The Financial Guide for Post-Secondary Students - continued

Post-Secondary Studies: Starting off on the Right Foot

Today, post-secondary studies are an important part of the search and pursuit of independence and financial security. Receiving an admission offer from a post-secondary institution can be a rewarding as well as a nerve-racking experience. But don't get too caught up in the moment, because important decisions lie ahead of you, such as class schedules, education funding, housing choice, transportation and work. Whether you are a full-time or part-time student, you will have various decisions to make about different aspects of student life. Every choice entails options, some more advantageous than others. It is up to you to choose which ones will be best for you.

This guide presents various options. The goal is not to tell you what to do but rather to provide you with information to help you make decisions that are right for you and make your student life as enjoyable as possible.

This guide provides detailed information on the subjects that are summarized in the next few pages. Consult the sections that will help you. If you need further information, follow the links to other Web sites.

Managing Your Money

A budget establishes your expenses based on your revenue, so you don't go into debt. Think of budgeting as a management tool that will allow you to optimize your resources in order to reach your goals and satisfy your needs. Try this step-by-step budget plan: 

• Step 1: Evaluate your personal and financial situation

• Step 2: Set financial and personal goals for yourself

• Step 3: Establish a budget

• Step 4: List your expenses

• Step 5: Compare your budget with your real expenditures

• Step 6: Do a follow-up of your financial situation and review your budget

Saving and Investments

We all hope to one day be able to save some money and have our money work for us. An investment is a place to put some money in hopes of gaining a profit or a return (investment income). At first glance, the investment world seems complex. This guide offers a straightforward look at the steps to making a good investment.

• Step 1: What is your investment profile?
  • Establish your financial goals
• Step 2: Save
  • Why save?
  • How to save
  • Interest rates on savings
• Step 3: Where to invest
  • Types of investments

Income Tax

Income tax is the contribution that everyone pays for the services and goods provided by the government. Income tax is imposed on the money you make during the course of a year. A percentage is deducted from every paycheque.

By accumulating all your tax deductions and by deducting them from your gross income, you obtain the amount on which you should be taxed. An income tax return is the amount that exceeds what should have been your contribution, therefore, what the government will have to reimburse you. As a student, you have a number of tax deductions available to you, which means that you will likely receive a full reimbursement. Therefore, think of income tax deductions as a savings account that compels you to save.

What Type of Credit is Best for You?

What type of credit is best for you? Compare the risks and the advantages of a student loan, a credit card, a line of credit, a personal loan, an instalment plan and a mortgage loan. Take a look at the different packages offered by financial institutions and analyze how interest can boost the total cost of your expenses.

Bank Accounts and Services

Whether you deal with a bank, a credit union or a “caisse populaire,” this section will explain the main products and services offered by financial institutions. This section will give you the opportunity to further understand this world and to better protect, manage and even save your money. In order to save every dollar you have worked so hard to earn, you must compare savings accounts with chequing accounts and understand different service charges.

Tips on How to Save

Students are often on the lookout for ways to save money. Who doesn't want to make more with less? This section gives you practical tips regarding tuition, transportation, insurance and bank services to help you handle your money responsibly.

Employment

Being able to fully or partially support yourself financially is a sign of independence, resourcefulness, autonomy and maturity. Conquering this step allows you to move on to the adult world. This section will give you tips on what kind of student jobs are available and how to get hired. Learn about summer jobs and jobs during the school year.

Putting a Roof Over Your Head

Whether you are a part-time or full-time student, you will have a number of choices regarding housing. Each option has advantages and disadvantages. It is a question of choosing the best option for you. This section gives you some information about housing to help you make that choice.

This section examines the possibility of staying at home or moving out. For those who want to leave home, it explains the advantages and the disadvantages of dorms, apartments and boarding rooms. The guide offers tips on connecting your services, signing the lease and saving on living costs in an apartment.

Transportation

Transportation plays an important part in a post-secondary student's independence. Without it, how can you socialize, explore and discover the joys of student life? Take a look at how to fill the need for travelling during your studies. This guide can help you decide whether purchasing a car is the right choice for you. If so, take a look at our tips for financing and calculations for maintaining your vehicle, and then establish a budget for your vehicle. If you decide not to buy a car, look at the alternatives available to you.

Complain!

Being polite will get you far in life. But that doesn't mean you shouldn't complain if you are not satisfied with the goods and services you buy. Did you know that 96% of unsatisfied people do not complain and consequently do not fully get what they paid for?

If you are dissatisfied, follow these steps: 

• Step 1: Contact the salesperson, retailer or business.

• Step 2: Contact the headquarters and address yourself to the customer services department.

• Step 3: Contact the government offices and consumer organizations that apply to your situation.

• Step 4: As a last resort, take legal action.

Fraud

No one is completely safe from fraud. Fraud includes false advertising, fraudulent telemarketing, multiple-level sales and pyramid sales, deceptive commercial practices and counterfeit money.

This section gives you an idea of the different types of fraud and practical tips on how to avoid being a target.

Test Your Knowledge

Once you have read the different sections and become a student finance expert, test your knowledge with the help of the quiz section. Fill out the questionnaire and compare your answers with ours.

Glossary

The terms used in finance and budgets are not always easy to understand. If you have trouble understanding some of them, consult this glossary: www.yourmoney.cba.ca/eng/glossary.cfm

Managing Your Money

Budgeting — is there anything more tedious? Still, it's a necessary evil. But try to think of it as a way to squeeze more out of your money and reach your goals.

Why should you budget?

