Getting off on the right foot when you start your new life after high school or post-secondary studies is about more than just getting good grades or a job in your field. Knowing how to make and keep a budget is something you should now how to do before you leave home.

“No one has limitless money,” says Laurie Campbell, executive director of Credit Canada, a non-profit credit counseling organization. “And even if your parents are supporting you, you still need to be able to budget.”

Why? Because bank overdrafts or and unpaid credit card bills can cost you a lot in interest and hurt your credit rating which will prevent you from buying things like a car or a home later on, says Campbell.

“Overdraft interest can be devastating – up to 21 percent - and we’ve seen far too many young people end up in starting their futures mired in debt because they were using their credit cards to supplement their income, “ says Campbell. “Far too many of them end up in our offices because they’ve overspent.”

Never mind how stressful it can be to worry about not having money at the end of the month when the landlord comes calling or your credit card payment is due.

“Going to college or university is a stressful time, and worrying about your finances on top of your studies can add another incredible burden to students. That’s why it is more important than ever for young people to learn the basics about money, budget management, and the difference between needs versus wants,” says Laurel Ostfield, spokesperson for Capital One Canada.

Young Canadians are surprising uneducated about money, says Ostfield, pointing to a Capital One back-to-school survey that shows nearly 60 percent of post secondary students surveyed were worried about having enough money to last them through the school year. In fact, some students said they make some big (and surprising) sacrifices to get by:

• 53 percent said they dip in to savings to cover every day expenses.
• 36 percent said they skip meals to save money.
• 24 percent said they forgo medication, dental visits or other medical treatment.
• 11 percent said they sometimes wear dirty clothes when they can’t afford a visit to the laundromat.

Despite worries about not having enough cash to cover school year expenses, the survey showed many students were not using basic money management skills to help make ends meet. More than half (51 percent) of students did not develop a budget and stick to it, and 40 percent did not track their daily purchases. Half of the students surveyed (50.4 per cent) said they learned how to manage their finances from their parents, while only 1.8 percent said that they learned about financial management at school. Just over 40 percent said they taught themselves how to manage their finances.

Knowing the difference between needs and wants is crucial to developing a balanced budget, financial experts agree.

So how do you start budgeting? Start by setting a goal, says Campbell.

“It’s the very first thing you should do. Even if it’s just paying off a credit card or saving money to go on vacation, it can help you motivate yourself to start budgeting,” she says.

Then draw up a list of your current expenses.

“Remember all the categories, like rent, food, entertainment, transportation, books,” says Campbell. First time budget trackers can obtain a list of possible expenditures and even a budget spending tracker that can be downloaded to a cell phone at piggypal.ca. There are also numerous apps and other programs to help you with this task.

Next, add up your sources of income, then calculate the difference. If you’re making less than you’re spending, you need to take a closer at what you’re spending money on. For example, a student might consider cooking at home, rather than ordering a pizza. Spending on clothing may have to be limited to sweaters and jeans, and not include Gucci bags. And books can be purchased second hand rather than new.

It’s all about knowing the difference between needs and wants, says Campbell, who adds you should set some money aside for that goal you had in mind. “That way there’s a reward for all your hard work,” she says. jp