College is probably the first time you have to think about money. Namely, you have to figure out how to balance your income and expenses to stay afloat.
This is where budgeting comes in. It’s fairly easy to set a budget, and it helps you use your financial resources more efficiently.
But budgeting is tricky, especially if you’re a novice in this matter.
You may think you have everything figured out. But then you’re hit with an expense that you didn’t take into account, like paying for a dissertation writing service or purchasing textbooks. Whatever that bill might be, your budget may not be able to handle it if you didn’t plan ahead properly.
That’s why it’s crucial to approach budgeting wisely. Here are six tips for doing just that.
Figure Out Your Average Monthly Income
Budgeting is, in its essence, planning your incomes and expenses and making sure the bottom line is zero or in the black. So, first, determine how much money you typically have at your disposal. Take into account
- part-time job wages;
- side hustles;
- student loans (they can be used for paying rent, for example);
- other financial aid programs.
If you have a fixed monthly salary, money management is a little easier: your income isn’t a variable you have to guess. If that’s not your case, take your monthly income over the past three months and find the average.
Keep in mind: it’s not only the amount that matters; it’s also when you get the money. Plan your expenses around that time.
Sort Out Your Expenses
There are several ways to break down expenses into categories:
- variable vs. fixed: your utility bills and groceries costs differ from month to month, but the rent itself remains the same;
- essential vs. non-essential (needs vs. wants): you need to pay for rent, but getting a cup of latte at Starbucks is more of a whim;
- regular vs. unexpected: you know you have to pay for food every month and for tuition every semester, but fixing your car is a surprise bill.
Why should you care about these types? They’ll help you
- figure out your bare minimum – i.e., the amount of money you can’t survive without;
- plan ahead for large bills like tuition fees;
- understand which costs you could cut if needed.
Don’t get the wrong idea, though. The point of budgeting isn’t to live on a bare minimum. Fun-related expenses should be included in your budget, too. Otherwise, life will be too depressing, right?
Add Savings to Your Budget
Preparing for surprise bills isn’t something a lot of students do, but they absolutely should. You never know when your laptop decides to quit on you or when your car breaks down. The rule of thumb is to have $500-$1,000 in your emergency fund for such situations.
But it’s not only unexpected bills you should save up for. You also have large expenses, like textbooks and tuition fees, that you can anticipate and prepare for. Furthermore, no one says you can’t create a fund for a road trip or a semester abroad.
Here are some best practices for making savings work for you.
- Put money into different envelopes. Those may be real envelopes for cash or several savings accounts.
- Have a goal in mind for every personal fund you set up. This is how you avoid draining it for whims.
- Set money aside the moment you get your income. You can do it by automating a transfer to your savings account.
Use the 50/30/20 Rule or Zero-Based System
It’s not obligatory to set a cap on every spending category. Instead, you can divide your income into three “envelopes”:
- 50% on needs, i.e., essential expenses;
- 30% on wants, i.e., whims and leisure activities;
- 20% on savings.
Alternatively, you can establish a monthly goal for yourself: a zero in the bottom line. That doesn’t mean you should be determined with every cent you have, of course. If you’re in the black, that surplus can go to savings.
Track How Well You Stick to the Budget
The first budget you ever set for yourself is likely to turn out unrealistic. That’s not uncommon because it’s easy to forget about a certain category of expenses.
This is where tracking your incomes and expenses comes in. It’ll provide you with data on how you actually spend your money, not how you think you do it.
This data will help you catch those impulse purchases and cut down on them, as well as understand other ways you can optimize your spending.
The best way to do it is by tracking your incomes and expenses using apps like Mint and Spendee. They don’t just store the data in a table. Most of them also allow setting budgets within the app and show nice graphs and pie charts with spending breakdowns by category.
Build Sound Spending Habits
Instead of micromanaging your every expense, focus on establishing clear financial goals and developing good spending habits.
For a student, such habits usually boil down to finding cheaper options and ways to save money. Here are some most popular tips on that:
- opt for used textbooks or rent them out;
- take coffee with you instead of grabbing a $5 latte at Starbucks;
- cook instead of ordering takeout (you can take a lunchbox with you, too);
- find places that offer student discounts;
- use public transport with a bus pass instead of driving if possible;
- shop in second-hand stores or find free giveaways via Craigslist or Facebook groups.
But that’s not all. Smart day-to-day habits also include
- avoiding impulse purchases;
- taking advantage of discounts, clearance sales, and good deals;
- buying groceries and other household items in bulk;
- getting rid of “it’s just a buck” syndrome – a buck a day means $30 a month;
- abstaining from using credit card limits.
As you can see, it’s not that difficult to determine your monthly budget in college if you know the tips and tricks. Use the information from this article wisely, and you’ll master the art of budgeting in no time!