According to a National “Save the Student” survey, 70% of young adults wish that they had a better financial education by the time they started college. Unfortunately, while you might have learned all about algebra and history at school, the chances are that you didn’t get much direction when it comes to how you should be using your money.
Finances and budgeting aren’t the most glamorous subjects, but they’re both things you’ll need to learn about if you want to protect yourself from future issues. Fortunately, we’ve got some top tips for students who are feeling unprepared for their biggest financial exam – life on their own.
Why Students Need a Budget
Budgeting doesn’t seem like the most exciting thing in the world at first. However, there are plenty of benefits in controlling and tracking your spending habits.
Your bank account is like a bucket that’s constantly leaking money. While you fill the bucket up with your income once a month, that money quickly drains out the more “holes” you have to worry about. If you can get control of your spending habits, you can continue to spend money on the things you want and need, without putting yourself in a difficult position.
1. Start by Establishing your Income
The first step in creating an effective budget is knowing how much money you have coming in. The chances are that as a student, you won’t have much, but you should have:
- Loans (make sure that you compare your options to keep interest rates low)
- Extra money from bursaries, grants, and scholarships (check all the options in your area)
- Money from your parents or other people in your family
- Income from a part-time job or freelance work
- Savings that you collected before going to college
2. Estimate Outgoing Expenses
You’d be surprised how many students have no idea where their money is really going. Figuring out where your cash is ending up each month is crucial to your success. You can do this by looking at your bank statement and making a list of previous purchases.
Most of the time, you’ll be able to split your outgoing expenses into two separate categories. The first chunk will be attributed to things that you have to pay for, such as rent for your room, bills like electricity, and food shopping. You should also include course fees and textbooks in these fees. The other category involves all the non-essential things that you spend cash on like beauty expenses, cinema tickets, eating out with friends, and gym memberships.
3. Create a Weekly Budget
Once you’ve got all your incoming and outgoing expenses figured out, you can begin to break things down into a weekly budget. This is the money that you can spend after all the cash for your bills has gone out. For instance, if your income for the first 12-week term is $3000, and your expenses add up to $2,000, then you’ll have a little over $83.00 a week.
If you’re unhappy with this amount, that’s when you need to start setting some goals. What would be the ideal number that you’d like to end up with? How can you reduce expenses in both your essential and non-essential payments? For instance, could you cut the cost of food by shopping with your roommates? Would it be possible to switch to a different car insurance provider to save some money there?
4. Don’t Eliminate all the Non-Essentials
Although it’s tempting to start stripping the non-essentials and luxuries from your budget when you’re struggling for cash, you don’t want to leave yourself with no room for fun. If you never have any cash left aside to go to the latest festival with your friends or enjoy a night out, then you could end up finishing college and feeling as though you haven’t had the full experience.
Set aside a small amount of cash each week that you can dedicate to you and doing what you want. Although it’s important to be realistic and smart with your money, you also can’t expect yourself to get by having no fun in life. After all, you’re a student – now’s the best time to get out there and try new things whenever you can.
5. Practice Being Thrifty
Finally, if you’re used to living at home where you had no bills to pay, the difference in life at college is sure to throw you off a little bit. The good news is that you can practice being thrifty and begin to transform your money habits over time. For instance, every time you shop for something, compare your options online to make sure that you’re getting the right price.
When you need to buy something that isn’t food or clothes, ask yourself whether you can save money by getting it second-hand. Used textbooks can save you a fortune when you’re a student.