As students many of us do not pay close attention to our finances. Financial Aid comes in twice a year and gets spent like it is free money (many times it is scholarships or grants, but a lot of the time the money is loaned to us from the government, which means it has to be paid back with interest). Understanding where money comes from and where it goes is a key to financial success.
No matter where your money comes from, one of the first steps to financial success is having a list of financial goals written out. Seeing the goals you want to achieve can help you start to find ways to achieve them. Some examples of goals could be paying off credit cards, going on vacation or investing in your future.
Another one of the first steps in managing finances is to see what you are spending money on. Try this: Document where every penny goes in a one-month period. By doing this you can see where there is an opportunity to save money.
Say you were to see that you spend $25 a month on lattes at the local coffee house. You might find that $25 could be better spent paying down a credit card or saving for a house (one of your goals).
What if you decided to invest that $25 a month for 10 years (maybe toward a down payment on a house). By using the time value of money, if you could get an 8 percent interest rate annually, that $25 a month for 10 years could become $4,344 — which is $1,344 earned in interest. That is from cutting out only $25 from your spending every month.
Knowing where your money goes is key to financial success, and it is an easy first step.