Balancing a chequebook isn’t a course taught at many high schools. Managing debt from your student loans isn’t often a prerequisite course before you get your degree.
But with a few tips, you might resolve to change that for the new year.
Often we try to make a budget, but other priorities distract us from keeping on top of our finances. The Financial Consumer Agency of Canada (FCAC) found that 66 per cent of young Canadians report that they make a monthly budget, but only 22 per cent say they stick to it.
When you find yourself losing your way with your finances, it’s important to remember you can find focus in the teachings from the Church and from God.
Proverbs 21:5 says, “The plans of the diligent lead surely to abundance, but every one who is hasty comes only to want.” Start slow. And the first step to a good financial plan is to create a budget.
Figure out your monthly expenses. Subtract that from your monthly income to see how much you have left.
Understand that you’ll probably spend a little bit more on social activities, so set aside a certain range of funds that you can afford. And if you have any money leftover, decide what you want to do with it.
Phil Lenahan, author of Generation Next: A Catholic Guide to Financial Freedom for Young Adults, writes that “it normally takes a few months before you develop confidence that your budget is a true reflection.”
So if the first few months are difficult, it’s normal. James 1:12 says, “Blessed is the one who perseveres under trial because, having stood the test, that person will receive the crown of life that the Lord has promised to those who love him.” Persevering with a budget will be reward you with financial stability.
The second step to a good financial plan is creating a balance sheet that will help you keep to your budget. There are two sections to your balance sheet: assets and liabilities. Simply put, they are your income and your expenses.
In the balance sheet, you should create sections that lay out what expenses you have. For instance, three columns might be: cash/debit purchases, credit card purchases, and monthly payment.
Each week, you would put the amount that you spent under cash/debit purchases, credit card purchases and then monthly payment, such as your rent and your cellphone bill.
“The makeup of your balance sheet should change dramatically over the years, with a growing base of assets to help pay for future responsibilities, and a declining debt balance as college loans and mortgages are paid off,” Lenahan writes.
With more responsibilities, we become less dependent on our parents and our balance sheet will change.
The Canadian University Survey Consortium said that among the more than 18,000 graduating university students surveyed last year, the average debt-ridden student owed $26,819.
Most students are not earning enough income during their studies to balance that student debt, so that debt must be taken into account after graduation. Any income that is leftover from the monthly budget should be set aside to start paying that debt.
“It’s a big issue,” he said in an email to The Catholic Register. “It can be productive or unproductive (both materially and spiritually).”
He suggests that students and their parents create a roadmap that helps the student manage debt after graduation.
“I would hope that student loans could be limited to no more than the price of an inexpensive new car (maybe $20K) for a four-year degree,” said Lenahan.
Managing finances is about setting spending priorities as well. The Catechism of the Catholic Church explains that the economy should “serve man and the common good is a reasonable demand in keeping with human dignity.”
In other words, our financial plan is not just about making ourselves better money managers, but also better citizens.
(Tim, 23, is a first-year Master’s student in the Road to Democracy program at the University of Siegen in Germany.)