If college is the first time you’ve ever had to be financially independent, do yourself a favor: Establish a budget. It may not sound fun at first—but you’ll be really glad you did it. Budgeting is worth your time for a lot of reasons:
- It prevents you from overspending. (This also help you to avoid credit card debt and bank overdraft fees.)
- It makes very clear how much money you have left to spend on things you want (clothes, nights out, or a new hair color) after you pay for the things you (Items for which you’re responsible—and can’t do without—like books, tuition and groceries.)
- It helps reduce your stress level because you know where your money is going—and that you won’t run out at critical times.
- It teaches you responsibility and helps you live within your means.
- It lays the foundation for later in life when you want to save for bigger purchases (like a car or a house.
The point is—budgeting arms you with a valuable skill for being a successful adult. So, how can you get started on developing a budget as a college student? Here are several tips:
1. Create a Simple Spreadsheet, Or Use an App
If you go with the spreadsheet, create two sections—one for income and one for expenses. Or, there are also several apps out there that are great for creating and managing a budget. Check out Mint, a simple money management app; EasyDollar, a budget planner and expense tracker; or something similar. Apps can often sync with your bank and credit card accounts so you always have up-to-date information at your fingertips.
2. Make a List of Your Monthly Income Sources
When you’re in college, your income might be limited. Still, you could be collecting money from several sources:
- Allowance from your parents/other family members
- Savings from a summer job
- Part-time job income
- Work-study income
- Scholarship funds that don’t go straight to your institution for tuition, etc.
- Leftover aid refunded to you by your college (more on this below)
3. Make a List of Your Monthly Expenses
Get a good handle on the expenses your parents will cover vs. those for which you are responsible. Your responsibilities can probably be broken down into the following categories:
Fixed (i.e. Costs that Stay the Same)
- Housing expenses: Rent, utilities, water
- Transportation expenses: Car expenses, insurance, gas, public transportation pass, parking pass
- School expenses: Tuition, books, fees
- Other: Cell phone, cable, internet
Variable (i.e. Costs that Change Each Month)
- Personal expenses: Medical bills or expenses, hygiene products, laundry costs
- Food expenses: Groceries, eating out
- Entertainment expenses: Movies, concerts, activities with friends
If you add up all your sources of income—and subtract all your actual expenses—and you’re spending more than you brought in, you need to work on reducing your expenses. Maybe that means eating out less often, or riding your bike more than driving and parking.
Don’t just set a budget and walk away. Update it frequently and pay attention to areas where you might be able to pinch pennies and make your dollars go a little further.
5. Use Financial Aid Money for School-Related Expenses
If your college applies your financial aid toward your tuition bill and there’s money left over, those funds will be sent to you—so that you can use them for books or other educational costs. If such money does show up, don’t blow it on new clothes or nights out with friends. Set it aside for its intended use: your education.
6. Plan for the Unexpected
If possible, try to add a line item in your budget to put away a little money each month for that unexpected car repair or pricey textbook. Variable expenses are one thing, but sometimes emergencies happen and unusual expenses arise. If you lose your bus pass, you don’t want to be stuck without a way to get around.
And one more thing: Remember to keep working hard in school. There is a lot of financial aid out there, both need- and merit-based. Earn good grades and continue to apply for scholarships in addition to financial aid. You might very well be able to ease your financial burden with free money in the form of scholarships and grants.
Budgeting might seem like a tedious process, but it really is time well spent. It’s also great practice for adulthood, when all expenses are your responsibility. Set yourself up with a reliable system for keeping track of your cash inflow and outflow—and eventually, the amount you have left over to save or invest. When you finish college with a clear picture of your financial situation, you’ll be on solid footing for a successful future. Trust me—you’ll be glad you did.