Budgeting is the act of creating a spending plan depending on your income and expected expenses. Most students start budgeting during their freshman year in college. It is probably their first time living an independent life, managing everything, including their finances, on their own. So, even if you joined one of the colleges that waive math requirements, you will still need to use your math skills for budgeting and tracking your finances.
Sounds overwhelming? Don’t stress! In this post, we’re going to share some amazing budgeting tips for college students like you so money management never feels like an impossible task.
Why budget?
Before we share our effective budgeting tips, it is important for you to understand why one needs to budget in the first place. When you’re a college student with limited income:
- Budgeting keeps you aware of your financial standing
- Helps manage your income effectively
- Gives you a clear picture of where you should spend your money
- Stops you from making unnecessary expenditures
- Helps you build responsible financial habits
- Supports your long-term financial goals like further studies, travel, etc.
What’s more? The importance of budgeting for college students is clearly reflected in the savings you acquire while strategically handling your corpus. It can drastically reduce stress and allow you to focus on your academic success.
Typical income sources and expenses of college students
The first step to better financial management is to know where your money comes from and where it ends up being spent.
A college student’s income or cash inflow usually comes from monetary support from parents and money earned through part-time or on-campus jobs, paid internships, scholarships, government or institutional grants, stipends, paid surveys, and other small gigs.
Common expenses include rent toward accommodation, travel costs, college supplies, groceries, utilities like gas and electricity, household supplies, phone and Wi-Fi charges, loan repayments, and entertainment costs.
Pro budgeting tips for college students: Keep your finances in check!
Here are some highly effective tips to help you ace budgeting and become an expert at managing your finances as a college student:
1. List down your needs and wants
Before you begin budgeting, you must categorize your expenses into needs and wants. Needs are basic necessities you can’t do without. These are uncompromisable expenses, mostly recurring, that allow a person to live a basic life. For students, needs include accommodation rent, groceries, transportation costs, etc.
Wants, on the other hand, are things you would love to have but can certainly do without. Eating out in fancy restaurants, vacations, and getting yourself the latest mobile phone fall into this category.
Once you learn to differentiate between your needs and wants, you will be able to prioritize your expenses much more effectively and save yourself from compromising your financial stability.
2. Calculate your monthly income and expenditures
Because college students do not have time to take up full-time jobs that come with consistent earnings, their income usually relies on one or multiple sources. With that in mind, write down all the sources from where you get money every month. It could be through your parents, financial aid obtained from the government, or any other source. Add them up to calculate your total income.
Similarly, list down your expected expenditures at the start of the month and find how much you need to spend.
If your total expenditure exceeds your income, you can revise the list to see if there is anything you can avoid spending on. If not, prioritize the most important expenses first so you don’t run out of money to take care of them. The idea here is to live below your means to ensure your expenditures remain less than your income.
3. Make note of your expenses
Individuals who are great at budgeting and know how to manage their finances have one thing in common. They keep track of their daily expenses so they know where the funds are flowing.
To get into this habit of noting down every small expense, you can make use of one of the many budgeting apps available through the internet. A quick entry into the app can help you keep a record for future reference.
But if you are a traditionalist who would like to go the old-school way, use a pen and a small notebook to jot down your expenses for the day. Do this before bedtime, during lunch, and even when you have extra time left after brain break activities and games.
4. Follow the 50/30/20 rule
Never heard of the classic 50/30/20 budget rule? Let us break it down for you.
The rule states that if you wish to manage your finances well, you should allocate 50% of your total income (after taxes) to your needs, 30% to your wants, and the rest 20% to savings. Dividing your income this way gives you the option to fulfil your needs while splurging on a few specials to keep your sanity, and also save some money for the long run.
However, this rule may or may not suit everyone depending on their monetary situation. Other options like the 70/30 rule (spend 70% and save 30%) or the 70/20/10 rule (spend 70%, save 20%, and repay student loans or debts with the remaining 10%) also make good choices for strategic financial planning.
Before you follow them, access your finances carefully and select the option best suited to your current situation.
5. Get yourself a student bank account
Saving is important. Though it may seem hard to save money from the little income you have as a college student, getting into this habit can be extremely rewarding. While you sure can keep your savings with you, having a dedicated student bank account to deposit your savings can help in times when you feel tempted to spend on something unnecessary.
Many banks offer student accounts at no to minimal charges. Get yourself one and see your savings grow eventually. You can always withdraw this money during emergencies or to pay off your student loan during or after college.
6. Say NO to impulse buying
It is easy to fall for a pair of trendy shades or that cute black dress you saw at the shopping mall. But as a student with limited resources, it is important to keep a check on these urges and avoid impulse buying.
