One of the most common mistakes that not only students but even working adults make is that they do not know where their money goes. It is important to be aware of your own spending habits and make monthly spending plans accordingly. What you can do is keep a note book or an excel file to note down every little thing that you spend for a month to know what your spending habits are like. Only then you are able to make a realistic assumption of how much money you spend for each category to set a spending limit for each of those categories. So your monthly budget would look something like this: Transportation – RM500, food – RM600 per month, entertainment – RM300 per month, savings/emergencies – RM500 per month. This way you can keep track of where you tend overspend and try to minimize spending on items that are not necessary.
That brings us to the second mistake students make when spending their money on things that are not necessary; confusing their Wants with their Needs. Sometimes that thin line between Wants and Needs can get a little hazy but one way to tell them apart is to ask yourself, “What will happen if I don’t purchase that item?”
Let’s look at an example.
Situation: “I don’t have a white shirt. I want/need a new white shirt”
So we ask this question: “What will happen if I don’t purchase the shirt?”
Student 1: “It is mandatory for law students to wear a white shirt under a black suit for mooting and if I do not buy that white shirt my lecturer might not allow me to compete.”
Student 2: “I think that shirt would match nicely with my pants for tomorrow’s event. But if I don’t purchase it, I can probably find something else to wear in my wardrobe.”
By asking yourself “What will happen if I don’t purchase that particular item?”, you can probably differentiate Wants and Needs to make a well-informed decision when purchasing an item. We can see that in the case of Student 1, buying a white shirt is detrimental to his final grade whereas buying that same item might not affect Student 2 as much. We can conclude that the white shirt is a Need for Student 1 and a Want for Student 2. One other mantra you should recite at the mall is “Trends come and go”. If you think that you would not need that piece of clothing, or that expensive tablet three years down the line, then you should consider downgrading to a cheaper alternative or even not purchasing the item at all.
Now, let’s talk about the credit card. Some students have parents who provide supplementary credit cards while some apply for themselves. One word of advice – Don’t. By using the credit card, you are always putting yourself in debt which means that you are spending money you don’t even have. Owning a credit card does have its perks but abusing that privilege might put your mind at a state of unease. That would be another problem to worry about other than that project paper deadline that is nearing. The same goes with borrowing money from your friends. It is bad enough that you are in debt. You do not want to sever a friendship because of that unpaid debt.
College is the time where people make friends for life, they say. But no matter how close you are to your friends, you should listen to your bank account before making plans. Hanging-out or travelling with friends are almost always fun but they also almost always deduct some numbers from your bank account. Make proper arrangements before your meet-ups so you are able to make proper calculations to avoid overspending. It is also important to not fall victim to peer pressure. Learn to say ‘No’ to meet-ups that you know you cannot afford. Your bank account and the future you will surely thank you.
One other mistake that students make is related to cars and transportation. We know that driving in Malaysia is one of the most convenient ways to travel and to get to class but is it wallet friendly too? Sure, you can afford the car but did you factor in insurance, fuel, parking fees, maintenance fees, road tax, driver’s license fees and tolls when purchasing the car? If your institution is located in well-connected cities like Kuala Lumpur or Petaling Jaya, you should consider taking the public transport that costs a fraction of the price compared to buying a car. If there is no other form of transportation available in your area, buying a used shared car with your friends would also be a good idea so you are able to split the costs among 2 to 4 friends.
One other practice which can be quite important for you is that you should educate yourself on money management trends that are happening in both Malaysia and your own country. As a university student, it is quite easy to feel sheltered and ignore the adult responsibilities that will slowly creep up after graduation. You might not be aware of how important your current savings can be for your future that you end up using your savings for your Wants such as the latest laptop model rather than create a fund for future investments or to pay off any loans. This way, as soon as you start earning, whether in an internship while still studying or your first full-time job, you should start paying off that tuition fee loan or save up for your dream house or your dream car. You can never start saving too early.