Handling finances during your college years can be daunting. For many, it’s the first time the responsibility of paying bills and managing money falls squarely on your shoulders. When you have a game plan to track when and how you spend your money however, these obligations become much more manageable. Welcome to the world of budgeting. With a budget, you are taking your first step toward establishing healthy spending habits and setting yourself up for financial success for your college years, and beyond.
A budget is a financial plan that helps you divide your income, or the money you bring in each month, to cover bills and other living expenses. It is an excellent tool for anyone, regardless of the amount of money you earn, as it helps to control spending and forge a path for a balanced financial future.
For college students, a budget is an especially useful tool. It helps you to keep a handle on your financial obligations while you work hard to balance the demands of coursework, employment, extracurricular activities, social events and other obligations that make up the rich texture of the college experience. With just a few minutes each day, you can easily track and plan for the full range of expenses you’ll encounter in your college years like:
- Housing and utilities
- Groceries, meal plans, and/or dining out
- Public or private transportation
- Clothing and laundry
- Technology needs (cellphone, internet service, etc.)
- Medical expenses
- Student loan payments
- Gym membership
- Organizational dues (fraternities or sororities)
Basic Budgeting for College Students
Budgeting your money doesn’t have to be complicated or time-consuming. With the following tips, you can quickly set up a budget and start tracking your spending to make wise use of money throughout your college years.
- Begin with the basics: Start with a simple spreadsheet, or online budgeting template and list all of your income from part-time jobs, scholarships, allowances from family members, or other ways you consistently earn money each month. Next, list every bill you know you must pay each month. How much is left over after you pay these necessary expenses? Divide this remaining amount wisely among expense categories including groceries, entertainment, emergency funds and more.
- Record your purchases: Do you tend to spend all of your cash shortly after payday? If so, use your budgeting spreadsheet to record and track all of your purchases. Then lump your purchases together based on a category such as food, gas, school supplies, entertainment, etc. This practice not only helps you avoid buying unnecessary items but also shows exactly how much you spend each month per category. Armed with this data, you can easily tweak your monthly budget and avoid going broke before payday arrives.
- Adjust your budget each month: It is important to revisit your budget each month to make adjustments until you can balance the books. Did you spend too much on groceries or entertainment last month? If so, adjust your spending plan to bring it more in line with your income.
- Look for ways to cut costs: Once you have a basic budget in place, it helps to look for ways to reduce your living expenses. Begin by searching for student discounts on a variety of goods and services in your area. You can also save big by buying used textbooks, used furniture or other discounted items from second-hand stores. After each semester, be sure to sell your textbooks (if you don’t need them anymore) online or at the student store.
- Use credit cards cautiously: If used responsibly or for emergencies only, credit cards present a great way to help build your credit score to prepare for the future purchase of a home or to help you secure a loan to start a small business. However, many college students fall into the trap of misusing credit cards and racking up large balances which carry over to the next month and incur high interest charges. As the balances on your monthly credit card statements increase, the portion of your monthly budget needed to cover the minimum monthly pay offs will increase as well.
Leave Room to Invest in Your Future
As a college student, making it through the month with a positive balance in your checking account is a cause for celebration. As your budgeting prowess grows and you reign in spending, start investing in your future by setting some money aside each month. Investing even a small amount during your college years can yield incredible results later in life. Even a modest $50 a month invested in a savings account, or term account (similar to a CD) could help your money grow considerably. Consider opening multiple savings accounts, so you can see progress toward each goal you set for yourself.
The financial choices you make while in college will have a lasting impact on your future. With a simple budget in place to track and adjust your spending habits, your college years can be a memorable time and not a daily struggle to make ends meet.
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