Managing your money in college isn't easy. College is the first time many students have financial independence, which makes it much more difficult to say no to new and exciting experiences. However, responsible money habits—like sticking to a monthly budget—will help you avoid financial stress and ensure you don’t run out of cash freshman year.
Along with the new responsibilities and freedom you’ll gain as a student, you'll need to keep track of your personal finances and understand how to budget while in college. Whether your parents are paying for your cost of attendance or you’re juggling the expenses, these six budgeting tips for managing money in college can help.
1. Create a realistic budget before you leave for college
Creating a budget will be the last thing on your mind once you arrive on campus, so it’s smart to begin preparing before the school year gets underway. Until you start living the life of a college student, it's hard to know how much your lifestyle will cost or what your spending habits will be. You can estimate your expenses using the college's cost of attendance as a guide and revise your budget after your first month on campus. Consider using a free budgeting app, college budget template, or Excel spreadsheet to include the following budget sections:
Your monthly income
In college, your income usually comes from a combination of sources: loans, scholarships, grants, a part-time job, and contributions from parents and/or your savings. Colleges usually disperse your financial aid, taking what's required for tuition and fees and sending the rest directly to you, so you can pay for your remaining college expenses.
Your required spending
The amount you will spend on any college and life requirements, also known as essential expenses, should be subtracted from your income. These expenses, including your rent, books, room and board, cell phone service, laundry, prescriptions, etc, are most likely needs.
Your optional spending
The remaining money is the amount you have available to spend on extras, like eating out, movies, concerts, travel, gaming, gifts, and so on. If your budget is tight one month, your wants or optional spending, is the first category you should consider eliminating.
2. Budget for saving, surprises, and splurges
Your budget is also a tool that can help you save money. You may be wondering, how much should a college student save per month? While there is no set dollar amount, consistent, sustainable savings seem to work the best. Creating a category for savings and contributing a certain dollar amount or percentage of your income each month is a great way to start budgeting for college students. You can then put the money towards an emergency fund, retirement fund, student loans, or other long-term financial goals.
Although financial emergencies do happen, you can anticipate these costs by leaving a little extra room in your budget. At any time you may lose your job unexpectedly, a loved one can become ill, or your car could break down, but not all of your financial surprises will be major. These costs can be as simple as forgetting you had to pay club dues or getting a last-minute birthday gift for a friend. Allocating some additional money in your budget allows you a little more cushion when unexpected expenses–big or small–occur.
After accounting for savings and surprises, you can tuck a little bit of money away each month for splurges. Your budget category for indulging in things you enjoy could be broad or designed for a more specific purpose, like a spring break trip. Having designated funds means that you’re more likely to stay within your budget and not charge spontaneous purchases to your credit card. If you must spend money on extras, try to utilize student discounts to your advantage when splurging.
3. Track your spending
An important tip for budgeting in college is to track your spending regularly to make sure you’re getting the most out of your budget. Once you get to campus, record everything you spend money on for an entire month. A mobile app will make this easier, but you can also save receipts or use a notebook. Once you see exactly where your money is going, adjust your budget as needed.
A budget is made to aid you in your finances, not hinder you. Don’t be afraid to expand, limit, add, or remove categories from your budget as time goes by. The most beneficial budgets are ones that are realistic but flexible. Tracking your spending and repeating the process every few months could help your student budget stay relevant to your college life.
4. Review your budget regularly
Many financial experts say you should review your spending at the end of every month. You'll have a lot on your plate, but finding a way to fit in a regular budget review can benefit you significantly. Set a date in your calendar, or take time before or after a scheduled activity you never miss, such as a weekly study group or yoga class.
Take a look at both your required spending and your optional spending for the week. If you are starting to run low on spending money, you'll need to cut back somewhere. Cutting back on any unnecessary purchases will help your budget work best for you.
The obvious place is your optional spending, but you might find ways to reduce your required spending, too. For example, switching to a cheaper meal plan or renting textbooks. See How to Stretch Your College Dough for more money-saving ideas.
5. Set up direct deposit
You can keep track of your money by setting up three bank accounts: a billing account, a checking account, and a savings account. Have the money you've budgeted for each category automatically deposited into these accounts. With the three different accounts, it will be easier to separate the money in your mind, making it less likely that you’ll tap into your savings account or spend money allocated for bills.
As your debit card is linked to your checking account, you’ll need to be conscious of your monthly expenses. When your checking account is empty, it's empty; there’s no way around an empty bank account. To avoid dipping into other bank accounts, you’ll need to be able to hold yourself accountable.
6. Use credit cards wisely
Credit cards can be a helpful tool during college when used wisely. Not only can they help cover your expenses, but they also offer students a manageable way to build credit. Are you interested in applying for a student credit card? Apply for the 1FBUSA Student Credit Card today.
Being a responsible credit card holder is very important. Using one low-limit credit card and only charging things you have budgeted for can help you develop good habits when you’re first starting out. You’ll want to make sure you’re not spending money you don’t have by paying off your balance regularly. Paying your bill in full and on time each month will prevent you from racking up fees and debt at a high interest rate.
Because your spending habits in high school vs. in college will be different, it’s necessary to take the time to budget for life after high school. Sticking to a budget won’t ruin your college life. In fact, these money management tips for college students can help you live your college dreams to the fullest. By checking with your budget, you’ll be able to enjoy your college activities without worrying if you’ll have enough money to pay for them. Living within your means can reduce stress and put you on the path to a sound financial future.
🏡Prepare to reach your future financial dreams by reading 6 Smart Ways to Save for Your Future.
💸Making a budget is tricky. Find a template to help in How to Create Your Budget.