The art of personal finance

Personal finance is like a giant maze, there are numerous routes that can lead you to the exit and everyone just has to find their own individual route. Some of us can master their personal finance without paying too much attention about it, while the others struggle and grieve with it every day. I have the courage to claim that many of us college students spend substantially more time to think about our personal finance matters than those who are nine-to-fivers.

Without sounding boastful I can say that managing personal finance haven’t ever been a tall order for me. Apart from my trips to abroad I haven’t really made any budgets or tracked my spending, but that all changed rather radically when I got accepted to college. Before I started at college I had been nine-to-fiver for four and half years, so as you may guess my consumer habits were a bit different than they are today. So that inspired me to write a blog about personal finance for college students.

The internet is full of personal finance tips and blogs etc. and it is easy to get lost in data flow so I wanted to gather here all the information I think is the most useful.

The first thing I did and as Sarah Smith says on her blog is to formulate a budget. A budget is inevitable for you to know all your expenses and incomes precisely, expenses are usually a lot harder to keep track of than your incomes. I started to my budgeting first by counting all of my fixed costs (internet invoice, rent, travel card) in my point of view it is easiest that way. After fixed costs I counted all the expenses that might fluctuate a bit every month such as: phone bill and electricity bill. Second to last I estimated all of the most fluctuating expenses like: grocery bills, what I spend in school and other any other expenses what you can think of. I don’t know why but I added up my incomes last. (Smith, S. 2011 Jan 24, Personal Finance 101 for College Students, Retrieved March 15, 2014)

After I had made my budget I was unfortunate to realize that my expenses were remarkably bigger than my incomes. Then I just had to start cutting my cost one by one. In my point of view the easiest place to start was the grocery bill, because today grocery stores are full of low-priced brands (Pirkka, Rainbow) and by buying their products you can save reasonable amount of money. The second thing that I did to make my budget down to earth I shopped around my telephone subscription, internet deal, electricity deal and all the possible agreements that I had. For shopping around I used web page www.vertaa.fi which was pretty practical for it. After above mentioned tools I managed to get my expenses smaller than my incomes without having to give up anything important.

Preparing a budget was easy as pie when compared to sticking by it. The first couples of months were extremely difficult because I was mildly lethargic to track my spending and ended up consuming all of my income and some of my savings as well. After that got grip of myself and started using mobile budgeting app that helped me a lot to keep track of following my budget and I have been able to avoid significant budget overruns ever since. Today when most of us all constantly carrying our mobile phones with us everywhere I might state that mobile apps like Best Budget are the easiest way put down your incomes and expenses. For example with Best Budget you can follow your cash flow weekly, monthly, quarterly and yearly. On top of that the app draws you pie chart of your cash flows to depict the matter.

Some of us are so lucky that they never have to think even think about taking a loan, but for the rest of us whose parents aren’t loaded it is the only way to finance larger investments such as a house or a car. Roughly saying there are only two kinds of debt, good debt and bad debt. Case A: Mr. X uses his credit card to buy TV that cost €500 and Case B: Ms. Y takes a €500 student loan to buy school books and other school stuffs. Now take a wild guess which one is good and which one is bad debt? The idea of the example was to demonstrate that debt is not something you should avoid or be afraid of. “Be aware of all the terms associated with debt. When financing a purchase, always remember to make sure the interest rate is low and fixed, make sure you make your payments on time each month, and be aware of other fees. Make sure your purchase is something you can justify ideally, finance things that will appreciate in value or increase your earning potential and if this is not the case, make sure it is something you absolutely need”.  (Advani, Reuben. Financial Freedom. Springer eBooks. 2013)

All in all personal finance is much greater unity than mentioned above. To make long story short, in my point of view these are the most important things that will help you to the beginning. Taking control of your personal finance will not guarantee your happiness but it can certainly make your life fuller and more carefree. To crown it all well-kept personal finance might create new opportunities that can make you happy. ”.  (Advani, Reuben. Financial Freedom. Springer eBooks. 2013), (What is personal finance, Retrieved March 15, 2014)

References:

http://www.dailyfinance.com/2011/01/24/personal-finance-101-for-college-students/

http://www.practicalfinancialtips.com/personal-finance/what-is-personal-finance/

Advani, Reuben. Financial Freedom. Springer eBooks. 2013

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One Response to The art of personal finance

  1. miny1 says:

    It’s nice that you share your personal experience and tips for saving. I have to try that Best Budget application. For me it has been very challenging to manage my personal finances during the studying. But it has also been a wake up call and I’m learning a lot. I’m thankful for all the lessons!

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