By Derek Hall
Physically handling cash is slowly becoming a thing of the past. Even if you haven’t bought in to the idea of using cryptocurrencies such as Bitcoin, chances are your money is managed digitally from beginning to end.
I opened my personal checking account online. The income my employer pays me is automatically deposited into that checking account. When I want to spend that income, I use a little plastic card that’s far too easy to slip in and out of my pocket. There’s never a need to step into a bank or even visit an ATM. My account balances might as well be represented by digital credits as opposed to dollars.
The great thing about this new digital age of money management is its simplicity. However, that simplicity makes it far too easy to spend my money. Every morning, when I go to purchase my $4 cold-brew, it doesn’t hurt quite as bad to hand the barista my debit card as opposed to handing over some cold, hard cash.
My weapon against going broke in this new age of money is the time-tested strategy of creating a budget. Budgeting is how I keep from spending all my money on coffee or burning through my entire meal plan in the first few weeks of a semester. Creating and managing that budget forces me to focus on how much I’m spending, saving and investing. It’s also a skill I learned the hard way.
Not long after graduating high school, I went to work for myself as a photographer. I had to quickly learn how to manage my business expenses, pay quarterly taxes and, perhaps most important, create and manage a budget.
As a photographer, my business fluctuated seasonally, and I typically earned 100 percent of my revenue for an entire year in only six months. After struggling a bit through my first off-season, I began researching ways to better manage my money.
Through the process, I combined strategies from different books to establish a few simple rules, or guidelines. The resulting framework helped me navigate the times when business was slow and motivated me to save and invest more of my income.
Creating my first budget was as simple as establishing percentages to apportion my money. I had to set aside a certain percentage of my revenue for taxes and business expenses and the rest was income. I set aside 10 percent of my income for savings and 15 percent for investments, at a minimum.
Apportioning my money in this way forced me to closely monitor my living expenses and helped me to avoid spending too much on frivolous items. If I can’t afford to live on 75 percent of my income, then I probably need to make some changes.
The strategies I learned while running my photography business are the same ones that help me manage my money now that I’m in college. It can be as simple as setting aside certain percentages or sticking to a simple plan for managing financial aid.
The point is to become more aware of my finances and how I’m using that little plastic card in my pocket.
Derek Hall is a student at Arizona State University.