College is expensive. Anyone who tells you it isn’t… is probably lying! Ha! It’s really a wise practice to make a budget for any season in your life, but especially in college. You will be well occupied with your class schedule, and may not even be working part-time while you’re in school. So, without a big income source, how will you cover those many expenses? That’s where a smart budget comes in: you will never wonder how to pay your bills, and you will always know what’s left in your month allotment. Here are our very best tips to creating a realistic budget as you leave home for the first time:
Figure out where your income sources are coming from: Whether you are working or not while in school, you will have some sort of “income” source. It can be money from your parents, a trust fund, your own job, student loans, or any other sort of incoming finances. If your parents are supporting you in college, be clear with your expectations and how much you will be receiving. It’s not a fun conversation, but its really necessary with family, so no one has unfair expectations about their roles. If you are working, be sure to factor in taxes and fees that come out of your check, before you estimate how much you’re really taking home.
Next, divide up your upcoming expenses into categories. You will have many categories when it comes to college, but here are our suggested basics: Room and board, textbooks and school supplies, transportation, clothing, and discretionary spending. Room and board would include: cost of living on campus, or an apartment with utilities such as power and internet. Textbooks and supplies can include anything that you need for school, so don’t leave out items like scientific calculators, lab equipment, or any special uniforms or clothing. Transportation can include your own car, public transport, and any associated fuel or insurance fees, and clothing is self-explanatory. Discretionary spending includes any entertainment, spending money, or extras such as dining out with friends. We would also recommend adding a category for your cell phone plan, if that’s something you pay for.
Match up your expenses to your income, and figure out where the gaps are: If you are unable to meet your basic needs with your income, you will need to figure out a secondary plan, such as cutting out things like clothing money, or taking on part time work, such as selling clothes on Poshmark, or babysitting or tutoring. If at all possible, avoid taking out additional student loans because of the interest rates.
Track your expenses: Once you have a written or digital (like an app) budget in place, begin diligently tracking your expenses. You can often find out where your biggest pitfalls lie by looking at your online banking statements and matching them up to your categories. Before you leave for college, one of the wisest things you can do is to save a large nest egg up, in order to cover emergencies such as new tires, unexpected travel (especially if you live very far from home), or a medical crisis. We recommend at least $2000 as an “emergency” fund, although any more than that would be very wise as well.
By being diligent about managing your money in college, you are setting yourself up for success in the rest of your life as well. College is not only useful to gain academic knowledge, but it is also an important time to create healthy habits financially!