Budgeting can be a tough code to crack for anyone, including college students. That’s because it’s more than just writing a list of your upcoming expenses. It’s the complex art of tracking and managing your finances.
In this article, we are going to list down the different tips we have for college students on how to create a successful budget.
Differentiate Between Needs and Wants
The experience given by a couple of decades of adulthood is invaluable in determining what needs and wants are. However, college students don’t have that kind of insight yet. Some items can be easy to determine as a need: rent, utility bills, academic expenses. But what about the other things? Coffee, books, your weekly stress-relief party. Aren’t these things needs as well? Here’s a tip: list down all the expenses that will really put you in serious trouble. Unfortunately, unless you’re in the business of coffee retail, that might not include your latte runs.
Calculate Your Net Income
The next thing that you should determine is how much you’re earning. At the very least, you should ensure that it will be enough to cover all your needs. Otherwise, you will be forced to consider one of the three options:
- Are there needs that you can live without?
- Is there a way to increase your earnings?
- Is there an item in your budget list that you can further reduce? For instance, you can save money on groceries by using student discounts, coupons, or buying generic brands.
List Monthly Expenses
Once you have made your calculations, you can then move on to create the outline of your budget starting with your monthly expenses. There’s no need to make your list look aesthetically perfect. Just make sure that you don’t miss an important item. It would be a shame to complete your monthly budget and forget to list down, say, your internet bill.
Organize Your Expenses into Fixed and Variable Categories
Expenses can further be organized into two categories: fixed and variable. As the name suggests, fixed expenses are those that don’t change (at least, very often). For instance, your tuition, monthly rent, and bills will remain constant until rates increase. Meanwhile, variable expenses are those that change rates frequently. These typically include your wants. For instance, you might have increased your clothing budget last month to make way for the restocking of your favorite online shop. That might mean that you won’t need to budget a lot for your clothing expenses this month.
Determine Average Monthly Costs for Each Expense
Finally, you’re almost ready to determine your monthly budget. This is going to serve as your baseline goal for your monthly income. Feel free to determine the average monthly cost for each expense. Why? That’s because even if you spend more for some of your variables during certain months, this doesn’t mean that you shouldn’t save for them during their “off-peak” months. Doing so will make “peak” months easier to bear.
Finally, don’t stop there. As we’ve mentioned above, budgeting is a complex art of constant tweaking and re-tweaking. Eventually, you’ll have to account for other finances, especially if you want to expand and increase the quality of your life. Saving is very important too. We recommend listing savings under fixed needs. You should account for your future investments as well.
There are a lot of things that you can experience while you’re in college. You should definitely make the most out of it, but there’s no need to go broke. Learning how to budget your finances today will also help you deal with the massive debt awaiting you after graduation: your student loan. Good luck!