College Budgeting: A Guide for Students

College Budgeting: A Guide for Students

College is a great time to learn to have a lot of fun without much money. Make your money go further and learn money management skills for life.

For many young adults, college is a time of great freedom. With that freedom, though, comes a large dose of adult responsibility. Money is one of those responsibilities. It’s important to start setting up good fiscal behaviors in college. The decisions made in school can have long-lasting impacts. Students who sign up for credit cards and run up large debts can be haunted by the debt and its impact on their credit score for years. Luckily, setting up good financial habits is just a matter of a little work.

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Understand How Much Money Is Coming In and Going Out

Every college student is going to have different expenses. The very first step for college students and their families is understanding the various expenses in the student’s life. How much is tuition, what does financial aid cover, and what does the student need to pay for? Is the student responsible for paying for all books and course materials? Are they living at home, in a dorm, or on their own in an apartment? Are they mostly eating on campus, or do they need to figure out food for themselves? What about transportation?

There are two basic kinds of expenses. Fixed expenses are those that remain the same. Car insurance, tuition, and rent are fixed expenses. Variable expenses are those that change, like the price of groceries and transportation costs. Once you understand how much money needs to be spent, look at the money the student has coming in. Money usually comes what the student saved from after-school and summer jobs, income from a current job, any financial aid received for living expenses, and maybe financial support from their family. When considering income from current jobs, remember that the hourly pay rate will see deductions in the form of taxes. Once the student understands their fixed expenses and how much money they’ll have coming each month, they should use a simple math equation: monthly income - fixed expenses = $___. That $ represents the money they’ll have left over for necessary variable expenses (like food and transportation), optional expenses like entertainment, and savings. It’s important that students save some money each month: Everyone has emergencies at some point for which they need a little extra money.

In your college budgeting exploration, you may want to consider the cost of online college vs. an on-campus experience. Our guide compares both education options.

And since budgeting is a top priority for you, make sure that you get the Best Return on Investment (ROI) From College.

Setting Up a Budget and Tracking Expenses

Once it’s understood how much money is coming in and how much is needed to meet fixed expenses, it’s possible to set up a budget. Portion out the money coming in to cover these costs, and use what’s left to plan out non-necessary spending. Pay close attention to where the money goes throughout the month. There are a few different ways to track expenses. One way is to use an app. Some bank apps offer the ability to track money spent by category. Other services, like Intuit’s Mint, sync with credit cards and bank accounts to track all money spent. There are also apps that offer both budgeting and tracking capabilities. You Need a Budget (YNAB) is one, and it’s free for college students. Tracking expenses is vital to make sure that the budget is being followed. It also allows students to learn from their mistakes. Most people will overspend, especially when they are starting out. Knowing which categories are causing issues allows students to address their behavior and adjust their budget as needed.

It’s no secret that the cost of a college education has skyrocketed over the decades, but most people do not know just how much. We take a deep dive into the data and what these figures mean for students today.

Saving Money and Preparing for the Future

Students will either start their careers or pursue additional education once their undergraduate years are over. It’s important to use college to prepare for these next steps, and part of that preparation is saving money. That money can make a huge difference if they need to take an internship or move for their first job. It can also provide them a cushion for the time between the end of college and getting a paycheck from their first post-college job.

All college students need a checking account and a savings account. Some students find it helpful to have two savings accounts. The money in one account is dedicated to short-term savings, like studying abroad or even concert tickets. The other account is their post-college fund. Establishing credit is another important piece of the puzzle. Getting one credit card, using it responsibly, and paying it off monthly puts the student on the right footing for the future. However, running up debts they can’t pay can destroy their credit rating for years.

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