As a student, budgeting is essential if you want to make college a lot more affordable. However, more often than not, many students fail to set a budget beforehand. In a 2016 study, 43 percent of students say that they don’t track their spending habits, while a staggering 58 per cent say that they aren’t saving cash each month. As a result, it doesn’t come as a surprise anymore that 7 out of 10 students are stressed, when it comes to their financial security.
Why Do You Need to Budget?
While managing your cash flow and budgeting may be the last things that are on your mind, especially if you have a term paper to finish, or you’re studying for an unexpected exam, it is vital. By having a budgeting plan early on, you’ll likely develop healthy financial habits in the future.
The Budgeting Basics
Know Your Cash Flow
The first step in the overall cash flow process is first getting an overview of your present finances. It’s crucial because if you don’t have a clear picture if where you financially stand today, how can you expect to achieve your financial goals of surviving college?
So before you buy an expensive concert ticket or a gadget, take time to assess if you can afford it. You have to come up with a concrete game plan so that you can pay your way through college.
You can do this calculating your assets and liabilities, your income (if you have). You also need to understand where you are spending your money. So, let’s say you’re sending $350 for groceries each month. But what would happen if you spend $300? Would you be eating less, at that state? Chances are, you won’t even notice. Or instead of eating one every weekend, what if you plan to go every other weekend?
Focus on what you need, instead of what you want. If you start making these little sacrifices, you’d be surprised how much you can save every month.
Anticipate College Expenses
As any valuable step in making a budget plan, you need to determine your expenses. When you map out a budget, it’s crucial to determine which costs will be covered by your parent or guardian. Then, subtract it from your total monthly expenses.
Here are the most common expenses you’re expected to pay for during college:
Also, if you want to go in-depth on how much college could cost you, check out this college cost calculator for additional computations on yearly attendance, possible scholarships, and loans that you may incur during your college years.
Track Your Spending
The next thing that you should do is to track the average amount of cash that you send each month. Review your bank accounts, credit cards, and debit card. See where your money is going for the last couple of months, and where are the more expensive items coming from. Once you have a good idea where you’re spending your money on, it would surprise you that a lot of things there are non-essentials.
Automate Money Management
You’d be surprised that there are a lot of online tools and apps that are available for you to utilize once your prioritize your spending. These tools will make it more convenient for you to track your spending habits. As a result, it will be easier for you to map out a budget plan to monitor your spending. These apps would usually already categorize your budget in different categories. Then, it would alert you if a particular category is close to exceeding its specified limit.
Also, the Department of Education’s federal student aid office also provides essential resources on budgeting that’s ideal for college students. Another tip is to separate your finances into two accounts ‒ one for fixed expenses, another for variable costs. That way, you won’t be tempted to spend your money on fixed expenses like your monthly bills, rent or car insurance.
On the circumstance that you need extra cash for a night out, then you can spend the money that you’ve set aside for variable resources or the credit card that’s linked to your variable money. Managing your cash by automating is a simple, but an efficient concept that you can take advantage of.
Look for Ways to Save Money
If your monthly income exceeds your total expenses, then it’s a good time to cut back. There’s no doubt that cutting back is hard ‒ this might require you to give up on indulgences like eating out with your friends every weekend, or going to your dream getaway this summer. Saving and cutting back takes a lot of commitment, but you’d be quite surprised that saving opportunities exist virtually, everywhere. The important thing is for you to be aware of it, should an opportunity present itself.
For instance, before deciding to buy a brand-new car, ask yourself first if you’ll be able to afford it. Buying a car can be expensive, especially if you’re a young adult with a lower income. Not to mention, other miscellaneous expenses of having a car can add up quickly, such as tires, brakes, gas, and oil change.
The Bottom Line
Here’s the thing ‒ while it’s hard to create a budget, it’s even harder to live with the budget you’ve set for yourself. There will be times that you might need to take a small break from trying to pinch pennies. However, one month without having a clear budget in mind can quickly send you to the wrong direction, and you’d be surprised how much everything can add up.
If you don’t learn how to budget as early as now, you’ll likely end up being in debt, by borrowing too much for school. Once you graduate, you might have a hard time paying off these debts, as well as manage your finances properly to pay off those loans.
Meanwhile, if you proactively shape your financial life as early as now, you’ll be off having a fresh start by the time you graduate. Taking control of your finances now can be quite challenging, but once you start a strict budget for yourself and stick with it, you’ll soon be moving forward to the right direction.