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Students, have you set out a budget for yourself?

Plenty of resources available to help you stay on track financially
money
Managing your finances as a student can be a tricky affair. Jenny Lamothe looks at some options to stick to your budget.

If you spent your formative years in the loving embrace of a parent or guardian, even in a family that had to scrimp and save for everything, you probably didn’t have to worry too much about the household finances. 

Sure, you understood money as a concept, either hearing ‘yes’ or ‘no’ when pleading desperately for something, but in terms of your specific understanding of the household income, and the bills it paid, your working knowledge was probably pretty slim. 

And now that you are out on your own for the first time, with all the freedom it provides, it may be a real challenge for you to keep to a set budget. 

Unfortunately, your parents might be in a similar situation. 

“Eight out of ten young Canadians are not confident in their financial knowledge, and 60 per cent of adults rate their financial knowledge as fair to poor” says George Medakovic, a Licensed Insolvency Trustee and Chartered Insolvency and Restructuring Professional with 35 years’ experience. 

He says the disposable income of youth, coupled with little understanding of budgeting, can cause real problems. 

“When someone has regular disposable income, perhaps living at home where utilities, groceries and other living expenses are paid by mom and dad, there’s a false sense of security,” he says. 

“Believing that ‘I really don’t need a budget because there’s always money left over from my summer or part-time job’. Once school studies are finished and an individual is on his or her own, faced with all the new expenses, the budget is doomed.” 

And when that happens, it’s a slippery slope to real financial issues. 

“Once our finances get out of control, we tend to bury our heads in the sand and not deal with causes of the difficulties,” says Medakovic. “Rather than preparing a budget and sticking to it, we get one or more credit cards, make minimum payments from one card to another and keep living the same lifestyle. Eventually, stress builds, health issues and worry can take over and there is no more credit available to keep things going.”

Fortunately, there are resources available – both for post-secondary students, adults, and parents hoping to start the money talks early. 

If you’re looking to put together a budget you can stick to, excellent information can be found online with the Financial Consumer Agency of Canada (FCAC). They feature an interactive budget calculator, as well as offering tips and tricks for staying with it once you’ve put the plan together. 

The site also contains helpful information about your financial rights and responsibilities, how to plan your financial future, as well as your credit history, what it means, and the explanation behind the many banking terms and processes that can often feel overwhelming.  

For those who will stay more in line while online, Medakovic recommends Mint.com, and an app called The Birdy, for helping you stay on budget. 

The key is to stay vigilant, and check in on your budget’s accuracy on a regular basis. “Use a simple template and continually adjust the budget as new information comes to light,” says Medakovic. 

“For example, do you know how much you really spend for Tim’s coffee? Be honest with yourself when completing the budget. Only when you have a true picture as to what your actual budget looks like will you be able to make adjustments, if necessary, to stay within the budget.”

For parents, Medakovic recommends starting in elementary school. 

“At an elementary school level, discussions are quite basic, but kids know that money pays for everything. Children between the ages of 9 and 13 understand the difference between needs and wants…this may be a good time for a lesson on setting short, medium and long term goals," he says. 

"For teenagers, learning about the differences between cash payments, credit cards and spending within limits sets the groundwork for future habits as a post-secondary student and as an adult.”

Though the school year is in full swing, and things seem crazy enough as it is, it really is a good time to get focused on your student budget - before temptation has you rationalizing a concert ticket as an emergency expense. 

But also know that when you face trouble, there is help available to you. Help is not something that everyone asks for, even when they should. In fact, FCAC found that among those who use payday loans, only eight per cent of respondents reported ‘always seeking financial advice when they felt it was needed.’ On the other side of the coin, 27 per cent never sought out advice, even when they felt it was necessary. 

And if you’re considering a payday loan to cover any overages in your budget, you should definitely seek the advice of others. According to the same FCAC study, while borrowing from a line of credit or credit card advance could cost five to eight dollars (based on 300 dollars borrowed for two weeks), a payday loan could average 63 dollars in extra fees. 

If you do feel you have run out of options for your debt, the FCAC has a list of steps you can take to get yourself back on track – but if you feel like you are drowning, it may be time to contact a third party. 

The FCAC recommends a Licensed Insolvency Trustee, and offers a search function to find one near you, or a non-profit Credit Counselling Agency like Credit Counselling Sudbury.  But be sure to read the fine print on any dealings says Medakovic. 

“Although some companies advertise themselves as ‘credit counsellors’, they are actually for-profit companies which may charge high fees, and may not be able to solve the problems.”

While it can be hard to talk about money, with social rules dictating its discussion is in the same category as politics and religion, it is causing great trouble to those that don’t fully understand or track their own spending. 

Starting young can help, but even now, as with many things, an ounce of prevention – the creation of a budget - means a pound of cure. 

After all, Statistics Canada reports that Canadians owe $1.71 for every dollar of disposable income they had in the third quarter of 2017, the highest amount on record.

Jenny Lamothe is a freelance writer, proof-reader and editor in Greater Sudbury. Contact her through her website, JennytheWriter.wordpress.com.


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