Is it a need or a want? Consider your situation and categorize your purchases

Needs are basic and/or urgent items that involve physical or psychological and are essential to survival and well-being. Wants stem from emotional desires and are not necessary for survival or well-being; they are convenient and comfortable.

Understanding the difference between these two is the first step toward taking a smart approach to your money.

Needs involve things such as basic food and shelter; wants might be that special coffee drink or a trip over Winter break. Kristin Bhaumik of the U-M Office of Financial Aid and instructor for U-M's "The Financially Savvy Student" course, suggests that you save money for your wants and never borrow for them -- always pay cash, ask for student discounts, and only eat out when you can afford it.

Depending on your situation, items can fall into either category and your needs can change over time. For example, a computer could be a want if you have a working one and just want the latest and greatest model. It can be a need if you don't own a computer or yours has broken and you need it to complete your assignments or continue your education.

Think about your own situation: If you had an extra $100, what would you spend it on? This could be anything from clothing and accessories, travel, eating out or recreation. Think about how you are spending your money throughout the school year and where you could potentially save.

Setting your priorities for those "extras" allows you to set goals, determine spending priorities and decide how to best spend your money. Setting a financial goal, developing a plan to reach that goal and taking action to achieve it are three of the most critical money decisions you will make both as a student and moving into adulthood.