Face it: College is expensive, and most students have limited financial resources. Not only is tuition a major cost, but day-to-day expenses can add up quickly. No matter what your financial situation, a budget for college is a must. Although a budget might not completely eliminate debt after graduation, it can help you become realistic about your finances so that you can have a basis for future life planning.
A budget is a spending plan that tracks all sources of income (student loan disbursements, money from parents, etc.) and expenses (rent, tuition, etc.) during a set period of time (weekly, monthly, etc.). Creating and following a budget will allow you to pay your bills on time, cut costs, put some money away for emergencies, and finish college with as little debt as possible.
A budget will condition you to live within your means, put money into savings, and possibly invest down the road. Here are a few tips to help you get started.
To create an effective budget, you need to learn more about your income and your spending behaviors. First, determine how much money is coming in and when. Sources of income might include a job, your savings, gifts from relatives, student loans, scholarship dollars, or grants. List all your income sources, making note of how often you receive each type of income (weekly or monthly paychecks, quarterly loan disbursements, one-time gifts, etc.) and how much money you can expect each time. Knowing when your money is coming in will help you decide how to structure your budget. For example, if most of your income comes in on a monthly basis, you’ll want to create a monthly budget. If you are paid every other week, a biweekly budget might work better.
Expenses will include tuition; residence hall fees if you live on campus; and the costs of books and course materials, lab fees, and membership fees for any organizations you might join. Some institutions offer a separate January or May term. Although your tuition for these one-month terms is generally covered in your overall tuition payment, you would have extra expenses if you wanted to travel to another location in the United States or abroad.
First, get a “reality check.” How do you think that you are spending your money? To find out for sure where your money is going and when, track your spending for a few weeks—ideally at least a full month—in a notebook or in a table or spreadsheet. The kinds of expense categories you should consider will vary depending on your situation. If you are a traditional full-time student who lives with your parents or family members, your living expenses won’t be the same as students living in a campus residence hall or in an off-campus apartment. If you are a returning student who is holding down a job and has a family of your own to support, you will calculate your expenses differently. Whatever your situation, keeping track of your expenses and learning about your spending behaviors are important habits to develop. Consider which of the following expense categories are relevant to you:
Utilities (e.g., electricity, gas, water)
Transportation (car payment, car insurance, car maintenance/repairs, gasoline, public transportation)
Medical expenses (prescriptions, doctor visits, hospital bills)
Entertainment (dining out, hobbies, movies)
Personal grooming (e.g., haircuts, toiletries)
Miscellaneous (e.g., travel, organization dues)
Be sure to recognize which expenses are fixed and which are variable. A fixed expense is one that will cost you the same amount every time you pay it. For example, your rent is a fixed expense because you owe your landlord the same amount each month. A variable expense is one that may change. Your textbooks are a variable expense because the number and cost of them will be different each term.
Once you have a sense of how your total income compares to your total weekly or monthly expenses, you can get a clearer picture of your current financial situation.
Although your budget might never be perfect, you can strive to improve it. In what areas did you spend much more or much less than expected? Do you need to reallocate funds to better meet the needs of your current situation? Be realistic and thoughtful in how you spend your money, and use your budget to help meet your goals, such as planning for a trip or getting a new pair of jeans.
Whatever you do, don’t give up if your bottom line doesn’t end up the way that you expected it would. Budgeting is a lot like dieting; you might slip up and eat a pizza (or spend too much buying one), but all is not lost. If you stay focused and flexible, your budget can lead you to financial stability and independence.
Once you have put together a working budget, have tried it out, and have adjusted it, you’re likely to discover that your expenses still exceed your income. Don’t panic. Simply begin to look for ways to reduce those expenses. Here are some tips for saving money in college:
Recognize the difference between your needs and your wants. A need is something that you must have. For example, tuition and textbooks are considered needs. On the other hand, your wants are goods, services, or experiences that you wish to purchase but could reasonably live without. For example, concert tickets and mochas are wants. Your budget should always provide for your needs first.
Share expenses. Having a roommate (or several) can be one of the easiest ways to cut costs on a regular basis. In exchange for giving up a little bit of privacy, you’ll save hundreds of dollars on rent, utilities, and food. Make sure, however, that you work out a plan for sharing expenses equally and that everyone accepts his or her responsibilities. For instance, remember that if only your name is on the cable account, you (and only you) are legally responsible for that bill. You’ll need to collect money from your roommates so that you can pay the bill in full and on time.
Consider the pros and cons of living on campus. Depending on your school’s location, off-campus housing might be less expensive than paying for a room and a meal plan on campus. Be aware, however, that although you might save some cash, you will give up a great deal of convenience by moving out of your campus residence. You almost certainly won’t be able to roll out of bed 10 minutes before class, and you will have to prepare your own meals. At the same time, living on campus makes it easier to make friends and develop a sense of connection to your college or university. Before you make the decision about where to live, weigh the advantages and disadvantages of each option.
Use low-cost transportation. If you live close to campus, consider whether or not you need to keep a car on campus. Take advantage of lower-cost options such as public transportation or biking to class to save money on gasoline and parking. If you live farther away, check to see whether your institution hosts a ride-sharing program for commuter students or join a carpool with someone in your area.
Seek out discount entertainment options. Take advantage of discounted or free programming through your college. Most institutions use a portion of their student fees to provide affordable entertainment options such as discounted or free tickets to concerts, movie theaters, sporting events, or other special events.
Embrace secondhand goods. Use online resources such as Craigslist and thrift stores such as Goodwill to expand your wardrobe, purchase extras such as games and sports equipment, or furnish and decorate your room or apartment. You’ll save money, and you won’t mind as much when someone spills a drink on your “new” couch.
Avoid unnecessary fees. Making late payments on credit cards and other bills can lead to expensive fees and can lower your credit score (which in turn will raise your interest rates). You might want to set up online, automatic payments to avoid making this costly mistake.