes savings, expenses, and payments, among others. Having said that, it is recommended that you limit your allocations to a maximum of 5 broad categories at most. This makes your budgeting plan a lot more intuitive, understandable, and easy to follow. However, you can further specify the areas where you allocate your money by creating sub-categories for each purpose that you have created.
Most beginners, when it comes to finance and budgeting, will prioritize savings above all other allocations. Although savings are definitely an important part of finance and budgeting, it is easily trumped by investments. Investments are critical because they allow you to gain returns on the money that you have instead of letting it sit around doing nothing. As successful entrepreneurs would put it: “investing is the process of making your money work for you.” In line with this, it is paramount that you allocate a portion of your money to investments.
Keep in mind that investments vary drastically as regards types. Some investments are going to be more conservative, meaning that you’ll have minimum returns but with less risk. Other investments are more aggressive, meaning that the returns will be huge, but you bear much greater risk. When developing an investment strategy, consider your preference as regards the risk that you want to bear and also consider how much you are willing to lose.
One of the most overlooked and downplayed components of a good finance and budgeting strategy is to set contingency or emergency funds. While people do recognize and set aside some cash for emergency purposes, it’s usually not enough to cover them in case something unfortunate indeed happens. When setting up a contingency or an emergency fund, be sure to keep in mind the gravity of the things that could happen. The last thing that you’d want is to be in a sticky situation and just not have enough cash to cover your needs. Contingency funds typically cover accidents, sudden losses, retirement plans, and more.
This last item on our list is especially critical for those student entrepreneurs who are trying to establish and grow their own brands. One of the best things that you want to do when you have a business is to separate all the financial matters related to business from your personal affairs. This ensures that your finances don’t get mixed up and that you won’t accidentally spend your business funds for personal use. Aside from budgeting purposes, it is also very practical because it makes it easier for you to file for taxes and other fees related to business.