Summer came & went; September arrived in the blink of an eye and the traditional school season began. Some of us at AU took a break from our studies, and some didn’t. Some AU students went on long road trips and adventurous travels. Others chose to stay at home and enjoy their downtime lounging around or decluttering their living spaces and lives. One thing most of us at AU did, however, was watch the graduation ceremonies in June, daydream about our turn, and plan our schedules out for the upcoming school year, so we can walk across that stage one day, too. Post-secondary students need good planning skills. We’ve all heard the modern-day proverb “Failing to plan is planning to fail.” Benjamin Franklin, Winston Churchill, and Alan Lakein, the writer of many self-help books on time management, are all known for this quote. What may not be apparent, however, is that a solid plan is not just a way to achieve success in your career and studies, but also in your budget, wallet, and finances.
When people try to figure out how to save money each month, they end up finding little ways to save here and there like cancelling the Netflix and Spotify subscriptions. That’s a great start because every little bit helps. However, if you have big goals—or big debt—you should be taking a closer look at big savings. There are two upsides to this. First, if you focus on the large-ticket items right from the start, you save thousands of dollars each year from the very outset, rather than waiting until you get to that item further down the list of priorities. Second, when you make big progress like that, it changes your momentum and intensity. Hence, the popularity of the snowball method. From a mathematical perspective, you should focus on paying down the debt with the highest interest rate first. This is the avalanche method. However, this method isn’t always the most effective because it doesn’t create the motivation we need. It might not make sense at all times, but people have a better chance at success by using the snowball method (Kettle, Trudel, Blanchard & Häubl, 2016).
The snowball effect occurs when something grows in size at an increasingly faster rate. Imagine a snowball rolling down a hill; the more the snow builds up, the larger it gets and the faster it moves downhill. When you see big leaps of progress, you go at it with greater intensity. To get the snowball rolling, however, you have to know your household budget inside and out. You can’t get to Timbuktu without a map, so you won’t know where you need to make changes to see drastic financial gains. Spreadsheets are my favourite way to do this. I have our monthly and annual budgets set up that way so I can filter and immediately see, at a higher level, what the inflated expenses are. This also shows me where I can make small tweaks to reap large rewards. You can make those small changes with a big impact and apply some straightforward tactics. All in the name of seeing a huge financial snowball rolling downhill! A couple quick and straightforward suggestions to make this happen follow. Read the next The Struggling Student Rants, for Part II, where I will list more concrete ways to get your snowball rolling with intensity!
Tuition in Full
I will start by giving you an example close to our hearts. Everyone’s circumstances differ, but I admit I’m not a fan of student loans. Some folks see student loans as “good debt,” or as an investment in yourself. I understand that for some, financing your education is a necessary evil. I will admit the thought of this has almost lured me in a couple times, too. I could reach my end-goal so much quicker without the need to work full-time to pay the bills. However, the beauty of AU is that you don’t have to pay tens of thousands for your full program upfront. You only pay for the courses you are registered in. Therefore, as a non-Alberta resident, I know that every three to four months (depending on my timeline), I will need approximately $850.00 per course. I can then plan accordingly and divide that number by how many pay periods I have before my next course starts. Suddenly this figure doesn’t seem so daunting. I plan for this expense and fit it into our budget – it’s an expected cost, just like groceries. If our budget falls short for this, I do what I need to, to make it up – deliver pizzas, drive for Uber, or pick up extra shifts at work. At the end of the day, I refuse to incur any student loan debt.
Avoid Impulsive Spending
With everything available at the click of a mouse, or the tap of an app, shopping in the digital age means we now have more places to spend our hard-earned cash than we ever had before. Manulife Bank conducted a very recent survey with approximately 2,000 Canadians, between the ages of 20 and 69. They picked on all three generations for this survey but noted that the 33% of millennials that had piled up consumer debt were the ones also regularly making impulse buys. But what made me shake my head (because I recognized my old self in there somewhere) was that 16% of those same millennials do this in the name of social gatherings and trying to impress or keep up (“Trying to stay instaworthy but hitting instadebt? You’re not alone.”, 2019). I wouldn’t be surprised if those of us in the GenX and Baby Boomer categories weren’t too far behind those same numbers. We don’t break the bank by buying one big-ticket item—folks usually think long and hard before buying furniture sets or brand-new vehicles (or, at least, I hope they do). Where we do see the death by a thousand cuts to our finances is spending on the small items, those we believe we deserve after a hard day’s work or because we’ve had a rough week. These things are not necessities, and they only provide us momentary pleasure, not happiness in the true sense. But, we nevertheless swipe while thinking “it’s only a latte” or click add to cart and convince ourselves we will pay the balance in full once our paycheque hits our account.
Social media shopping technology doesn’t help much with controlling impulse spending either. If you enjoy browsing fashion posts on Instagram to unwind after a long day, they now have a shopping bag feature. All you have to do is tap on the shopping bag icon if you see something you like; this takes you straight to the website where you can add it to your shopping cart. You then scan your fingerprint and your phone does the rest of the work for you. Meanwhile, Arianna Grande is blaring through your teenager’s room “I see it, I like it, I want it, I got it” and all the while you’re trying to remember when the last time was that you bought something nice for you rather than look after your family’s needs. You work harder than Arianna at providing for you and yours, you deserve that outfit or skin-care set more than she does, and “Click – Approved. Your shipment will arrive within three business days.” The thing is, that purchase may make you happy for that moment – maybe for a couple of days. But I guarantee that feeling of satisfaction will be long forgotten a month from now, when the credit card statement arrives and you’re wondering if you can return $40 conditioner that’s only been used once.
If you’re uncertain about whether you have a problem with impulse spending, the best way to find out is to go through your monthly statements. It’s not fun, unless you’re into that sort of thing, but if you take a detailed, honest look into your past year’s spending habits you just might get a good slap across the face. I personally know many families who spend at least a couple thousand a year on things they don’t plan to buy. I listen to friends and co-workers talk about how much they pay for things that are, in fact, luxuries rather than necessities. They then complain about how they can’t seem to catch up with bills. They know my frugal ways, yet choose to ask for my uncensored opinion. They don’t like what they hear, they continue doing the same thing, and each month the cycle continues.
Admittedly, this time last year, I was of the same mindset, but I chose to change my ways and I now sleep easier at night. I can vouch that it’s not as painful as it sounds, it just requires change—something not many people like. There are simple ways to reduce these impulse tendencies and save your money for what matters.
If you tend to spend on a whim frequently with your credit cards, freeze them – literally. Put them in a cup of water in the freezer. By the time you thaw them, you may have a change of heart about buying that trinket. Another strategy I use is a waiting-period rule. When I want to buy anything that costs over a certain amount (e.g., $50) I make myself wait at least 24 hours to think about it. It may be longer than 24 hours, which is even better; I have more time to let it sink in and decide if I really do need that trinket. If I find something I’m convinced I can’t live without, I do some comparison shopping online. If I can find it elsewhere, at a fraction of the cost, or used and dirt-cheap I consider it a victory.
Think about these simple tactics you can implement into your everyday life and try them for a month or two. The first few times may be a challenge, and you might feel a little upset at having to change your ways—that sounds perfectly normal to me. Nevertheless, AU students crush obstacles and eat adversity for breakfast! Soon, your finances will take a breather and you’ll be smiling at the big debt or savings snowball rolling down your hill.