Why It’s Important to Create a Budget as a College Student

Why It’s Important to Create a Budget as a College Student

by | Apr 18, 2023

Most college students simply can’t afford to ignore the importance of budgeting their money while working toward an education. Expenses such as tuition, room and board, monthly utility bills, books, food, and transportation costs can quickly add up and become impossible to manage when you aren’t carefully monitoring your finances.

By budgeting your money as a college student, you can help ensure  you have sufficient funds to cover your costs while leaving room for fun and recreation.

The Importance of Budgeting During College

Many college students attend school while living on a limited income and figuring out basic independence and life skills for the first time. A monthly budget can help you stay on track and pay for all your expenses while having enough cash left over for fun.

Creating a budget now can help you maintain your finances and help make sure you can afford to stay in school and successfully obtain your degree. Plus, you can develop important financial management skills that can serve you well for the rest of your life.

How to Make a Budget

Budgets are relatively straightforward financial management tools, but creating a budget from scratch requires a little work. Once a monthly budget is established, you can use it to track your income and expenses and live within your means.

Whether you use budgeting apps or create a budget using a spreadsheet, here’s how to get started:

1. Add up your income.

Add up all the monthly income you receive from sources, including a part-time job, grants, scholarships, loans, or an allowance from your parents. If you live off your own savings, only allocate yourself an amount of monthly income that can allow you to stretch your savings through the school year.

If your income varies from month to month, calculate the average amount of money you can expect to receive based on previous months.

2. List out your expenses.

Create a separate line item in your budget for every monthly expense, including rent, bills, food, gas, school supplies, and more. Fixed monthly expenses (like internet or phone bills) are easy to plug into your budget, while variable expenses should be averaged For example, if you spent $600 on groceries in the last four months, your average monthly grocery bill is $150.

You can assign each expense a category, such as school expenses, home necessities, and recreation to further break down your spending habits.

3. Subtract your expenses from your income.

The number left over after you subtract your expenses from your income represents your discretionary income and spending money, which can be used for fun and recreation or other financial goals like savings. Ideally, you want a healthy amount of wiggle room – if this number is too small, or negative, you need to work on increasing your income or reducing your expenses.

Now you have a working budget and should refer to it regularly as part of the budgeting process. Remember that your budget is a living document. If your income changes, make sure to adjust it in your budget.

For example, if you repay a loan, remove that monthly payment from your outgoing expenses. By continuing to make updates, you can help ensure you’re always working with a realistic picture of your finances.

Tips for Saving Money and Budgeting in College

Saving money and budgeting can be tough when you’re a college student on a limited income, but there are ways to make your money go further:

  • Get a job. A part-time job can help you cover your costs while you’re in school. Many local jobs can work around your class schedule.
  • Live at home. If it’s realistic, living at home with your family can help you save money on rent, food, and other expenses.
  • Review your discretionary spending. Be mindful of what you’re buying and regularly look at where most of your discretionary spending is going. There may be opportunities for cutbacks.
  • Shop around. Look for the best deals on textbooks, school supplies, groceries, and other expenses. Don’t assume the campus bookstore give you the best deal.
  • Avoid debt. No matter what, try to avoid unnecessary loans. Taking on extra loans as a college student can increase your monthly expenses and add more debt on top of your student loan debt.
  • Attend student-friendly events. Budgeting doesn’t equal boring. Your campus should offer various free or low-cost opportunities to engage in activities and meet people.
  • Put extra money in savings. Put some of your discretionary income into savings each month. This can help you afford emergency expenses, like a vehicle repair, without breaking your budget.

Common Budgeting Mistakes to Avoid

It’s natural to make mistakes when learning to budget for the first time. Here are some of the common mistakes you should try to avoid:

  • Not budgeting at all. This is the biggest mistake you can make. If you don’t have a plan for how to spend your money, you could easily overspend and run out of money mid-semester.
  • Not sticking to your budget. Sticking to your budget is the hardest part. Check your monthly expenses to help make sure your spending aligns with your budget.
  • Not creating a budget that works for you. You need to be realistic and create a budget that fits your life. If you overestimate your income or underestimate your expenses, you can run out of money.
  • Not revisiting your budget. Your budget should be a living document that changes to reflect your financial situation. Revisit and update your budget whenever your income or expenses change.

Bottom Line

Budgeting is crucial for college students to manage their finances. To help stay financially secure, use MyScoreIQ services for credit report monitoring.  These services monitor your credit score, help you work toward your financial goals and help detect possible fraud. These services are essential to help achieve your financial goals.

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