Why do I need to budget?
Budgeting is essential to everyone, but especially to college students. To ensure your financial stability, you need to start managing your money right away! If you neglect to manage your money now, it'll only be harder in the future.
Budgeting, as a college student, can be tough, but to increase your savings and avoid future debt, start today. In this article, we'll teach you how to start managing your money like a pro.
What are the differences between fixed and variable expenses?
A Fixed Expense is a recurring cost of which the amount never changes. You will pay these expenses regularly (weekly, monthly, quarterly, or yearly). Because they cost the same every month, fixed expenses are easy to budget! Examples of fixed expenses for college students include housing, books, utilities, & transportation.
A Variable Expense is a potential cost that differs depending on your personal spending decisions. Unlike fixed expenses, variable expenses can fluctuate each month; this can make budgeting a little tricky. Examples of variable expenses in college include dining out, childcare, entertainment, medical/health, clothing, laundry, & groceries.
How do I identify unnecessary purchases?
Many shiny, new, exciting products catch our attention from time to time, but are they worth the money? Impulse buys, and other unnecessary purchases, can make or break your budget. To save yourself and your bank account, here are four questions to ask yourself before purchasing anything outside of your budget.
- Can you buy it three times? Think to yourself, is this something that I am able to purchase three times? If you can't make the purchase three times, then you shouldn't make the purchase.
- Is this a want or a need? Determine whether or not this item is for your satisfaction or an actual purpose. Try your best to limit yourself to only one small "Want" a week and one large "Want" a month.
- Will I still want/need this in a week? A lot of impulse buys are for convenience, and often aren't beneficial in the long run! If you are having a hard time deciding whether or not a purchase is necessary, give it a week to think about it!
- How will this purchase benefit my life? If you have convinced yourself that you NEED something that is not within your budget, write a pros and cons list. When looking them over, see if the pros realistically outweigh the cost and the price.
What are some budgeting tips for college students?
There are many ways that college students can start to budget. Starting to make small steps and improvements towards your budget will help tremendously. Start with small changes to your spending habits, and you can make some progress. Some examples are listed below:
- Purchase used textbooks
- Take advantage of student discounts
- Cancel memberships
- Make supper at home or use your student meal plan, instead of eating out
- Limit extra purchases
- Sell unwanted items
- Get a credit card and begin establishing credit
- 50 / 20 / 30 • divide after-tax income, spending 50% on needs, 30% on wants, and 20% into savings
What are some additional things to consider when budgeting?
First off, there are many reasons you should create a budget in college. However, the main reason is that after graduation, you have to start repaying any student loans. You may have some time to start preparing for that, but building your savings is going to help tremendously.
Learning to manage and save money can be challenging, but is also very necessary. Living paycheck to paycheck isn’t going to be your ideal situation. If you have a part-time job and little expenses, start saving small amounts every month. You might be surprised by how much you can save.
Second, tracking your spending and creating a budget helps you to become aware of what you are typically spending your money on. This can help cut out any unnecessary purchases you may have. When cutting out all the extra costs, you can start adding to your savings accounts and building an emergency fund, which will be super helpful.
Finally, creating a college budget can help you to learn what type of financial decisions are right and wrong early in your life. This will also help you build your savings and spend your money wisely for the rest of your life. Be cautious and picky about what you are going to spend your next paycheck on.
Ready to build your own budget? Check out How to Create Your Budget.
Do you have your budget mastered? Check out 6 Smart Ways to Save for Your Future!