When financial emergency strikes, most students will not be prepared. Your car overheated this morning and made you late to class, but because you spent $10 on a bottle of wine last night, you don’t have $10 in your bank account to buy coolant.
According to a 2016 survey conducted by the Federal Reserve, 46 percent of adults said they did not have the funds to cover a $400 emergency expense, and 31 percent of adults said they had no retirement savings or pension plan.
If college students neglect their financial needs and spend without reserve while in college, they will form habits that will dramatically affect their financial futures upon entering the working world.
If you, as a college student, don’t have a personal budget now, then you need to make a personal budget. Now.
Here’s the urgency: today’s financial literacy statistics are sobering. A 2014 Fidelity Investments study reported that 39 percent of millennials worry about their financial future at least once a week, and 25 percent of millennials “don’t know who to trust” when looking for ways to secure their financial future. Just last week, The Wall Street Journal published an article decrying the average individual’s knowledge of financial information, headlined, “Financial Literacy Is Still Abysmal Everywhere: A new OECD survey of 30 countries shows few people can perform basic financial calculations or understand simple investment rules.”
Those are scary stats. Hillsdale College students take note: the national student debt is at $1.2 trillion and climbing, and every student with debt is going to need a plan to pay it off. A Wells Fargo study reported in 2013 that “more than half of millennials (54 percent) said debt is their ‘biggest financial concern.’” Financial responsibility will settle upon your shoulders on graduation day, and if you’re an average college student, then according to the statistics, you probably don’t even have a personal budget.
So make a budget. Budgets estimate your income and your expenditures for a given period of time — that means if you make a budget today, it’ll help you plan your immediate obligations around your spending sprees for the month of October. If you make a budget today, you’ll learn to spend money on that new jacket you’ve been wanting for months only after you’ve set aside funds for your rent, utilities, and phone bill. Maybe that means in October you don’t buy that new jacket because you only made enough money to pay rent, and you’d rather live in a warm house than live outside in a sort of warm new jacket.
Budgets teach self-discipline and responsibility — something Hillsdale College also endeavors to teach us in the classroom. Budgets help stabilize what may seem like an uncertain financial future upon graduation — they’ll help you make student loan payments on time, they’ll help you strategize ways to pay off your debt faster. A personal budget will help eliminate a lot of money worries, and in the long run, you’ll learn how to spend more wisely and save more money. Don’t we all want that?
Don’t be another statistic proving the financial illiteracy of America and the millennial generation. Make a budget. Take control of your money – because it’s your money.
If you’re struggling to make your own budget or are still unconvinced that you do need one, look for an article next week discussing different budgeting apps that can streamline the budgeting process and make your life that much easier.
Patrick is a senior business journalist.
