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Student: I think you have to like, live life and uh, not let money get in the way of that. But, that said you also can't let your life get in the way of your limited money so, it, you know keep it in mind it's really important what your limits are and uh, what kind of income you have versus what kind of spending your used to doing. But don't let it stress you out all the time because then you're no fun.
Jaclyn: Hi, I'm Jaclyn and I'm your podcast host. Our podcast topic for today is Budgeting: Where did all my money go?
Everyone has been there - the money's there and before you know it, it's gone.
Learning to budget and make your money last is one of the most valuable skills you can learn during your student years. It becomes even more important when you have a limited income to live on.
To answer some questions for us on this topic is Gord Tyndle, Branch Manager at RBC Royal Bank.
Hi Gord.
Gord: Hi Jaclyn, it's great to be with you this morning.
Jaclyn: Thanks for coming out.
Gord: You're welcome.
Jaclyn: Well, I'm going to dive right into it with our first question which is "What is a budget?"
Gord: Jaclyn, a budget is simply a plan to help you keep track of what you are spending from month to month, day to day, year to year. Managing a budget isn't difficult; it's just a matter of smart thinking and careful planning.
Jaclyn: Well, why should I budget?
Gord: Well Jaclyn, whether you're a student you're someone in their sixties, or even a government, a budget will give you the clearest picture of exactly where your money is going, so you can be in control of your money instead of your money limiting what you can do. The goal of a budget, simply put, is to spend less than you earn. Learn to save for emergencies or larger purchases, is also helped by a budget. A budget helps you know where you are spending your money and find any deficiencies in your spending. It helps you take steps to keep your money from slipping through your finger tips and believe me, that's happened in my life many times.
Jaclyn: So, how do I come up with a workable budget that suits me?
Gord: I think the first most important step Jaclyn is in creating a monthly budget is making the decision that you are going to follow a budget. The first step to identify where your money is going by tracking your spending and I'm talking about every cent you spend. Get the clear picture of monthly spending by writing down everything you spend your money on for at least a month.
Jaclyn: So including all those little coffees and chocolate bars and all of those dollar expenses that you don't think add up?
Gord: Absolutely, because you know one example and I say this to many people because I am a big culprit of that in my spending habits. Uh, a bottle of pop and a bag of chips every day costs me over $2.00. When you add that up over a month that's at least $60.00 that's going out. So when I say write down every purchase you make, write it down even whether it's cash, your wrote a cheque, used your debit card or your credit card. Wherever possible save all your receipts that you had for those purchases.
Jaclyn: So, once I've written everything down and saved up all my receipts, then how do I organize my expenses?
Gord: That's a great question Jaclyn, first thing you want to do is break your expenses into two distinct categories: fixed and flexible expenses.
Fixed expenses are what they really are: fixed. They are recurring or required expenses such as your rent, your tuition, any books that you need to buy, your transit fares and utilities. And included in utilities make sure that you include your cell phone and any other bills including cable.
Your flexible expenses include things like groceries, clothing, entertainment and those are items you need to spend money but that amount can change and vary from month to month.
By making sure you categorize your expenses you can see how much spending money you have to play with after your necessary expenses have been taken care of.
If the amount you spend, Jaclyn is greater than your monthly income, you'll have to adjust your non-essential expenses and set priorities. For example, instead of going out two nights a week you may only go out one night a week.
Jaclyn: Ok, so priorities you just be you know, you maybe can't spend as much money on beer as you would on rent. You have to make sure that those things that are fixed are always going to be your priority to pay first and save for first.
Gord: Absolutely, the fixed expenses I mean you have to pay your tuition.
Jaclyn: Right
Gord: You have to pay your rent. Can you sacrifice not going to a movie one night a week?
Jaclyn: Probably, ya.
Gord: So, it's definitely not uncommon for some students to suffer cash flow problems, Jaclyn. Ah, it could be a budgeting problem but it could be also caused by something beyond the student's control.
Jaclyn: So what if I have money left over after I've organized all my expenses?
Gord: If you've done that Jaclyn, you've and you've realized you've got money left over, you're in great shape. You're spending less than you're earning and that's the goal of everyone. Budget the extra money to pay off any credit card or other debts you may have. And if there's still money left over, consider adding it to your savings.
The one thing Jaclyn that people want to do is get in the habit of putting a percentage of your money aside for savings each month. If you do that you're learning one of the secrets to financial success and security in the future. A good rule of thumb is that you should try to save at least 10 per cent of your net earnings wherever possible.
Jaclyn: So that means even if I'm making $10,000.00 per month or $100.00 a week, 10% of whatever I'm making should go into a little piggy bank or a special savings account, something like that?
Gord: Absolutely, so if you are making that $100.00 try to put away $10.00 a week into a savings account.
Jaclyn: Because that will end up adding up over the year and that'll be a surprise money that you wouldn't realize you might've had before?
Gord: Exactly, you could use it for other things or ah, just save for a vacation, save for a trip or save for other priorities that you may have. And if you start saving early in life you're really gonna… it's gonna to pay dividends for you long term. That's' a great piece of advice to start saving early.
Jaclyn: So youth is really on our side.
Gord: It sure is, definitely.
Jaclyn: So I have a hard time making my money last. It seems that my paycheque comes and then two days later I'm wishing that it's Friday all over again. So do you have any tips on how to make my money last longer?
Gord: Jaclyn, that's a great question and it's a question that's asked by so many people. I guess the first thing: It's always better to overestimate your expenses. Prices can increase; we see that with gasoline prices increasing all the time. Also people don't set aside money for unexpected expenses, for example car repairs. So that's one thing that is always better to overestimate your expenses.
Grocery shop with a list and stick to it. So when you are going out to the grocery store Jaclyn, I would say have a list prepared. And when you get there stick to that list and don't buy impulsively because when you throw those items in your basket it's going to throw your budget out of wack.
For many people, they eat lunch out every day and that becomes very expensive. Try to make your own as much as possible. And if you're one of those people that likes getting up in the morning and running out the door try preparing your lunch the night before.
When it comes to textbooks, Jaclyn try to buy used ones if possible. You could save as much as 20% off the cost of new books. Try your campus bookstore first, or try searching online or on school bulletin boards for students looking to sell their textbooks.
One thing I would definitely recommend is try not to use the white-labeled ATMs that you find in bars, restaurants and corner stores. They will charge you a service fee on top of the fee the bank is already going to charge you.
Now one thing I would definitely recommend that people don't like doing it a lot of times but definitely a recommendation: keep an eye out for specials and coupons at restaurants and grocery stores. For example, if you find coupon for 2 for 1 dinner you and a friend could split the cost of dinner and that way you'll still be able to go out.
Jaclyn: That was a great overview on budgeting. Thank you Gord for your time and for joining us today.
Gord: Thanks Jaclyn, it's been great to be with you.
Jaclyn: We realize that every student's situation is unique. If you have questions about coping with unexpected financial challenges get in touch with a representative at your RBC Royal Bank branch or call us at 1-800 ROYAL® 1-1 or (1 800 769-2511) today.
We're very interested in hearing what you think. If you have any comments, budgeting tips, questions or ideas for future podcasts contact us today at studentpodcasts@rbc.com
We won't be able to respond directly to questions or comments, but we may use your input for future shows.
For a transcript of this podcast, please visit www.rbcroyalbank.com/studentpodcast
Of course every student's situation is different. In this podcast, we mean to give you information that most students will find helpful, but you should speak to someone who knows your unique financial situation before implementing a plan.
Also, the testimonials at the beginning of the podcast are the unscripted opinions of the people who spoke them - not ours.
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