College Bound: Get ahead with our top student budgeting tips.
in Managing Money & Credit, Youth & Student Finances
Preparing for college can be exciting, time-consuming, and even downright stressful. You likely have a lot on your plate with college applications, course selection, room/boarding, and so much more.
As you embark on this new chapter, you’ll want to ensure you’re doing everything you can to set yourself up for success, especially when it comes to your finances.
Learning how to build and adhere to a budget is a skill that will not only serve you well during your collegiate years, but also for your life thereafter. It’s the foundation for building upon your personal finances, and will be your roadmap for many future financial decisions.
The Benefits of a Budget
Contrary to popular belief, a budget does not necessarily equate to complete restriction. Think of it as your financial GPS—navigating you in your lifelong journey.
In addition to directing you in your spending, a budget has other numerous benefits such as:
- Helps you build strong financial habits: A budget is essential, regardless of how much money you’re earning. If you don’t have a handle on your income and spending, you can feel like you never earn or have enough. You can also potentially get into a cycle of debt and overspending. Start your financial journey strong by making budgeting a normal part of your life.
- Improves your credit score: A budget helps prevent overspending, especially with ease-of-use products like credit cards. By properly utilizing credit cards, you can increase your credit score. A strong credit score will help you secure future housing, receive better loan terms, and lower interest rates on financing.
- Guides you to reach your financial goals: Chances are, you have a couple of goals in mind. Maybe you’d like to save for a special trip, business venture, or even retirement. A budget helps you allocate funds for your different financial goals so you can maintain progress.
Popular Budget Categories for Students
As you enter into adulthood, it can be overwhelming to consider all the associated expenses that go along with it. But they are crucial to be aware of so you can properly manage your income and not go into debt. Consider these common budget categories for students:
- Housing/Rent
- Tuition and Fees
- Textbooks and Supplies
- Groceries
- Car payments
- Transportation
- Eating out
- Cell phone
- Entertainment
Depending on your level of income and individual circumstances, your budget may or may not be able to accommodate some of these line items. Taking an inventory of your expenses within each of these categories, then classifying them within your own ranking system, will help you as you begin to build out your budget.
How to Create and Maintain Your Back-to-School Budget in 7 Simple Steps
- Brainstorm your financial goals. Your budget can help guide you in successfully completing your financial goals. Whether you want to start saving for retirement or a car, you can incorporate your goals into your budget. It’s important to write these down and come up with smaller milestones that will help you achieve your larger goals.
2. Choose a budgeting app or software. A digital budgeting software or app makes it easy to track your spending and check your progress on the go. Look at the different features of popular budgeting apps and determine which one works best for you. Bonus – you don’t need to download a paid app/software, most of the free versions will suit your needs.
3. Determine your income. Add up all of the money you expect to receive from part-time work, side hustles, financial assistance, loans, or even support from Mom and Dad. If you’re unsure of the exact numbers, calculate your best guess and always underestimate your income, just to be safe.
If any of the income you receive is taxable, make sure to subtract your taxes from your income first so you know exactly how much you have left to spend and save.
4. Add up all of your expenses. Start with your fixed, essential expenses—the ones that need to be paid every month for you to survive and attend school. This can include rent, utilities, tuition, textbooks, transportation, groceries, etc.
Next, look back over your financial goals and determine how much you want to contribute to them each paycheck or month. For example, you might decide to save 5% of your paycheck for retirement or $100 per month for a car. Whatever your goal, make sure it has a place on your “expenses” list, even if you won’t be immediately utilizing the money.
5. See what’s left over. After adding up all of your income and expenses, perform a simple subtraction calculation!
Income (-) Fixed Expenses = Discretionary Spending
If the number is positive, then you can the allocate money towards non-essential budget categories such as entertainment, subscriptions, eating out, etc., and assign a set amount of money to each category.
If the number is negative, reevaluate your fixed expenses and see if there’s a way to increase your income or decrease your costs. You might need to apply for more scholarships, get another roommate, work a few more hours, or even select a less expensive school.
6. Get started! Once you have your income and expenses laid out and an allocated amount of money for each budget category, it’s time to start tracking your spending. After a month or two, compare your actual spending to what you allocated in your budget. If the numbers are similar, that’s great! Continue on with your budget. If the numbers vary, re-evaluate your budget and change the categories as necessary.
