Planning to pay for your education is fundamental. Not only do you need to know what you have to pay, you need to know how you're going to pay for it. Now that you know your expenses and your options for income, let's talk about budgeting.
A budget is a plan where you can estimate your income and your expenses over a certain period of time. It may seem boring, but budgets are perfect to keep track of your spending. They allow you to spend your money intentionally and mindfully without overspending. Budgets are especially important for students who take out loans because keeping track of your spending can prevent you from ramping up additional fees on your loan called overdraft fees. (These fees lower your credit score, which can prevent you from being eligible for a mortgage or eligible to lease a car later on).
Before you get started, there are a few terms you should be familiar with:
Income: The money you have earned or saved.
Expenses: The money you spend.
Savings: The money you have put away.
Needs: Essential items
Wants: Non-essential items
A student budget includes Income (Money earned), Essential Expenses (Needs), Non-Essential Expenses (Wants), and Savings. Ideally, your total income would be greater than your total expenses and savings. According to experts, your income should be divided as follows:
50% for Needs
Things like rent, groceries, phone bills, and textbook costs are all needs for a student.
30% for Wants
Things like a Netflix subscription, new clothes, and eating out are examples of wants.
20% for Savings
If there is one budget rule you need to follow, it's save, save, save! By starting to save early, you will be prepared for financial emergencies, be able to avoid debt, be free of financial stress, and you will have better financial security in the future. In other words, saving is awesome.
Also included in your budget should be money for unexpected expenses, like a car repair or a birthday gift.
So what does building a budget look like? Here are some easy steps:
Calculate your income after taxes.
Estimate your expenses and savings.
Subtract your expenses from your income.
If your expenses are greater than your income, go through your wants and decide what you can do without.
Keep track of every budget you make, it will help you estimate for future budgets.
Plan for unexpected events.
Pro tip: If you can't come up with a definite number, underestimate income and overestimate expenses. You can do a lot more with excess money than a lack of money.
Students are already on a tight budget. Below is a short list of ways that students can save money. Discuss how the tips below could help you save money. Which methods would you use?
Look for student discounts.
Rent, borrow, or buy used textbooks.
Sell back your textbooks after you are finished with them.
Take advantage of services on campus, like the gym and food court (if in-person).
Sell unused items.
Buy off-brand items (A.K.A Don't Keep Up With The Joneses).
Make your own food and coffee instead of eating out.
Don't use your credit card carelessly.
Choose social activities that are free.
Resist impulse buys by using the 24 hour rule-If you want to buy something, wait 24 hours before you consider buying it.
Make your payments on-time (Your credit score will thank you!).
Get an Air-Miles card.
Get a reusable water bottle.
Monitor your phone plan and data usage.
Split membership and subscription costs with friends.
Now that you know the ins and outs of budgeting, use these resources to visualize your own budget!
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