No one has limitless money, says Laurie Campbell, executive director of Credit Canada, a non-profit credit counselling organization. And even if your parents are supporting you, you still need to be able to budget. Knowing the difference between needs and wants is crucial to developing a balanced budget, financial experts agree. We asked Laurie Campbell for some advice.
A study by Capital One found many recent graduates fall victim to impulse purchases, and often overlook extra income as an opportunity to improve their finances. The survey asked about saving and spending habits:
43 percent of respondents say that they are putting money in savings on a monthly basis or more;
36 percent admit they are not setting aside money for savings on a regular basis;
And if given $500 to save or spend, 74 percent of the young adults surveyed say that they would spend at least $100 of it and 44 percent would spend at least $300, reports the survey.
It's important to start off on the right foot after high school or post-secondary school. Knowing how to create and maintain a budget is something to take just as seriously as getting good grades and finding a job.
So, let's build a budget!
Start by setting a goal: It's the very first thing you should do. Even if it's just paying off a credit card or saving money to go on vacation, it can help you motivate yourself to start budgeting, says Campbell.
Draw up a list of your current expenses: Remember all the categories: rent, food, entertainment, transportation, books, and bills.
Add up your sources of income, then calculate the difference: There are a ton of applications and software programs that can help you do this. If you're making less than you're spending, you need to take a closer at what you're spending your money on. For example, you might consider cooking at home, rather than ordering in. Spending on clothing may have to be limited to sweaters and jeans, and not include designer handbags. And books can be purchased second hand rather than brand new.
Know the Difference
It's all about knowing the difference between needs and wants, says Campbell, adding that you should set some money aside for that goal you had in mind, that way there's a reward for all your hard work."