7. Update as needed. Continually assessing your budget and goal(s) progress is imperative in being financially success.
When you graduate and receive your first full-time job, you’ll need to update your budget and account for any loan repayments (more on that later), changes in insurance and housing costs, and more.
Student Budgeting Tips: Top Ways to Save Money
As you start diligently tracking your spending, you may find yourself wanting to find more ways to save your hard-earned money. Learning how to be thrifty and financially savvy are also great personal finance skills.
Here are a few easy ways to save money as a college student:
- Apply for scholarships and grants. These types of financial aid are gifts, meaning you do not have to pay the money back! Scholarships and grants are often based on various criteria, but with some dedicated time and patience, you may find ones that you are qualified for. Read our Financial Aid 101 article to learn more.
- Ask about student discounts. Your student ID is more valuable than just an identification card. It can prove your status as a student and get you discounts at many places. Student discounts can be found at restaurants, movie theaters, gyms, museums, and some stores. You may also get discounts on public transportation, travel, and streaming services.
A student discount may not always be obvious, so make it a habit to ask with each purchase, you never know what kind of savings you might uncover!
- Buy used items. Consider buying used textbooks to avoid the hefty bookstore prices. You can also find quality, gently-used clothing at local thrift stores and online consignment shops.
- Learn to cook at home. Eating out can be a major strain on your budget, especially when you consider delivery surcharges and tips. Commit to learning how to cook a few meals that you really enjoy at home to cut down on your food budget. Preparing quick and easy meals and snacks is also helpful when you’re busy going to classes and studying.
- Opt out of a car (if possible). The cost of owning a vehicle can quickly add up between insurance, maintenance, and gas. If possible, try walking, riding a bike, or taking public transportation to school and work.
Must-Know Student Financial Tips
Now that you know the benefits of a budget, how to set one up, and some money-saving tips, we want to share with you some general financial tips that will help you start your financial journey on a strong foot.
Consequences of Debt
When you and your parents are applying for student loans, it can be challenging to think about the consequences of them. But it’s crucial to truly understand how much money you’re taking out and what the repayment will look like once you begin your career.
Student loans can be a valuable tool to propel you into your working years, but they should be taken out cautiously and knowledgeably.
You should understand:
- Student loans need to be paid back with interest.
- You’ll need to start repaying your loans within six months of graduating (for most loans).
- There are different terms and conditions for private and federal loans.
One way to comprehend the effects of student loans is to create a realistic post-graduation budget. Consider the career you want to pursue and find out the average salary for an entry-level position. Next, calculate how much your income could be per month and then calculate how much your student loan repayment could be.
Seeing how much of your paycheck could be taken for student loan repayment can help you understand the consequences of debt. Sometimes, student loans are unavoidable, and that’s okay. You should just be aware of what the repayment looks like before you sign up for them—knowledge is power!
The Benefits of Working Part-Time
Working while you are studying helps you pay for your school and necessities, decreases your dependence on loans, and builds on-the-job skills that will benefit you in your career.
There are often job opportunities available at schools such as being a research assistant, student receptionist, resident assistant, tour guide, tutor, etc. The hours are often flexible and can fit into your study and class schedule.
Some students may also be eligible for work-study programs. These are part of financial aid packages and can be offered after families fill out the Free Application for Federal Student Aid (FAFSA).
The Basics of Investing
Investing early and often is one of the most effective ways to build wealth. Don’t underestimate the power of time that you have on your side. Even if you can only invest 5% of your income, you can start building your wealth and saving for retirement in powerful ways.
Investing in low-cost index funds is a great way to start your investing journey while keeping your fees and risk at a minimum. The earlier you start investing, the less you’ll need to contribute each month in order to reach your goals, thanks to the power of compounding.
Start Your Financial Future off Strong with LFCU
At Lafayette Federal Credit Union, we offer numerous educational resources for our members and their families. Our Youth and Student Finances page offers a wealth of information to help you navigate this transitional time in your life.
We also offer checking accounts where you can get free online banking, mobile deposits, and the ability to earn up to 2.02% APY on your money, all without minimum balance or maintenance fees. These accounts are perfect for college students looking for a secure place to manage their money.
If you’re looking for a place to keep your money for a longer period of time, our savings accounts offer great solutions. Our Preferred Savings account can be opened with as little as $50 and provides a dividend rate of 3.30%.