Now, how do you know if you’re buying impulsively? Check your bills. If it has items that you didn’t need or planned on buying, it could be a sign of impulse buying.
Some effective ways to break this habit are to wait for 24-48 hours before making a purchase and hold off on new purchases if you have already spent 30% of your income on things you wanted.
7. Shop from budget-friendly stores
Many stores offer budget-friendly products to their customers. Identify these stores and buy necessary items from there. For example, you could buy affordable clothes from Walmart and Target, small household items and party supplies from Dollar Store, and discounted bulk groceries from Costco.
You could even practice comparison shopping to identify which store offers you the best price, especially for large one-time items like bedding, desks and chairs, storage cubbies, etc.
8. Take advantage of cash backs and student discounts
Some companies offer a small percentage of the product’s price as cash back when you make payments using a credit card. Therefore, know your card benefits so you can maximize your savings.
Then you have student discounts, which are offered to those who hold student IDs. Student discounts are typically available on subscriptions, entertainment, electronics, and more! So, keep an eye out for existing discounts at stores or online to leverage your student identity to save some extra dollars.
9. Say YES to homemade meals and free entertainment
If you love dining out, reserve it for special occasions such as birthdays. On other days, make your own meals, which are far more affordable and healthier than outside food.
And while you may want to spend some money on a movie night with your friends once in a while, try to explore opportunities for free entertainment in your city. Look up local and campus events or indulge in recreational activities like hiking, spending a day at the beach, or taking a free visit to the museum, which can cost minimally while lending you a good time.
10. Weigh your travel options
Many college students reside off campus and need to travel to college or go for internships on an everyday basis. If you’re one of them, try estimating the cost of travel by different means. Typically, a bus ride will cost far less than a cab service. You could even get yourself a monthly travel pass, which is priced lower than the total cost of buying tickets regularly.
Furthermore, if your college is just a mile or two away, you could simply walk to your destination so you save on cash while reaching your daily step count to stay fit and healthy.
11. Find ways to generate income
It is possible to generate or find additional sources of income while you’re still a student in college. Of course, it may not match the paycheck of a full-time job, but even a small amount can boost your total income and give you that added advantage to cover your college expenses.
So, find a part-time job wherein you can gain work experience, make some money, and use your free hours productively. Jobs such as server, teaching assistant, and tutor are ideal for college students.
In addition, keep looking for scholarships that cover tuition and other college expenses even after joining college. Yes! It is possible to apply for scholarships throughout your college years. There is no harm in trying. If you are lucky, you may end up getting one that will substantially lessen the financial burden off your shoulders.
12. Build that credit score, but use your credit card wisely
There are many benefits to building a solid credit score. It can make it easier for you to lease a car or rent an apartment in the future. You may enjoy lower insurance rates and better credit card rewards. However, these benefits come with the responsible use of credit cards.
If you plan to use one, make sure you pay back on time and limit spending only to the amount you can easily pay off. Missing payments result in heavy penalty charges and can bring your credit score down substantially.
13. Review your monthly expenses
Noting your expenses is one part of budgeting. The other is to review them and make adjustments to your spending habits. Every month end, open your budget spreadsheet and calculate your total expenditure for the month.
See if you could stick to your initial budget. If not, find out where you spent in excess. Analyze if your extra expenditure is justifiable or if it was something you could have easily avoided. Derive meaningful conclusions and adjust your strategy for the coming months.
And don’t forget to account for changes like rent hikes or a special grant from college (in case you get one) in your next budget.
14. Get help if needed
Budgeting is a new experience for college students, if you haven’t done it before. It can take time to understand the concepts and bring them to practice.
In case you face difficulty figuring out what budgeting entails or how you can do it better, ask your family for help. Your parents can guide you well. After all, they have been doing it for years! You could even ask a friend or take up financial literacy classes to understand it better.
In conclusion
Students are expected to be good at managing time and are often seen participating in time management activities in college. Besides time management, learning money management is just as important because both time and money are valuable and essential for success.
We hope our budgeting tips help you take care of your finances as a student and prepare you for complex financial management in the future. Just be realistic while budgeting and stick to your daily or weekly tracking routine to persevere with this important life skill and use it to your advantage.
I am Priyanka Sonkushre, a writer and blogger. I am the person behind “One Loving Mama,” a mom blog. Equipped with a Bachelor’s degree along with an MBA, my healthcare background helps me deeply understand learning difficulties. I know how challenging it can be for parents to find the right resources to help their children excel in life. So, here I am to blend my healthcare expertise with my parenting experience to create valuable and helpful resources for parents and teachers supporting children with learning differences. If you wish, you can follow me on Facebook and LinkedIn.