As a student, you may be receiving income from several sources, including grants and loans, employment and family support. What's more, these resources may be credited to you in different ways and at different times during the academic year. For example, your loans may be applied toward your student bill at the beginning of the semester and your employment wages paid directly to you as you work. Your parents may be making payments to the school through a payment plan or loan, or they may give you money directly throughout the year. And if you receive scholarship funding from an outside organization, when and how you receive the funding can vary widely, depending on the way the program is set up.
So how can you successfully stretch your money and stick to a spending plan when you're dealing with all these variables?
Know what budgeting means
As a first step, understand the definition of a budget: A budget (the noun) is simply a list of your financial resources, and your expenses for a specific period of time. The purpose is to coordinate the two so your expenses do not exceed your income. But budgeting (the verb) is something more. The act of budgeting also means identifying goals—like saving for a vacation over spring break or for buying a used car, or simply having enough money to pay your bills and have pizza money every weekend—and making adjustments to your income and expense stream to help meet those goals.
Focus on what's in your control month-to-month
Tuition and fees may be the biggest expenses of going to school, but they're not really in your control nor do you pay them monthly. (Your parents may pay toward these expenses under a monthly payment plan but, if so, they include them in their own budget.) Instead, focus on creating a personal spending budget during school that takes into consideration your income after your tuition bill and monthly expenses have been paid.
Your income may include savings from summer employment, excess financial aid (returned to you after your billed expenses are covered), employment earnings, and support from family.
If you live on campus, your expenses will probably include books and supplies, meals and snacks not covered by a meal plan, laundry, entertainment, toiletries, transportation, and other personal expenses. If you live off campus in an apartment, in addition to the above items, your expenses will include rent and utilities.
There are many standard budget worksheets that can help you itemize your income and expenses. For online help, visit Nellie Mae's budgeting calculator at www.nelliemae.com/calculators.
Timing your budget
A good time to establish your personal spending plan is shortly after the beginning of the semester. At that point, your billed expenses should be paid and you may have excess financial aid money to help cover your personal (non-billed) expenses. If you plan to work, hopefully you will have lined up a job so you have an idea of what your monthly work earnings will be.
Since your schedule and resources may change, it's a good idea to set a new spending plan each semester. As part of that strategy, divide the resources that you receive each semester by the number of months in the semester to get a monthly budget. For example, if you receive $500 in excess loan funding, divide it by four ($500 / 4 = $125) to consider it as monthly income for September through December.
One way to help make your personal budgeting easier is to be sure all your resources are in place at the beginning of the semester. That is, be sure to apply for financial aid and sign any required forms (such as loan promissory notes) in time for the funding to be applied to your student account before the billing due date. If you're late, chances are your school won't release any excess funds to you until the bill is covered.
Making the numbers work
So you've identified your monthly income and personal expenses and listed them on a worksheet. Now what? The real key (and challenge) to budgeting is making sure the numbers work in your favor—that you have enough income to cover your expenses.
If you do, that's terrific, but it doesn't mean you should abandon budgeting.
Let's say you don't have enough income to cover expenses. Basically, you have two options: increase your income and/or reduce your expenses. Increasing your income may be possible, but for most students and non-students alike, it's not the most feasible option. That leaves reducing your expenses.
Do you really know how much you spend in a given week on things like snacks, music, and other non-essential items (including alcohol and tobacco)? How often do you withdraw money from the ATM for spontaneous purchases? Budgeting begins by taking a good hard look at where you spend money and determining how you can cut back. Then, it involves adapting your behavior to follow through with your spending plan. This process can be summed up in three words: track, tweak, and trim.
The payoff
While it may sound like drudgery, budgeting your money is just like any other act of self-discipline that provides a positive end result. For example, if you work out, it may be a bit of an effort to get to the gym on a regular basis, but you probably feel really good after you do. Likewise with studying for an exam: If you study consistently for days before the exam, you probably feel much more confident and prepared than if you wait to cram for hours the night before. It's the same with managing your money. If you budget consistently and thoughtfully, not only does it become less of a chore, it's guaranteed to give you a sense of accomplishment, independence, and well-being when you achieve your goals.
Budgeting strategies especially for students
Here are a few suggestions for ways to help you budget during school. You can probably think of many more—even some things that you may already be doing.
Finances
- Comparison shop for the best banking services, including free checking and limited or no ATM fees.
- Plan your ATM usage once or twice a week, then leave your card in your room to avoid spontaneous withdrawals.
- Track your ATM withdrawals in your checkbook immediately; or store your receipts in your checkbook and enter them regularly.
- If you work, have your paycheck automatically deposited into your bank account (if available) to reduce "handling" and the temptation to pocket more.
- Each semester, deposit any excess financial aid into your account and only withdraw what you've budgeted monthly.
- Have only one credit card (at most) for emergencies and keep it in your room instead of in your wallet.
- Save your spontaneity for people (practice "random acts of kindness") not purchases
Entertainment
- Enjoy free activities on campus or at local parks, libraries, or galleries.
- Use an exercise tape or free on-campus gym facilities instead of buying a gym membership.
- Download legal MP3s or burn your own CDs.
Food
- Shop for snacks and other groceries at a regular grocery story instead of at a convenience store where prices are higher. Cut coupons and use them.
- If living off campus, plan meals with the thought of the next day's lunch. Brown bagging saves dollars and can be more nutritious.
- Buy store-brand items that are cheaper and contain the same ingredients as popular brand names.
- Coordinate group potluck meals (everyone brings something) on weekends to minimize eating out.
Household
- Check out "dollar stores" for cheap household items like sponges, trash bags, cleaning products.
- Long distance telephone calls can be a big expense. Find the cheapest long distance rates and limit your phone time; or better yet, write emails instead of using the telephone.
- Use free email Internet service providers.
Books and supplies
- Buy used books when possible.
- Return books at the end of the semester for partial refund.
- Check out student discounts widely available for books, computer equipment, and other items.
Transportation
- Take public transit, bicycle or walk as much as possible to save on transportation costs.
- If you must have a car, buy a used one and avoid having an auto loan while you're in school.
Clothing
- Shop for clothes at off-price stores or factory outlets.
- Avoid purchasing "dry clean only" items.
- Borrow special occasion clothes instead of buying a one-time outfit; or "invest" and share with a couple of similar-size friends.
Giving
- Make gifts for friends and family (like baked goods, audio tapes, etc.) instead of buying them.
- Volunteer your time instead of making charitable contributions.