How to Budget for College?
Before you’re ready to move into your dorm room and start your classes, you need a budget. Your budget needs to be smart, flexible, and most importantly, realistic. Here’s how you make one.
Know Who’s Paying for College
As you’re starting to think about college expenses, it’s important you start by working out some details with your parents. Sit down together and discuss who’s paying for what so you know what types of expenses you’ll be responsible for.
If you’re responsible for tuition, for example, be sure to fill out the FAFSA® form to ensure that you’re eligible for loans, grants, and need-based scholarships. If you’re responsible for paying for your living expenses, consider applying for work-study, an on-campus job, a paid internship, or another part-time job near campus.
Calculate Your Income
Once you know who’s paying for what, it’s easier to start crunching numbers. First, decide on a time period. Are you creating a weekly budget, a monthly budget, a semester budget, or an annual budget?
Next, you’ll want to calculate your income. Your income could come from many sources, including:
- Student Loans
- Part-Time Job
- Parental Support
Add up all your sources of income, and be sure to account for your budget’s time frame.
Estimate Your Expenses
If you’re planning for your first year in college, estimating your expenses might not be easy. Conversations with your parents, friends in college, and college financial aid officers can help you understand what kinds of expenses you’re likely to encounter during your first year and beyond.
Most first-year college students have a few basic expenses, including:
- University Facilities Fees
- Rent, Dorm Fee, or Room and Board
- Meal Plan
- Textbooks and School Supplies
Many students also like to budget for social activities, like movies or dining out. You may also have some recurring expenses, like:
- Car Payment, Insurance, and Gas
- Cellphone Bill
- Public Transit Fees
- Credit Card Payments
- Groceries and Personal Hygiene
Keep your budget as flexible as you can. Leave room for emergency expenses like technology malfunctions or doctor’s visits. Finally, don’t forget to budget for travel to and from school.
As a college student, saving money might seem like a low priority, since you have so many other things to worry about. However, it’s particularly important to save while you’re in college, especially if you’ll be away from home for the first time.
To decide how much to save, start by setting a goal or two. Your savings goals might be practical, such as saving for unexpected car repairs or a medical emergency, or they might be aspirational, such as saving for a semester abroad.
Decide Where to Cut Back
Once you’ve listed your sources of income, your anticipated expenses, and your intended savings, add up each column and see how they balance out. If your income exceeds your anticipated expenses, you’re in great shape. You may even be able to save a little extra for major purchases or emergency spending.
If your expenses exceed your income, think about where to cut back. Some expenses, such as tuition and rent, are relatively firm. You may be able to lower your discretionary expenses, such as dining out and entertainment.
Of course, you can also approach an imbalanced budget from the other side. If you hadn’t planned to look for a part-time job during your first year in college, assess whether working a few hours a week would help balance your budget.
Consider Credit Cards
Many college students add a student credit card to their wallets during the first year or two of school. While getting a credit card might stretch your income a little further, it’s important to know what you’re getting into before you start paying for everything with plastic.
If you’re under 21, you may need a parent to co-sign your application. Whether or not you need a co-signer, you should think about establishing some ground rules for using your credit card. For example, many people use credit cards when their paycheck comes after certain expenses are due, and they pay off the debt right after their paycheck finally arrives. Others will only use the card for emergencies.
Remember that you’ll need to pay off any credit card balance you rack up. Before you run up a major credit card bill, make a plan for paying off the balance before it starts generating major interest fees.
Track Spending and Earning
Once you’ve decided on a budget that works for you, you’ll need to start tracking your spending and earning. Most banks and credit unions offer apps with tracking features, but it’s highly recommended you take a more specific approach to track while you’re still getting the hang of living on your own. There are a number of methods, so it should be easy to find one that works for you.
You could manually enter each item from your bank statement into a spreadsheet. Spreadsheets are easy to share and help you get used to keeping an eye on your budget.
If you’re looking for something more automated, choose from one of the many apps that make budgeting a breeze. Mint syncs with your bank and credit card account for the automated expense and income tracking, while You Need a Budget pulls data from your online accounts and offers helpful tracking tools.
Assess and Adjust
As you live with your budget for a few months, it’s important to remember that you should assess and adjust it regularly. If you’ve found you’re spending much more on groceries and gas than you anticipated, for example, consider adjusting those line items in future months. You may need to cut down some other expenses to do so, but at least you’ll have an accurate picture of your spending needs.
While constant budget adjustments might not be necessary, you should consider reassessing your needs at least once a semester. Doing so can help you keep your bank account healthy and prevent you from taking on unnecessary debt while you’re in college.
Creating a budget for college can be a challenging task. Once you’ve made a budget, however, you can put your mind at ease about paying for college and enjoy the next four years to the fullest.