• In case of financial difficulty (loss of employment, falling behind in payments, etc.).
• To realize short- or long-term projects (purchasing a car, going on a trip, etc.).
• To better control your financial situation and to know where your money is going.

The basic principles of budgeting

The basis of budgeting is to establish your expenses according to your income. If you spend more than you have, you'll go into debt.

How to make a budget?

Planning a budget can be divided into six different steps.

Step 1: Evaluate your personal financial situation

First, take some time to evaluate your personal financial situation. Ask yourself the following questions.

• What are my needs?
• What are my attitudes to money?
• How are my finances today?

Step 2: Set financial and personal goals for yourself

Your goals will depend on your personal financial situation. Goals, or objectives, could include anything from purchasing a snowboard, to going on a trip, to moving into an apartment. The best way to reach your goals is to determine your short-term, mid-term and long-term goals, and place them in order of priority. This will allow you to create an action plan that will help you reach these goals.

Your objectives must: 

• be realistic
  A student working part time cannot usually afford to buy a house for a few years.
  
• be specific and measurable
  I want to save $1,200 to go on a trip.
  
• have a determined time frame
  I want to pay off my car loan in three years.
  
• establish the necessary actions to achieve your goals
  I will transfer $100 per month from my chequing account to my savings account.
  • Work Sheet 1: Identify your objectives
  • Work Sheet 2: Prioritize objectives
  • Work Sheet 3: Find a way to reach your objectives

Step 3: Establish a budget

Use the proposed template to establish your budget. Plan your income and expenses for a period of one month. Try to be as realistic as possible in your budget estimates. Try to predict unexpected expenses in your budget. And do not forget your goals.

• There are a number of ways to establish a budget; it can be on a daily basis, a weekly basis or a monthly basis. Some budgets are very detailed, while others are less detailed. What is important is for you to find a budget that suits you. Do not hesitate to adapt this budget to your situation.
• To complete a monthly budget, you must convert your income and expenditures into monthly amounts. For weekly amounts, multiply by 4.3 (example: $55 for groceries per week x 4.3 = $236.50 per month).
• A budget item is a category of expenditures. For example, rent is a budget item, as are clothes.
• In your budget estimate, do not forget to consider certain big expenses such as moving, starting a new school year, buying presents, etc.

Avoid…

To make sure your budget works, be honest. Here are some things not to do when preparing your budget

• Forget or purposely reduce your expenses.
• Overestimate your income (it's better to be conservative).
• Use next month's income to balance this month's budget.
• Rely on your borrowing ability to make up a deficit.

Step 4: List your expenses

This is a very revealing step, although it can be disheartening. For a period of one month, list all your expenses, no matter how small. Then you will know where your money goes.

Use a small booklet to list your expenses. Here are a few more tips: 

• Keep all your receipts.
• Use a chequebook to keep track of where purchases were made, the amount spent and what was purchased (food, clothes, leisure activities, etc.).
• Keep track of when you receive money, when you spend money and when bills have to be paid.
• Verify your credit card statements.
• Keep up-to-date records of your finances. Include cancelled cheques, receipts, credit card statements, etc.

Source: Canadian Bankers Association — Investing Your Dollar

Step 5: Compare your budget with your real expenditures

At the end of the month compare your budget established in step 3 with your expenses registered from step 4. In order to do this, fill in the third column (“real”) of your budget. Comparing your estimated expenses with your real expenditures will tell you a lot about your financial situation. The difference between the two will indicate underestimated and overestimated budget items. You will then be able to make any necessary corrections.

Step 6: Do a follow-up on your financial situation and review your budget

Review and evaluate your budget regularly. Does your budget still allow you to satisfy your needs and reach your goals? Should you increase or decrease certain budget items? These adjustments should rectify or balance your financial situation. Your budget should be flexible: your needs, your values and your income change over time.

Back to the basics

• Establish expenditures according to income
• Make budget estimates that reflect reality and not your desires
• Be disciplined enough to keep track of all expenses for a certain period of time
• Have a flexible budget that can be adapted to any situation

What to do when you are running up a deficit

If, after completing your budget, it does not balance, here are few tips: 

• Reduce your expenses. Certain budget items cannot be reduced, while others can. Fixed expenditures, such as rent, are difficult to reduce. However, variable expenditures (e.g., transportation) can sometimes be limited. Essential expenditures have to be distinguished from expenditures that can be delayed.
• Consult the Saving Tips section.
• Increase your income.

Would you like to know more?

• Get the brochure Managing Money published by the Canadian Bankers Association, available at no charge at: www.cba.ca
• Different not-for-profit credit counselling organizations generally offer services in budget planning. Contact one in your region. Go to: www.creditcounsellingcanada.ca
• Consumer associations also may offer some help. Check out the Canadian Consumer Handbook at www.consumer.ic.gc.ca/handbook

Fixed expenditures

Fixed expenditures are the expenses that change very little.

Savings

In order to achieve your objectives, you must save. This is why it is important to consider savings as a budget item on the same basis as the others. Of course, not all students can save. However, remember that it is to your advantage to start saving early, even if it is a small amount.

Net income

The income indicated in your budget should always be your net income. Net income is your income after taxes and other deductions.

Student loans

Student loans are an important source of revenue for several students. Remember that student loans have to be paid back.

Variable expenditures

These expenses vary from one month to the other. In case of a cash crunch, it is these budget items that you might have to change.

Irregular expenditures

Certain expenses only occur a few times a year. That's why they are called irregular expenditures, even though their amounts may be predictable.