Budgeting as a college student is crucial for taking control of your finances. Here is a how-to guide to get started!
How to Start a Budget as a College Student
Budgeting as a college student can be a little tricky. There are a lot of one time expenses you’ll come across each semester like textbooks or class supplies. Whether you are looking to go on a Spring Break trip with your friends in Cancun or wanting to graduate with little to no debt, a budget can help make that happen! Budgets are in place to keep track of where your money is going and ensure you don’t overspend. Here is how to start a budget as a college student.
Identify what your financial goals are
The first thing you need to do is identify what financial goals you are trying to achieve. Do you want to graduate without student loans? Do you want to try to save up for more outings with your friends? Are you saving for a house? Whatever your financial goals are, it’s important to start here. The decisions you make in this step will greatly impact your overall budget.
By identifying your goals now, you can better determine what categories are important to you.
Download the Spending app or Mint app and track your expenses.
Do this for at least a week. Then, try a month.
Mint hooks up directly to your bank account to track expenses, but if you’re responsible, you can track all of your expenses with the Spending app (the one I used – you have to manually put in transactions. This forces you to acknowledge your spending dollar by dollar). I stick all of my receipts I have to enter on a section of my nightstand, then at the end of the week enter them in.
Before you start a budget, acknowledge where your current money is going. This can help you realize how much you’re actually spending on little purchases, like coffee, clothes, or eating out.
Identify areas of improvement
Once you have finished tracking your spending for a few months, you will have a better idea of how you are spending your money. Once you have this information, it’s time to start analyzing your spending.
- Is the way you are spending your money in line with your financial goals?
- Are you overspending?
- If you are underspending, what are you doing with the excess money?
- Are there any areas where you can make improvements to save?
Ask yourself these four questions and see where you need to make adjustments to your spending habits.
Figure out your income
Figuring out how much money you make might sound simple, but it rarely is. Your income is your take-home pay at the end of the day. This is after taxes, tips (if you receive them), side hustles, and any other areas where you may be earning an income. If you don’t have a consistent income, then take your totals from your lowest month to allow for wiggle room.
Creating your first budget
First, take your spending habits and put them into different categories. Some examples might be:
Once you have created your categories, look at your spending habits. How much are you spending on each category? If you want to reduce your spending in a specific category, use your spending habits as a way to see how much you need to reduce it by to stay in budget or to meet your savings goals.
In a basic example, you make $1000 a month, you could say you want to allocate:
- $400 for rent
- $200 for groceries
- $150 for school/other necessities
- $100 for gas + car expenses (ie saving for oil changes or car washes)
- $100 for entertainment
- $50 for savings
The goal of budgeting is to give each dollar a home. YOU are in control of your money. Your money is not in control of you.
Dave Ramsey recommends having a “fun money” section. This money is the amount you can spend worry-free. Impromptu outing with friends? Use your fun money. Find something cool at the mall? Use your fun money. The fun money allows for some extra freedom but allows you to be in control of what you’re spending.
This section will look a little different for everyone. The key to a successful budget is knowing what your goals are and having the self-control to stick to it. You also need to be realistic in the process. If you currently eat out 6 days a week, you probably won’t be able to stop cold turkey. (if you do, serious props to you.) Instead, limit yourself to only eating out 1-2 times a week and find a friend to try to cook with.
Automate as much as possible
One of the key parts of a functional budget is one that is on autopilot as much as possible! One way to do this is by scheduling bill and savings payments. Some bills will allow you to schedule a payment and even do a reoccurring payment too. Do these for any bills that you can. Next, you need to set up a way to automate your savings. Start doing this by setting up an auto draft from your checking account to whatever place you keep your savings.