College Budgeting Explained with Textbook Simplicity
College studying is already time consuming and draining and the last thing you want to worry about is money. However, you don’t want to pay too much attention to studying and not think about money at all. Between the cost of tuition and the wages you aren’t making while you are in school, earning a degree is costly.
You don’t want to add to the price of your education by taking on credit card debt and overspending. By working on college budgeting and planning finances at the beginning, you can look forward to a successful year and possibly graduate without going broke.
Why You Need to Work on College Budgeting
Setting aside time to create and maintain a simple budget can seem like a big task in college but it must be done. Students who pay attention to financial spending limits and have savings goals early on worry less about money and have a nest egg available after graduation to help begin the adult phase of life. In order to make college budgeting easier, the best advice is to keep it simple. While some adults use a yearly budget system, students can find it easier to work with a semester or quarter model.
How To Create a College Budget
The college budgeting process can be a bit difficult and take some time but there are some basic steps to creating a college budget.
- Talk It Out
Before creating a budget, you want to chat with those who are involved in financing your education. Discuss who will be paying for what, your expected expenses, any financial aid, and if it makes sense to get a credit card
- List Expenses
It helps to anticipate the cost of school supplies, textbooks, transportation, room and board, and other spending
- Identify Your Income Sources
Think about if you are getting financial aid, any money you have from family members, and part-time job wages
- Track Spending
Once you are at school, you need to monitor your spending. Determine your needs and wants and which non-essentials you can do without.
- Take College Budgeting to the Next Level
If you are in good financial shape then you can set yourself up for the future. This can be by creating an emergency fund or a plan for paying off student loans.
Talking About College Budgeting
Money shouldn’t be a taboo subject so it helps to talk about it when it comes to college budgeting. Discuss what things can cost and how everyone can keep money in their pocket.
Who is paying for college and how? Have a conversation before the start of every school year to decide if your family will pay for some of the cost out of pocket and if you are relying on financial aid, getting a job, or combining the two options.
If a parent or guardian is claiming you as a dependent then it will depend on how you file taxes and who is required to fill out the FAFSA form. Discuss your financial status before each school year and address any changes, such as a job loss or raise.
If you want to open a credit card but are under 21 and don’t have a full-time income then you will need a co-signer. You should speak about the ground rules, such as only using the card for emergencies. You should also discuss what constitutes an emergency. Approach any new financial products with caution since you want to be careful to not take on any debt.
Planning Your Income Sources
If you are using student loans for any living expenses then you get a lump sum payout at the beginning of the semester. This is why it makes sense to budget on a semester or quarter basis, depending on your school schedule. Using student loan money for your living expenses can sometimes be necessary. Keep in mind this does mean that you will have debt with interest to pay back. However, if you use your student loan money, you will have more time for studying and will be able to work less.
If work is part of your income then you want your money to last. Certain side jobs can help you make some money without having to commit to a part-time or full-time schedule. If you need to work more to cover your costs then you can miss out on study time.
You may have a combination of income sources and how you get paid from each one may differ from the other. It’s important to take into account how often you will get paid from various sources. As mentioned earlier, student loans give you a lump sum at the beginning that you have to manage. If you have a part-time job, you may get paid every week or every other week. You may also have income that comes in more irregularly, such as tips from a serving job, random side gigs, or money your parents send you. If you are going to rely on this income then you need a way to figure out the average coming from the source each month.
A Store to Create a Budget
Make Smart Financial Decisions.
Expenses College Students Should Expect
When it comes to college budgeting, it helps to know what expenses you will be facing.
Housing
Whether you live on campus or off campus, this can likely be one of the largest monthly expenses.
Books
Books can add up pretty quickly, depending on whether or not you are purchasing them used or new.
Utilities
If you live on campus then your electricity, gas, cable, water, and Internet will be covered in your student housing payment but for those who live off campus, you need to calculate these expenses. Students should also include a monthly cell phone bill.
Transportation
Students with cars will need to factor in the related costs, such as insurance, repairs, parking, fuel, and maintenance. Those who are going to rely on public transportation will need to think about the cost of subway or bus passes. If you are taking advantage of ride sharing services then you also need to consider these expenses.
Savings
Those who budget carefully and plan can save money while in school. While it may not seem like much, it adds up.
Groceries
While cooking in a dorm may not exactly be feasible, students can buy snacks or meals for the microwave to cut down on costs. Those with full kitchens can cut expenses by preparing meals at home instead of eating out.
Dining Out
College students will dine out whether it’s with friends or picking up some dinner after a long day of classes.
Childcare
If you are a parent while going to school then you need to factor in the cost of childcare while you are in class.
Entertainment
Activities such as concerts, movies, TV, or music subscriptions should be factored in as these costs can add up and play a role in college budgeting.
Healthcare
This includes premiums for insurance, prescriptions, and memberships at gyms.
