This step is crucial for building a college budget that actually works, so don’t skip it!
The second step in creating a budget is to assess your income. Strictly speaking, your income is your salary or wages. But you should also consider other monies you receive, like scholarships, grants or student financial aid — anything that can be applied to your living expenses and tuition. Make a list of everything you earn or receive and add it up. This will give you an idea of how much money you have to work with each month.
A money leak is any expense you may not be aware of but that is slowly draining your finances. These expenses can be small, but over time they can add up to significantly impact your overall financial health.
Money leaks take many forms, such as subscription services you no longer use, impulse purchases or unnecessary fees and charges.
Using the spreadsheet you created in Step 1, identify three money leaks you could reduce or cut out this week. Ask yourself questions like:
By cutting out unnecessary expenses, you can free up more money to put toward your financial goals, such as paying off student loans or saving for an emergency fund.
Another important step in budgeting for college is setting financial goals. These goals should be specific, measurable, achievable, relevant and time-bound (SMART).
For example, you might want to start an emergency fund so you can:
Whatever your financial goals may be, take five minutes to list out three of them and why they are important.
After you review your income and expenses and identified some financial goals, it’s time to create your spending plan. The easiest way to do this is with a budgeting app, like You Need a Budget (YNAB), Mint or one offered by your bank.
To make the most of this step:
Budgeting is not a one-and-done thing. Your expenses and income can fluctuate from month to month or semester to semester as a student. Therefore, it’s important to think of your budget as a living document that needs to be adjusted regularly.
For example, one month you might have unexpected car repairs or medical bills that require you to cut back on other expenses. Alternatively, you might have a higher income another month due to a bonus or overtime pay.
By thinking of your budget as an evolving tool, you can stay on top of your finances and make adjustments as needed. This can help avoid overspending or falling behind on financial goals.
As a student, you’re likely looking for ways to save money and stretch your budget. Here are some ideas for maximizing your savings — even when inflation and interest rates are high:
Christine Conway, director of financial education initiatives at University of Phoenix, explains that every student should try to borrow as little as possible for college. This is one smart way to maximize the amount you’re able to save over your lifetime.
Understanding the cost and debt is just one piece of it. Students also need to have a realistic approach to repayment.
“Many students say they’ll borrow more now and start paying back while in school,” Conway explains. “But over the years, student loan service providers have told us that hardly anyone pays while in school.”
Conway says that if you don’t need the money right now, don’t borrow it since you’ll start accruing interest instantly on unsubsidized federal student loans.
You can reduce expenses in several ways and save money as a college student. Consider these tips:
Admittedly, this is easier said than done. But there are opportunities beyond getting a promotion or another job. (Although that is an option!) Consider the following:
In the end, budgeting and saving aren’t rocket science. They are, however, contingent on discipline and organization. Luckily for students (and their bank account), those are skills that can be learned and applied immediately.