Going to college is an exciting period in your life. You’ll likely experience more freedom than at any prior point in your life. While spreading your wings is fun and amazing, one area that can get you in trouble is money.
Without a thorough understanding of basic finance, new college students often find themselves in trouble very quickly. College can be a great place to learn how to budget your finances, a skill that will benefit you for the rest of your life.
1. Start by Adding Up Your Incoming
Before you can budget anything, you need to know what you are working with. Total up the amount of money you have coming in each month. Start with any full-time or part-time jobs you may hold while in college. If your hours fluctuate each week, you can look at the last several months and figure out the average.
Also, consider any other sources of income, such as money from your parents, student loans, gifts from relatives, or anything that brings in money. Add all those income sources to calculate your monthly net income. This is what you use to budget your expenses.
2. Add Together Your Expenses
Now you’ll want to total up all your expenses. Are you living in an apartment? You want to write down your rent (or your share of it if you have roommates). What about transportation? Do you have a car, or do you use public transportation?
If you rent an apartment, what about your utilities, such as gas, electricity, water, parking, and anything else associated with it? Living in an apartment also means you’re probably responsible for your food. Add that in.
What about gym memberships, going to the movies, books, clothes, cell phones, and other materials? It’s essential to sit down and go through your month daily and write down any time you spend money.
You may need to calculate an average once again when totaling your expenses. If you rent an apartment, chances are your rent is fixed, the same amount month to month. But costs like food may vary significantly from month to month. Total your expenses for several months. Divide the total by the number of months. There’s your average for those expenses that may fluctuate every month.
3. Divide Your Expenses into Needs VS Wants
Here’s where you have to get real. If you struggle to make ends meet each month, you may need to make some cuts. Start by tracking your expenses and deciding if you need them or if they are expendable.
If you live in your own apartment, that’s probably a need. You may be able to find additional roommates to help shoulder the cost. You might be able to find a cheaper apartment. Or you may consider moving into your college’s dorms.
Other expenses can be adjusted, too. What about your cell phone? Do you really need it? If you do, maybe you can move to a more affordable plan. Consider your food. Learn a few simple cooking techniques, buy some groceries, and you’ll be amazed at how much money you can save.
Many online services are subscription-based. These services rely on customers forgetting about them, and they roll over month to month. Look at any subscriptions you may have. Are there any you’ve forgotten? Of the ones you have, are you really using them enough to warrant the expense?
4. Saving Money Where You Live
Most financial experts will say living in a dorm is better for your bottom line. Your heat, water, electricity, and meal plan are often rolled up into one expense. This makes it much easier to keep track of your money and what you need to pay.
Unless you live in your parent’s home, try to get an apartment close to school. Instead of dumping all your money into a used car that may break down at the worst time, walk to school. You’ll be healthier and save a lot of money.
If you own a dog or cat, you may be able to get pet surcharges in your apartment dropped by getting your pet certified as an emotional support animal. Getting an ESA letter is easier to get now than in years past.
5. Watch the Economy
Pay attention to the global, national, and local economies. Like it or not, the economy affects college students, too. If the economy is doing well, you may be able to find a better-paying part-time job while you are in college. However, if the economy is doing poorly, you might want to hang onto that job you were thinking about quitting until things get better.
6. Look for Online and Offline Savings
There are many opportunities to save when shopping online. One well-known tactic is using credit cards to rack up rewards points, cashback, or airline miles. Another way to save is by using an online shopping extension like Capital One Shopping or Honey.
Another simple way to save money while shopping is using your student ID. That little card opens a world of savings to you. There’s only one catch. Many times, you must ask if a business offers student discounts. Many do, but they don’t advertise it. Carry your student ID with you everywhere you go. It’s that simple.
7. Compare Investing with Paying Off Student Loans
Yes, investing and planning for your retirement as early as possible is wise. Paying off student loans is also a great move. The key to deciding which to do and how much depends on interest rates.
How much money will you save by paying off your college loans early? How much money will you make in your investments? Comparing your student loans and investment goals will give you an idea of where to put your money.
Going to college is an essential step in your journey into adulthood. The best part? Many important life lessons are the ones you don’t learn in a classroom. By being proactive, you can save a lot of money, reduce the pressure on yourself, and enjoy college even more.