It was not a typical post on a public Facebook group, but Chelsea Rollay had to know,. “Is anyone else running out of money?”
It was the only way to find out what she was doing wrong. “I’m eating Ramen noodles and I’m trying to be smart about my money,” she said. Responses from friends in Rollay’s internship program commented with similar struggles.
Rollay came to Washington, D.C. with $1000 to last eight weeks while she interns and takes classes at Georgetown University. Though this is not her first time balancing a budget, new challenges were immediately presented.
“When you’re in a new place and there’s so much to do, it’s easy to spend money on things that you don’t even think you’re spending money on,” she said.
Rollay saw her internship as a networking opportunity, but did not realize how costly a good impression can be.
“I wanted to go out and make friends with my [co-workers] and my boss,” she said.“That first week…I spent around $10 per day on lunch; Friday came along and I was like whoa, I just spent $50.”
Rollay posed her question on Facebook seeking advice from others because after only four weeks, the lack of income worried the junior from the University of Wisconsin-Madison. Between a full-time unpaid internship and six credit hours from Georgetown, Rollay’s only monetary source came from her savings.
“I don’t have parents that can just wire me money,” she said. “[They said] they wish they could help me, but [they] really can’t do anything.”
Budgeting is a skill that everyone needs, but many do not possess. College students are usually not aware of the cost-of-living and its hidden fees, nor are they aware of the tools made specifically to help.
A budget begins with the right type of bank account. Student checking accounts are available and typically have lower minimum balances and fees.
Joan Goldwasser of Kiplinger’s Personal Finance magazine said that the key to successfully budgeting is being wary of what is available and which fees can add up quickly. For example, using an ATM from a different bank charge fees that fall around two dollars, but some do not realize that their banks also charge for using these machines. So, a $20 withdrawal could end up costing $24.
For those who do not closely monitor their balances, linking checking accounts to a back-up savings account might seem like a good option, however Goldwasser says this could lead to less-strict spending habits. A $30 overdraft fee might seem extreme for some, but draining a savings account without realizing it could have longer-term ramifications. According to Moebs Services economic research group, banks collected almost $30 million last year in overdraft fees.But when you have a depleting savings account, Goldwasser said keeping a closer eye on spending habits instead of using overdraft protection can go a long way.
“You have to put a little effort into it,” she said. “The only thing you actually have to do is look at [your statements] and see what you’re doing with your money.”
Keeping track of spending can be done through balancing a checkbook or reviewing monthly bank statements. Most banks now offer instant access to accounts online or through mobile applications. Account statements are available as soon as the transaction is made and most sites allow users to search through their history in monthly increments.
Signing up for a checking account or credit card is easy, but managing expenses and actually cutting down on unnecessary spending is where most first-timers struggle. Experts debate how much of a person’s income should go to certain expenses, but there is no magical equation to tell consumers how to slice their paycheck. Monthly bills–such as rent, car insurance or loan payments–give a relatively solid foundation to maintaining a budget, but individuals have other recurring expenses that vary, like gas or groceries, to keep in mind.
There are websites that help users create budgets using their past spending habits and salary. The sites suggest categorizing the last three to six months of expenses in order to establish a spending pattern and build the budget from there.
“When you have a really good record of what you’re spending [the most money] on, you’re more likely to take a second look,” said Georgetown Finance Professor James Angel.
Rollay and her parents did not make a specific budget before she left Minnesota for the summer. “I didn’t just because I have been on my own many times before and because college isn’t new to me. I assumed, and my parents assumed, that I would be responsible enough to budget myself.”
Categorizing every expense seems like a daunting task and many do not utilize the online tools to create personal budgets. However, taking that second glance at the day-to-day purchases might make those same people think twice.
“It’s a reality check,” said Rollay. “At this point, I only really have money for food.”
The kids on the Hill... 