Thriving on a Student Budget: What to Do with Your Dollar
Written by: Safa Awed, 3rd Year Integrated Science specializing in Synthetic Biology
Photo by: Western Communications
If I got a dollar for every “get rich quick” video I scrolled past, this article probably wouldn’t even exist. Yet, despite all the dollars I’d rack up, how financially “successful” would I be? Financial freedom isn't just about how much money you make; it's about learning how to manage it. However, if you’ve ever been like me and tried to trudge through the vast amount of information available on financial literacy, it can be overwhelming. But here’s the key thing: Just as gaining financial freedom is a gradual process, so is learning how to manage your money and it's simpler than you think.
As students, our plates are already full of classes, part-time jobs, studying, and trying to have a social life. For many of us, learning about finances can feel like being thrown into the deep end of a pool and told to swim -as someone who can’t swim, it's not fun. The truth is that money plays a role in almost every part of life- from tuition and rent to something as simple as dinner. Learning to manage it will just make life a little easier. So where do you begin learning about personal financing? For me it was sifting through the expansive number of books on this topic. But I never thought a book about personal finance could keep me interested but that changed when I found ‘The Wealthy Barber’.
Learning from The Wealthy Barber
When I first picked up ‘The Wealthy Barber’ by David Chilton, I didn't expect a book about money to read like a story and change how I see personal finance. It follows three young adults who visit a local barber, Roy, who has achieved his own financial success. This character's triumph attests to the point that financial freedom is not about how much you make but about how to manage it. And his message, as David Chilton narrates, is simple: “Good financial planning is nothing more than common sense”.
Now I won’t bore you with a summary of the book, but I do recommend you pick it up when you get a chance because this book needs to be experienced directly. But here are some tips that I’ve taken from this book and I’ve applied to my own life.
Budgeting is easy:
One of the key lessons Chilton shares is to “pay yourself first”. Traditional budgeting relies on willpower, simply avoiding buying your “wants”. But that is not how the average person operates. For me, checking my bank account meant seeing the crazy amount of money I spent on iced coffee. So, I decided to “pay myself” for my coffee. Since I work a part-time job, I started setting aside about 30% of my income as my “fun money.” Some of it goes to my “Ice coffee fund”, while the rest I save for other things I might want like fun experiences with friends, Netflix subscription, etc. I even gave myself an alternative: I invested in a few cute reusable cups and started making my own coffee at home. It’s cheaper and more sustainable. Now, when I do buy a coffee from a café, it feels like a treat rather than a habit. So, the key is to work around your personal finance goals rather than letting it build up later.
Once you’ve figured out how to “pay yourself first,” the next step is learning how to budget. This is where the real planning begins, deciding how to stretch your remaining money across all the parts of student life: rent, food, and everything in between. Now, how you budget can depend on what framework is best for you. The most popular and simple method is the 50-30-20 rule: 50% of your income goes to needs like rent, food, and school supplies, 30% to your wants (or “paying yourself”), and 20% to savings. So, for example, if you earn $500 a month, $250 should go to needs, $150 on your wants and $100 to savings.
Determining that 50% is best done by going through your bank statement, I know everyone's favourite part. Determining how much money goes to each of your rent, food, and school supplies every month will help you determine how much of your money needs to be set aside for the important stuff in your life.
Now that you've set aside your 20% savings, you might be wondering what the point of saving if it’s just sitting there. This brings up another habit from Chilton’s book, “Time is your greatest ally”. He discusses this through teaching ”The Power of Compounding” . The idea is that the money you save today can grow on its own over time. Whether that be contributing to long-term investments like ETFs or RRSPs (for beginners, check out the Beginners Guide to Investing) or simply setting aside money regularly. The idea is that staying consistent over time leads to growth.
So maybe financial freedom is not about getting that extra dollar, maybe it's about learning how to manage that first one. For students like us, that might start as simple as budgeting for iced coffee or saving a few dollars every paycheck. The lessons from The Wealthy Barber remind me that money doesn't have to be stressful or scary, it's just another skill we need to grow. In the words of our wealthy barber Roy, “(KISS) Keep it simple, sweetheart.” So, keep it simple by setting one simple financial goal for yourself today. Small simple steps today allow you to grow both financial habits and compound your savings.
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