After a long day juggling study, society activities and work commitments while trying to maintain a social life, the last thing you want to think about is your finances.
As a student, finances are often placed in the too hard basket or something to sort out when you start a grad job. Simply ignoring your finances while at uni can impact the age you are financially able to retire. So instead of sipping margaritas on a yacht in the Maldives or jet setting around the world, you may be still working the nine-to-five.
Here are my top five tips to get your uni finances as an engineer in shape:
1. Set goals
It’s impossible to climb a mountain if you don’t know where the mountain is. Set a few SMART (Specific, Measurable, Attainable, Realistic, Timely) financial goals, maybe you want to buy a house before you’re 30 or go travelling overseas. Break these larger goals down into smaller steps, such as saving a certain amount of money each week. This will keep your goals manageable and give you a sense of accomplishment each week when you achieve the sub-goal.
Budgets may not be sexy, but having financial security is! Spend 15 minutes to put together a weekly budget using the excel budget template. By knowing where you’re spending money, you can reduce discretionary spending and increase the amount of money you are saving each week. However, when developing your budget, it’s important to set realistic targets and incorporate some ‘fun’ money into each week to reward yourself for budgeting.
3. Start an emergency fund
Next, start an emergency fund with some money for a raining day. If 2020 has taught us one thing, it is expect the unexpected as you never know what’s just around the corner. When setting up your emergency fund make sure the account isn’t linked to your card so you can’t easily spend it and choose a bank with a high interest rate. After placing an initial deposit into the account set up regular transfers into this account. Overtime your emergency fund will grow because of compound interest. If you start with $1000 and invest $50 per month, in ten years’ time you’ll have $8,000!
Start saving while you’re young, even if it’s only small amount. A little now can add up to a lot later, especially with the help of compound interest. There are endless ways to invest money such as shares, mutual funds, ASX 200 funds and ETFs. Selecting the right way to invest depends on your risk tolerate and how much you want to invest. Start with the products above and do some research to find out what works for your situation.
5. Avoid debt
If you can't afford it without a credit card, don't buy it. We may all want to keep up with the Jones, but appearances aren’t worth putting your financial future in jeopardy. Avoid debt and instead set SMART goals and save up for your purchase.
So next time you go to binge watch another season on Netflix, watch one less episode and follow my five tips for tackling your finances. Saving a small amount today, can really add up later!