Creating a Budget 101
The cliche of a constantly broke college student is true. With prices of everything from tuition, gas, and food prices on the the rise, it gets difficult to manage all of the college student expenses – even more so when the income is sporadic or very little. How do you keep it all straight? Create a budget.
(If the word budget scares you for some reason, feel free to use the word spending plan)
To get an idea of what you’re working with, grab a pen and paper and get to jotting down the answers to these questions:
- For those of you graduating high school seniors, will you be saving the money you receive from your graduation? What about other sources from your high school years?
- Will your parents being helping you out financially? How much? Will they only pay certain bills (like your car insurance and tuition)? Will you be on their health/dental insurance plans?
- How much after tax income will you be making from work – whether it be work-study, a part time job, or freelancing gigs?
- How much will you save over the summer months?
- What about other income like financial aid: scholarships, student loans, grants. How much of that will you actually see in the form of a check (ie: after the school pays for your expenses first)?
Add up all of the above and divide by the number of months you’ll be at school. For example, if your total income was $8,000 and you were in school 10 months of out the year, then you would divide $8,000 by 10 months and get $800 a month. You have $800 for the month.
Now comes the fun part: Expenses. Expenses are where things get tricky. There will be certain things that will have a set price every month, like rent for example. But other costs can vary every month like money for going out to the movies or eating out. So the first thing to do is to write out a list of your expenses every month.
- Will you be paying rent every month? How much?
- How much will you be realistically paying for food? If you are on a meal plan, how much will that cost? What about other snacks you want to keep in your room – how much will those realistically cost?
- Will you be paying utilities? Cell phone? Internet? Cable TV? Netflix?
- Will you be making a car payment? What about insurance? And gas?
- How about that daily coffee habit? How much will that cost?
- How about clothing or toiletries like shampoo and conditioner?
You can also bet that once in awhile you are going to want to have a little fun. Maybe buy a new album on iTunes or head out for a night on the town with your friends. Maybe even a date. Those things all cost money so be sure to do a bit of budgeting for that too.
Last but not least, don’t forget savings. Everyone, even the uber broke college student, should have a bit of savings stashed away for those emergency situations. Whether it is for emergency medical expenses, fees you just didn’t anticipate, or for paying the mechanic when that clunker you call a car breaks down, you need to have some cash at the ready to prevent a disaster.
Now write it all. Can you afford everything? Do you have to make some cost cutting adjustments?
The point of a budget or spending plan is not to torture you; It is meant to help you succeed and reach your financial goals.