As the back-to-school buzz fills the air, seize the opportunity to establish a strong foundation for a truly successful year- not just academically, but financially! For college students, mastering the art of budgeting is more than just managing money. A budget can help you gain freedom, reduce stress, and ensure you have the resources you need to embrace your studies, and all the other opportunities college has to offer. A well-defined budget is essential for an empowered college experience, and here’s how to get started.
1. Calculate Your Monthly Income
Start by gaining a clear picture of your financial landscape. This involves identifying every contribution to your income, from student loans, scholarships, and grants to financial aid, parental contributions, part-time job earnings, and any other sources.
Once there is a clear picture, sum up all your incoming funds. Remember, for annual sources, divide them by 12 before adding them to reveal an accurate monthly income.
2. List and Categorize Expenses
It’s okay to spend money, as long as you are doing so smartly! The most effective approach to responsible spending starts with dividing your costs into three groups: fixed expenses, variable expenses, and savings.
- Fixed expenses are unavoidable. They are consistent and necessary costs that will help you keep your college journey on track. Think tuition payments, rent, transportation, and groceries.
- Variable expenses are where you will allocate resources for your “wants”, or more flexible spending. Dining out, shopping, and entertainment all fall into this category.
- Don’t forget to prioritize your future by contributing to your savings when possible! Channeling your money into an emergency fund safeguards you from unforeseen circumstances, making sure you are ready for anything. Also take some time to consider whether you have any personal goals or aspirations to save for.
3. Determine Average Monthly Costs
It’s all in the details! Review your bank and credit card statements to determine the average amount you are spending on variable expenses month to month. Then, add all fixed, variable, and savings expenses up to get your monthly costs. This will give you more insight into your spending patterns.
4. See Where You Stand
Now, it’s the moment of truth, where you will align how much you are making with how much you are spending. Subtract your average monthly costs from your monthly income to produce your net income.
If you have money left over, awesome! That means you are bringing in more money than you’re spending. But if you get a negative amount, your expenses are higher than your income. Don’t sweat it! This just means it’s time to make some smart choices about where your money is going.
5. Tweak and Refine Your Budget
Your budget isn’t set in stone, but instead a guideline that you can adjust where you need. First, make sure all your fixed expenses are covered. Once those most important needs are prioritized, look at your variable expenses to see if there’s areas you can trim down spending a little.
This could be a simple as eating out one less time per month or cancelling subscriptions you don’t really use. There are also less expensive alternatives for your needs, like renting textbooks instead of buying them or choosing a more affordable meal plan. These steps may seem small, but they can quickly add up!
6. Keep Track of Your Budget
Now that you have a plan, it’s time to put it to work! Choose a way to track your spending that makes sense for you. Some common tactics include using a spreadsheet, a notebook and pen, or even a mobile app. The key is to regularly log where your money is going.
7. Give Your Budget a Regular Check-Up
Think of your budget as a living thing. It needs a bit of attention and care to thrive! Your income may eventually change, or unexpected expenses may pop up. So, it’s a good idea to review your budget every month or so. Take a quick look to see if it’s still meeting your needs or if there’s areas for improvement. Maybe you’ll even find that you’ve been so on track that you have extra money to put toward a personal savings goal!
By following these steps, you will have every opportunity to ace your college experience, inside and outside of the classroom. Happy budgeting!