College is an exciting time filled with many new experiences, including learning how to budget life as a college student. Creating a budget in college is a good first step to take when you’re first learning to manage your finances. With a better understanding of your spending and saving habits, you can work toward bigger goals, such as paying off student loan debt, traveling and saving money for future milestones like moving to a new city after college.
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Assess Your Income
You first need to determine how much money you have coming in and how much you have going out. Helpful tools can include anything from a simple spreadsheet to a budgeting app. Income includes all sources of after-tax money you receive each month. This can be money from a part-time job, financial aid, stipends, grants, loans, or a monthly allowance from your parents.
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List Monthly Expenses
Next, you’ll want to list all of your monthly expenses. Look back at three months’ worth of expenses and account for every dollar you’ve spent. Here are some common college-related expenses:
- School supplies (such as textbooks, backpack, and electronics)
- Rent or room and board
- Groceries/Dining
- Household goods
- Phone, internet and monthly streaming subscriptions
- Transportation (such as gas, train tickets and bus fares)
- Loan payments (such as student, auto and personal)
- Insurance (such as health, rental and auto)
- Utilities (such as electricity, water and gas)
- Miscellaneous (such as gifts, entertainment, and apparel)
- Save For Emergencies
- Don’t forget to include savings in your expenses! College might not seem like a natural time to save money, but it can be done and saving money will be a critical skill you will continue to use throughout your life. An emergency fund is money you use for unexpected expenses, like a flat tire or a malfunctioning laptop.
Automate your savings by opening a savings account and setting up regular transfers. You can determine the amount based on a percentage of your income that you allocate to your savings each month.
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Organize Your Expenses into Categories
After you list your monthly expenses, categorize which are fixed and which are variable. If your income were to decrease, you could cancel your gym membership or reduce your takeout spending without much consequence. But you’re likely to need to pay for rent/room and board, transportation, and insurance.
- Fixed expenses are bills you can’t ignore and need to pay, including textbooks, rent/room and board, groceries, transportation, insurance and debt repayment.
- Variable expenses are more flexible and often include wants, like a gym membership, travel, dining out and entertainment purchases.
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Determine Average Monthly Cost for Each Category
Many fixed expenses and some variable expenses you incur will typically be the same month-to-month, making it easy to put a dollar amount to the cost. However, if you rent an apartment off campus utility expenses, such as electric and gas, can fluctuate month-to-month. The same goes for groceries, takeout, and household goods. For any areas where your spending varies from month-to-month, determine the average monthly cost, just add together three months’ worth of spending and divide by three.
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Choose A Type of Budget
There are different budgeting styles, and one might fit your specific situation better than another. A popular method is the 50/30/20 rule, which allocates 50% of your money toward needs (food, textbooks, tuition); 30% toward wants (entertainment, clothing); and 20% toward savings.
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Optimize Your Budget Regularly
Analyze all the information you gathered and decide if the numbers make sense. Look at your net income compared to your monthly expenses and see if you have enough money coming in each month to cover all your costs. If you can’t afford your lifestyle, it’s time to make adjustments. While you can consider ways to make more money, like picking up more hours at work, you should also think about ways you can cut costs. Once you’ve set your budget, keep track of it and as your needs change, so should your budget.
College can be the perfect time to start your financial future off on the right foot. Things like building credit, saving for retirement, and growing a thriving savings account come from making the right choices early and often. Getting a handle on your finances in college with a college student budget is one of the best first steps you can take.
For one-on-one budgeting assistance book an appointment with one of our Financial Coaches. Other resources can be found on our website under Financial Education.