Having a budget for college is an important aspect that every student should consider. Given that there are so many things to buy, such as books and other school supplies, it is not unusual for college students to get financial stress.
However, most college students believe that budgeting is something that they should start once they are done with school. This should not be the case. Practicing good money habits right from college can go a long way into ensuring financial health.
While it may seem like such a daunting task, budgeting is quite easy to do. Once you are sure where all your money is going to, cutting on costs and saving up becomes so much easier.
Have a look at all you need to know about budgeting while in college.
Choose a Budgeting Method
There are different budgeting methods that you can choose from. All you have to do is find one that suits your preferences. Some of the more popular methods are:
- Zero budgeting
- Percentage-based budgeting
For the zero budgeting, your expenses are equal to your income, so there’s no money left once you are done with budgeting. This method has been found to be more favorable for accounting for every penny that you get.
The percentage-based budgeting uses ratios to determine the amount that you need to spend and save. The method focuses on the 50/30/20 rule. This rule states that 50 percent of your income should be spent on necessities such as food and housing.
Thirty percent should be spent on other expenditures such as entertainment, while 20 percent should go into your saving account.
When choosing a budgeting method, you may want to explore several tools. There are a number of mobile apps that help you to come up with a budget and stick to it. Online banking tools can also come in handy, as you are able to track your expenditures easily.
Track your income!
Budgeting involves tracking both your income and expenses. The first thing you need to focus on is your income. Identify all your sources of income and how much they bring in.
As a college student, the money coming in may be very limited. For this reason, you may find yourself relying on multiple sources of income. Some of these sources include:
- Allowance from parents
- Wages from your job
- Student grant or scholarship
It is also important to note how often the income comes in. For example, your parents could give you a weekly allowance.
Is this money enough to cover your weekly expenses? Ideally, it is advisable to budget your money monthly, so it would be best to figure out how much you earn each month.
For college students who work part-time, say, for example, as waiters, you may have some irregular income in the form of tips. Set this extra money aside as a safety net. This way, you have a place to fall back on whenever you make less money than you anticipated in a certain month.
If your parents are providing financial support, talk to them and find out how much they are willing to cover.
For instance, they may choose to cover tuition costs and school supplies. In this case, you may have to find other sources of income such as a teacher’s aide or a job within and around the school.
Record Your Actual Expenses
Anyone who has been to college will agree with me when I say that money usually disappears so fast. Having a record of all your actual expenses can help you identify what is making you waste money and how you can improve that.
The first thing you need to do is categorize your expenses. The kind of categories you have will depend entirely on you. You may have categories such as school books, food, housing, and clothing among others.
Once you have identified your expenses, you will need to make an estimate. If you are working with a monthly income, then you should estimate your monthly expenses.
Simply have a small notebook with you to record even the smallest expenditure. Keeping receipts will also help when you are trying to figure out your expenses.
When figuring out your expenses, you may want to categorize them to needs and wants. Before actually purchasing something, ask yourself whether you need it or simply want it. Often, college students spend so much money on wants, which are not so necessary.
Set up an Emergency Fund
While it may not seem important, having an emergency fund comes in handy while you are in college. The good thing about an emergency fund is that you can put in whatever amount you have at the moment.
With an emergency fund, you may have a head start on clearing your student loans once you are done with school.
Do Strategic Shopping
Another area where college students end up spending too much money is in shopping. Whether you are grocery shopping, buying school textbooks, or looking for your next outfit, you need to be strategic.
For example, when it comes to books, you can choose to buy used textbooks, as they are cheaper. Plan to get grocery in bulk if you have enough storage for it.
Most college students will not differentiate between an emergency fund and a savings plan. While both involve you putting aside some money, an emergency fund is meant to cater for any unexpected expenses.
On the other hand, your savings plan should be a financial goal. Set goals for yourself. How much do you want to have in your savings account by the end of the semester? A savings plan can also be set up to help you pay for something.
Say, for example, you need a laptop. You can set up a savings account for a certain period to help you with that.
The broke college student is a tale that is all too common. However, you do not have to be one of them.
With a couple of budgeting tips, managing your money while in college can be quite fulfilling. What’s more, is that these tips are helpful, even after you are done with college and are the first steps towards financial freedom.