Budgeting for college students
Living on a cash budget is important for everyone. But college students frequently face different challenges when it comes to managing their finances. If you are currently enrolled in college or will be heading there soon, knowing how to put together a realistic budget is one of the smartest things you can do for yourself financially.
Many times students receive their money in big chunks- either from loans, summer job savings, or from parents. If this applies to you also, budgeting can help you manage your specific amount of funds so that it lasts over the 2-3 months in a semester. If this is your first time managing your money, it can be very tempting to overspend in the beginning. You then end up having to struggle to make ends meet later on. A livable budget can help you avoid this very common and frustrating situation.
Most students groan at the thought of making a budget and living on what they have. But a sound financial plan may save you from the uncomfortable position of suddenly realizing it's November, you're out of money, and your next influx of cash is in January.
The following tips can help you create a budget and successfully stick to it.
How to Create a College Student Budget
- Involve Your Family - If your family is helping you fund your college education (either fully in 'cash' or in part), work with them to create your budget. It's important for everyone to be on the same page as far as how your money will be distributed, who will pay for what, and how much say you will have in your own financial decisions.
- Set a Timeframe - You need to decide if you want to set a monthly budget or plan one for the entire semester.
- List Your Income - For college students, income typically comes from financial aid (student loans, work study, grants, and scholarships), quick cash from parents, savings, or salary from a part-time job. Include the total amount of all sources of income when formulating your budget.
- List Your Expenses - Common expenses for students are room and board, books and supplies, tuition and fees, personal care items, groceries, transportation costs or car expenses, cell phone, clothes, entertainment and health insurance. Many people don't realize how much their expenses are until they write down everything for their budget. It can be a shock! The good news is that knowing what you spend (and on what) allows you to find ways to cut back and save.
- Save For Emergencies - You don't want to rely on credit every time something unexpected happens such as a car repair or trip to the doctor. An emergency fund can help you pay for these unplanned expenses without taking on new debt.
- Plan Ahead for Special Circumstances - If you want to join your friends on a Spring Break holiday, start saving for it in advance. Any big-ticket items you know you will need at some point should be saved for ahead of time. Go over your budget frequently to see where you can make cuts. Put the money you save into a savings account.
- Adjust Your Budget as Needed - Occasionally financial needs don't always happen as planned. Perhaps you needed to buy more textbooks for a course or went out to dinner more than anticipated. Remember that your budget is fluid and sometimes needs to be adjusted. Review it often. If you're spending too much on dining out then reduce the times you go out to eat. If one area of your budget consistently costs more than you have allotted, you may need to cut from other areas to fund the necessities.
- Your Budget Should Balance Out - At a minimum, your total income should balance out with your total expenses. Ideally, you want to have some money left over to put towards savings each month. If you have more money going out than coming in, you will need to find ways to cut your expenses and/or increase your income. You want to avoid being in the "red" each month and carrying over the deficit to the next month. That's not how a realistic budget works.
Being in college is generally one of the most exciting times in a person's life. For many young adults, it is the first time living away from home and having control of their money. If you are a college student or soon will be, this is the perfect opportunity to learn smart money-managing techniques which will serve you well throughout your entire life.
Remember that the biggest danger to your budget may be all the small things that quickly add up. A visit to the grocery for snacks, a piece of clothing you couldn't resist, or an unexpected social event you wanted to attend- all of these things can destroy a budget. A $5 latte or $4.00 burger may seem insignificant when you purchase them, but they can seriously damage your financial plan if you don't budget realistically. Always be aware of the "little" things that can wreck your best-laid financial plans.