Managing debt.
Tuesday, September 19th, 2006
When is a budget of no use at all? Most people believe it’s when there’s little or no income - but you still need money to carry on day to day. Typically, people encounter this while going to college - it’s true that a good degree can boost your income prospects, but getting the degree can set you back a fair amount. Usually, working full time while studying part time doesn’t bring the same kind of benefit.
But that’s the Catch-22 - you need money for the degree, a part time job won’t cover the cost, and can put pressure on your grades; and if you haven’t been able to get a scholarship or a fee waiver, the total spend is substantial.
You can get a student loan - but that means you’re getting into debt, and it builds up over the years that you’re studying. Even allowing for interest deferral and the subsequent lower interest rates on study loans, it’s still a substantial overhang when you finally do start earning.
Not to mention that if your part time job doesn’t pan out, or if you have unexpected expenses, the only way out (other than contributions from parents / friends) is the good old credit card.
But all this doesn’t mean a budget isn’t necessary. Even with all the “doing without” that you’ll practise, you still need to spend some money for survival. And with money being tight for a long period, you need to plan what you can spend on, and how you’ll manage through the entire period.
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