Clothing
You can find deals by shopping at secondhand stores and have your family ship out your existing clothes.
Laundry
Unless you live in an apartment with a washer and dryer in the unit, you will need to pay for laundry. There may also need to be some additional costs for dry cleaning.
Don’t forget about easy to miss expenses that don’t come up every month. For example, you may only pay your car insurance every six months and you may only have travel expenses at the beginning and end of the semester.
Different Budgeting Methods For You
There are different college budgeting styles that you can use and you have to find the right one for you.
Zero Based Budgeting
This is an extremely precise method where your total income will equal your total expenses. Your budget balances at the end of the month. This doesn’t mean you are spending every dollar you make and this includes adding money into your savings account. This just means you have a plan for every dollar of your income.
Percentage Based Budgeting
An example of a percentage based budget is 50% of income on essentials, 30% on personal spending, and 20% on financial goals. Now as a college student, you may want to tweak the ratios and 70% of the income can go to essentials while you allocate the other percentage to financial goals and personal spending. A percentage based budget helps you cover the necessary basics without sacrificing savings and fun. You aren’t tracking every dollar you spend as long as you stay within the spending limits of your categories.
Cash Envelope System
This system helps you stick to a budget by restricting spending on variable expenses. Even with a budget, it can be easy to spend too much money on food delivery or alcohol. The system works by determining the spending limits for any of your variable expenses, such as entertainment or food.
You aren’t including any fixed costs like your phone bill in this system. You put cash in labeled envelopes in order to match the spending limits and only use the cash for the category. Once an envelope is empty then you aren’t spending any more in that category. You don’t have to carry around a ton of cash in order to get this system to work and can digitalize the system with some budget tools and apps.
Ways To Cut the Cost Of College
College budgeting is important but it also helps if you can cut some of the cost of college.
Choice of School
Tuition and fees associated with college make up a lot of a student’s budget. The cost of attendance should be a factor in the choice of college. The average cost for an in-state public university can be much cheaper than out-of-state universities and private universities. While grants and scholarships can help cover some costs, going to an in-state school can help you save a lot of money on tuition and fees.
Textbooks
Renting textbooks can help you save money and also ease the burden of shopping around for books at the beginning of the semester. There are websites you can visit to rent or buy textbooks for cheaper than at the university bookstore.
Housing
Depending on the location of your university, it can be cheaper to live on campus. If your college is in a big city, such as Los Angeles or New York, where rent is high already then it’s likely cheaper to live on campus. For small towns, it’s better to live off campus.
Roommates
One of the ways to cut down on housing costs is by sharing expenses with roommates. Split the costs of rent, utilities, groceries, and more.
Cut Cable
The average cable bill can really be a budget killer and it’s just something that will procrastinate your studying. There are plenty of cheaper alternatives to cable.
Transportation
Owning and operating a car can get expensive. However, many universities have a bus system you can use in addition to the public transportation system in your city. If you need something to ride around town, consider a bike or a scooter. This way parking is never an issue.
Food
Cooking for three people is just as easy as cooking for one and can be much cheaper. If you plan to cook meals with your roommate then you can share the costs of the ingredients. When you do eat out, look for discounts and deals.
Coffee
It can be impossible for college students to live without coffee, especially with those 8 a.m. classes. It’s much cheaper to brew your own than heading to the coffee shop on campus or Starbucks.
Party Fund
You aren’t expected to stay home every weekend but when you do go out, make sure you aren't spending money that you need for more important things. Set aside some money to use for a night out. Leave credit cards at home and only use cash from the money you set aside to ensure you only spend what you can afford.
How To Save Money In College
Establishing healthy financial habits is a good practice in life and there are different ways for college students to save money.
Take Advantage of Free Food
There are plenty of on-campus events that happen that give out free food and beverages. Students may also want to consider working part-time at a restaurant. In addition to their tips and wages, restaurants will sometimes give free meals to employees.
Use Student Discounts
There are hundreds of companies that give student discounts and many of them can be significant. Apple and Dell give percentages off for students with a school email address, clothing stores offer discounts, and Amazon Prime offers free memberships.
Stay on Your Parents' Insurance
If you are able to, it’s best to stay on your parent’s insurance until the age limit. This can help with getting cheaper prescriptions and low- to no-cost visits at the doctor’s office.
Be Strategic at the Grocery Store
The advice about never shopping hungry is true. If you are throwing random things into your cart then the little splurges can add up. In addition to shopping the sales, purchase store brand items when you can and always check the clearance bins.
Sell Items You Don’t Need
You want to sell your old textbooks but you can also sell clothing through stores such as Poshmark to clean out your closet and make a profit. If you are getting rid of old furniture, technology, or other household items, consider using Craigslist.
Cancel Memberships
Instead of paying for Spotify or Apple Music, use free versions of the services. Cut memberships when you can or consider sharing a single membership with family and friends.
