By Denver Ellison
It’s a fact that people mismanage their money. However, when college students mismanage their funds, it may be a lifestyle issue rather than a mistake. Many of us don’t take the time to think about how we are spending our money or why we are spending our money. Instead of budgeting and tracking, we spend the majority of our paychecks and wait around for the next pay period so we can do the same thing all over again. Here are some of the reasons why college students mismanage their money.
Fixed Wants
The difference between needs and wants is usually explained to us when we are young. But, that understanding is easily forgotten when it comes to how we spend our money. We may convince ourselves that we need to spend money on fast food rather than cooking. Or, we may convince ourselves that we need the popular clothing brands and shoes. We forget that many of the things we spend our money on are wants and not needs. Matt Goren, adjunct associate professor of personal finance at the University of Georgia, said figuring out how to manage wants is part of understanding our behavior with money.
“College students and everybody spend a lot of wasted money on what I call fixed wants,” Goren said. “Wants are, by definition, things that you don’t need. Everybody needs transportation, but do you actually need a car, for example? Especially when you have Uber and Lyft and all your friends have cars.”
Thinking Your Money is Endless
On top of having these fixed wants, many college students overestimate how long their money supply will last. We get our paychecks and think we have money to spend for weekends to come. But, of course, that is never the case. Swarn Chatterjee, an associate professor in financial planning, housing and consumer economics at UGA, explained how this mindset plays out for many college students.
“A lot of times what happens is we are very optimistic about how long that money that we have can last,” Chatterjee said. “We tend to overestimate that. People spend a lot the first few days after receiving the money and then struggle towards the end of the semester or end of the month.”
Preference for Spending
Being a shopaholic and going out to eat every other night might be your thing. This may be the root cause of why money tends to fly out of your pockets. Chatterjee pointed out that some college students just enjoy spending all of their money on fun activities rather than saving.
“Many have a preference for spending money now rather than in the future,” Chatterjee said. “This may be because there are so many exciting things happening.”
Not Budgeting
Money will always disappear from your account if you do not take the time to plan, budget and track it. This tends to happen a lot around spring break. Many students may think they have enough money for their trips without taking the time to understand and break down the cost of everything. UGA junior Will Emedosi, a finance major from Villa Rica, Georgia, discussed his mistake of not budgeting for spring break.
“I wish I knew ahead of time that I would be going on a major spring break trip so that I could pick up a job sooner,” Emedosi said. “So instead of dipping into my finances as far as loans, I wish I had money that I had actually earned and set aside knowing that the money was going straight to my trip.”
