It’s the beginning of the semester and your financial aid money has (hopefully!) been deposited into your bank account. Now you need to figure out how to make that money last through the end of the semester, until you receive your next financial aid deposit or start a job.
If you’re like many people, receiving large sums of money on an infrequent basis makes budgeting a bit challenging. How do you avoid overspending at the beginning of the semester? How do you ensure that you’ll have enough money to get through the entire semester?
When your financial aid money is deposited in your bank account, follow these five simple steps:
Step 1: Repay credit card debt (if possible)
If you don’t have a balance on any of your credit cards, congrats! Skip to step 2.
Many vet students, however, find themselves with a small amount of credit card debt at the end of the semester. If you fall into that category, attempt to repay that balance as soon as you receive your financial aid money. Doing so will reduce the amount of interest you are required to pay and help avoid additional debt piling up on you.
If your credit card debt is more than you can realistically handle right now, you may need to consider a different option. First, pay off as much of the debt as you can at this time. Next, consider a balance transfer for the remaining debt. If you have good credit, many credit cards offer an interest-free balance transfer for a fixed period of time, in exchange for a one-time fee. Read the fine print carefully, but these balance transfers can often minimize the amount of interest you accrue as you work to aggressively pay off your debt.
Step 2: Assess your emergency fund
Unfortunately, emergencies happen to all of us. Whether it’s a car breakdown, an unexpected visit to urgent care, or an emergency involving one of your pets, unanticipated expenses occur more commonly than we would like to think.
Take the time now, at the beginning of the semester, to look at your emergency fund. Aim for a goal of $1,000 in your emergency fund, to cover common emergencies that might arise during the course of the year. If you haven’t started an emergency fund yet, consider putting a small amount of your financial aid money ($250-500) into savings, with the aim of adding to that amount each semester until it reaches $1,000.
Step 3: Plan for predictable expenses
Look ahead at your calendar, for the rest of the semester. Are there significant expenses coming up that you need to plan for?
Examples may include:
- Travel for externships
- Travel for job interviews
- NAVLE® (and VetPrep® to help you study!)
- Moving expenses
- Clothing/supplies for your first DVM job
If you anticipate upcoming expenses, set aside money for those expenses now. That way, you know that the money will be there when you need it.
Step 4: Match your monthly spending to your income
After covering tuition/fees, credit card debt, emergency fund, and anticipated expenses, the remaining money is yours to live off of for the semester. Divide that amount by the number of months in the semester, in order to determine how much you can afford to spend each month.
Next, create an itemized budget of your planned monthly expenses. (There are a number of different websites online that can help you with this, but I prefer to use my own Excel spreadsheet because I can customize it to match my own spending categories!) Remember to include everything: not just the obvious monthly bills (like rent, electricity, phone, insurance, etc.) but also variable items such as gas for your car, estimated repair bills for your car, vet bills, pet food, eating out with friends, etc.
If your monthly itemized budget is less than the allotted spending that you calculated for each month, congrats! Sticking to your budget will ensure that you finish the semester on track.
If your monthly budget exceeds your allotted spending, you have two options: decrease your spending or make more money. Either of these can be valid options; if you have a large gap, you probably should do both! If you choose to cut expenses, review each category of your budget carefully, looking for places to scale back (for example, cancel cable/Netflix/Hulu, trade happy hour with classmates for a potluck at home, or move in with a roommate). If you feel that your expenses are already as low as they can go, look for ways to generate additional income. Finding a regular part-time job is one option, but you could also consider pet-sitting for neighbors, tutoring college students, giving a neighbor a ride to school in exchange for gas money, or selling items on Craigslist. The key is to work on the spending and/or income side of the equation to bring them both into balance.
Step 5: Use an automated system to help you stay on track
Having a large sum of money sitting in your checking account, which you gradually draw down throughout the semester, can make it difficult to monitor your progress. Instead, create a system to deposit money into your checking account on a scheduled basis.
First, open a high-interest online savings account. Check online, because options and rates vary, but companies like CapitalOne® and Ally® are known for offering above-average interest rates on savings. When you’re depositing several thousand dollars, that interest can add up.
Next, set up automated transfers from your high-interest savings account to your checking account on a regular basis. Once monthly is probably the easiest way to schedule these transfers, but you may find that twice monthly or even weekly is more convenient. Look over your expenses and bill due dates to determine what will work best for you!
Money is going to be tight during vet school. That’s unavoidable.
Taking steps to actively manage your finances now, however, can minimize your money-related stress AND make it easier to get on track and stay on track once you’re out in “the real world!”