Be Careful with Credit
If you feel that you should have a credit card in college then choose one that doesn’t have an annual fee and has the lowest interest rate possible. Make the payments on time to avoid fees or penalties and damaging your credit for later on in life. Having a credit card can give you some benefits while in college if you use it responsibly. If you pay off the account on time each month and fully then it helps you establish a good credit score. Having a good credit score will be important when you want to rent an apartment, get an auto loan, buy a house, or even get a job.
Limit Spending on Alcohol
Find happy hours around campus or consider arranging a game night so you aren’t spending a ton of money out at a bar.
Why You Need an Emergency Fund In College
Everyone needs an emergency fund, including college students. There are a number of reasons why college students need an emergency fund and it should be worked into college budgeting. Most people don’t get serious with their money until much later on in life. Getting into the habit of creating an emergency fund while you are in college can open up more financial doors for you in the future.
Unexpected Expenses
If an emergency does come up then you won’t have to worry about it. Whether you like it or not, there will be unexpected expenses that come up. Your car could break down or you may need to visit a sick family member. Instead of relying on credit cards to get you through an emergency, an emergency fund will give you peace of mind.
Psychological Effect
Watching an emergency fund grow during this time in your life can also give you a psychological boost to make better financial decisions in life. If you are creating an emergency fund as part of your college budgeting then you will be more likely to pay off your student loan debt faster, purchase a house quicker, and reach savings and investment goals. You will also be less likely to depend on your parents for money.
Unemployment
If you are jobless after graduating for a bit, an emergency fund can help you survive until you find one. Sometimes finding a job doesn’t happen immediately after you graduate college so it helps to have that fund so you can spend some time looking.
An emergency fund is an investment in yourself. Being in school is work and it can be demoralizing to have nothing in a bank account to show for all the hard work you have been doing. When you put money into an emergency fund, you are investing in yourself.
How To Stick With Your Budget
Once you have done the hard work of creating a budget you then have to stick to it.
Public Accountability
Share your goals with others. Maintaining a sense of accountability can force you to stick with it.
Visualization Board
You can use different methods to create a visualization board. The specific type of board you create doesn’t matter because the important thing is to create a board that shows the reason why you are sticking to the budget. The dream board can have a picture of a graduation cap or an image that symbolizes debt freedom. Regardless of the goals, the visualization board should be placed somewhere that you will see it often. This gives a constant reminder of what you are working toward.
Occasional Indulgence
You won’t be able to stick to a budget if it is too strict, especially in college. Let yourself have an indulgence every once in a while.
Track Successes
Your goals might be large numbers and feel overwhelming. It’s easier to stay on track if you set milestones along the way. The idea is to celebrate the little milestones in your journey and break it into smaller steps so you don’t feel so overwhelmed.
College Budgeting Tips
Following these college budgeting tips can make it easier to stick with your budget as well.
You have a lot on your mind when it comes to your studies so don’t worry about when things are due and set your bills to automatically deduct each month. This way you don’t have to worry about any more late fees.
If saving is part of your budget, and it should be, then you want to pay yourself first. Set up automatic deductions from your checking account to your savings account every month to help you with your savings goals.
Whether you use budgeting software or an Excel spreadsheet, choose a budgeting system that is understandable and intuitive for you to use. The easier it is for you to use, the more likely you are to stick with it.
If you have trouble remembering receipts in order for you to keep track of your spending then round up to the nearest dollar instead. This can make it easier to avoid any mathematical errors since you are technically budgeting more than you spent. It’s much easier than tracking every single cent.
Things can change from month to month and you may spend more than you plan to. You need to make adjustments as you go. If you go over in one budget category then do your best to shave off dollars from another category. You can skip that meal out one weekend or make groceries last longer.
Your goals won’t matter much if you don’t remember what they are. Don’t leave the budget at home while you are shopping so you know how much you have for each category.
Instead of seeing your budget as something that is telling you what you can and can’t do, look at it as a challenge. Set budget goals for coming in under your entertainment budget by finding as many as free options as possible. Not only can you improve your budget by doing this, you can also add in some fun to make it interesting.
Every student’s budget is bound to change. Some months there may be more expenses, like at the beginning when you have more books to purchase. If you have to move into a new apartment or you have a roommate drop out mid-semester, it could affect your cost of living. The summer months might give you some extra income if you land a seasonal job or a paid internship. You may also find that you need to budget more carefully during the summer to pay for classes that a financial aid package doesn’t cover. You will need to regularly adjust your budget and that’s okay.
Final Thoughts
College budgeting is a must for students. Creating a budget begins with some simple steps. Be sure to talk over your financial goals with your family so you can all be on the same page. You will then want to consider your income sources and your monthly expenses.
There are plenty of ways to save money in college so it is easier to stick to your budget. Savings should still be a part of your budget goals and it’s important for college students to have an emergency fund. Sticking with your budget requires some discipline but there are ways to make it easier to stick with it while still enjoying your college experience.