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Sacrifice now; live better later

Summer savings plan for working students

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We all know more university and college students are graduating with large amounts of debt. They borrow money to pay rising tuition and other education costs and just to live while going to school.

For many, summer is the one opportunity to earn some money, put something away for the fall and hopefully, reduce a bit of debt incurred during the year.

We have some solid suggestions today, but first we have to acknowledge the obstacles. It’s tough to find a job and not everyone has been successful yet, lots of summer jobs are very low-paying, and a person still has to live.

Now let’s try to figure out how to overcome those obstacles.

Using financial-planning principles, the first two things to do are assess your situation and then set specific, measurable goals for summer savings.

For example, if you want to put away $2,000 by September to help out with tuition, and you have six paycheques coming over the summer, then you need to save $334 per paycheque. Do your own calculation.

As motivation, focus on the advantages of having that money, even if it won’t pay for everything you need.

If the job you have is not adequate to fund your savings goal, don’t be afraid to look around for one that pays better, or to take on a second job. Or create your own job, and get started as an entrepreneur. Most wealthy people started with mowing lawns, painting and odd jobs. The creative ones get enough customers so they can hire other students to work for them, and leverage their own time.

The next step is to plan your spending, and then don’t deviate from your plan. Use the power of your dreams — if you want to graduate without debt, use that as motivation to make better spending choices.

My best tip is to write down everything you spend. This can be done in a small notebook or in your smartphone. Every day, add up everything you spend, including cash from your pocket or an ATM machine.

It’s incredible how educational, motivational and inspirational this can be. Compare that daily spending to the calculation of your net income, and the amount you can spend each day while still reaching your daily savings goal. It’s these little choices that make the difference.

Watch your ATM withdrawals and set yourself a hard cash limit for those and for credit card use. Use your own bank’s ATMs to avoid service charges.

As a student, you can remind yourself this is a temporary situation and it’s leading to a more bountiful and generous life later on (as long as you graduate with the least amount of debt). What I mean here is that there is virtue in denying yourself luxuries now, so you can live better for the many, many years after you graduate. Get yourself into that state of mind.

Cook and eat at home, not out, as much as possible. Get together with friends and make your own convenience meals and freeze them for the week. Brown bag it to work.

Entertaining at home, rather than going out, can save huge amounts of money. Avoid the temptation of specialty coffees and other treats that can add up to $500 over the summer, and more than $1,200 in a year.

Take advantage of student discounts and no-fee student banking offers.

Share and swap things such as textbooks, music, Netflix, books, etc. If you have a friend who likes to cook, offer a service of your specialty in exchange for meals.

Carpool, take the bus or ride a bike. You may not like this recommendation, but not owning a car will save you thousands of dollars.

By keeping your spending in line, charging pre-budgeted amounts to a credit card and paying off the balance each month, you can start to build a good credit rating.

During the school year, you have every reason to focus on school work exclusively, so summer is your time to improve your financial situation.

 

David Christianson, BA, CFP, R.F.P., TEP, CIM is a financial planner with Christianson Wealth Advisors, a vice-president with National Bank Financial Wealth Management.

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