Ways Create a Successful Budget while in College
There are both long and short-term effects of inflation. While inflation can have an adverse effect on your financial future, it can also make it difficult to meet your financial obligations right now. That’s why it’s important to have steps in place to deal with inflation so you don’t end up breaking your budget, or worse, relying on credit cards and accumulating debt.
As you create and maintain your budget, you’ll want to keep some important tips and suggestions in mind. Follow these five steps to deal with inflation and keep your budget intact.
- Get on a budget
One of the best ways to beat inflation is to prepare a budget or spending plan. This will ensure that you are watching what you spend, and you are only spending on items that you absolutely need, regardless of how inflation affects the cost of something, like gas.
It’s better to overestimate your expenses and then underspend!
Budgeting will help you cover unusual expenses such as job loss, illness or car repairs and plan for changes that may happen while you’re in school.
One benefit of budgeting is that it helps you determine if you have the resources to spend on items that you want versus those you need.
- Start by managing your budget and record your actual expenses even the smallest expenditures such as coffee, movie tickets can add up to big monthly expenditures. Spending $10 a day eating out during the week translates to $50 a week and $200 a month.
- Identify whether each item on the list is something you absolutely need or is really a want.
- If you decide you to use a credit card utilize it wisely and don’t spend more than you can afford to pay in full on a month basis. Consider signing up for electronic payment reminders, balance notices, and billing statement notifications from your credit card provider.
- Next, prioritize each item on the list.
- Once you have set your priorities of your wants and needs record your actual expenses.
- Separate your expenses into fixed vs variable expenses
After you listed your monthly expenses, it’s time to categorize which are fixed and which are variable. Consider having two bank accounts- one for fixed expenses such as tuition, rent, car insurance, groceries, debt repayment and the other for variable expenses such as the gym membership, dining out and entertainment purchases. When you need money for entertainment just take cash so you don’t tap into the account for must-pay bills.
If your income were to decrease, you could always cancel your gym membership, postpone a vacation or reduce your takeout spending without much fallout. But you’re likely always going to have to pay for rent/room and board, transportation and insurance.
- Use online apps to reflect on your average monthly spending
Once you label fixed and variable expenses, list how much you spend on each expense per month. Refer to your bank and credit card statements to get the amount.
If it’s not easy to compare your actual expenses to your goals, use apps like Mint or whatever makes it easy for you to look back and see where you overspent and where you did well.
If you can’t afford your lifestyle, it’s time to make adjustments. This may include reducing the amount of money you spend on variable expenses, such as limiting takeout dinners and cutting streaming subscriptions that you don’t use regularly.
Your student ID can get you some valuable student discounts. For example, with a valid student email address, you can sign up for Prime Student on Amazon and receive exclusive college deals and promotions.
- Use credit cards wisely
To use your credit card wisely, know what to look out for before applying and using your card including shopping around for the lowest interest rates.
If you want to establish credit with a credit card, don’t have more than one. Choose one card with good rates and terms and pay off the entire balance monthly. Consider using it just to pay for one type of required expense each month so you won’t be tempted to use it to overextend. If you know you can be responsible with a credit card, apply for one that offers cash-back incentive so you can earn money on the purchases you make every day.
Credit cards can seem tempting and like free money. But to avoid the temptation of overspending, treat your credit card like a debit card, and avoid using it unless you truly need it and you can pay it off right away.
For example, If you charge $3,000 to a credit card with a 17% APR, and only pay the minimum each month — it’ll take you 10 years to pay off your initial balance, by which time you’ll have paid more than $2,200 in interest. That’s why it’s a good idea to keep low credit card balances and no overextend your credit utilization. For more information about how to build your credit, read the following article.
Apply for as many scholarships as you can. Unlike credit card debt, student loan debt can almost never be discharged in bankruptcy, so it is extremely important to put a plan together to paid student loans off as soon as possible.
Regardless of inflation, getting an early start on building credit can help you achieve your financial goals before and after graduation, as well as help you obtain lower interest rates in the future. Just make sure to practice smart credit habits, like keeping your debt at a minimum, avoiding opening or closing too many cards. If you follow this advice, your credit score should never hold you back from your financial goals.
If you need to repair your credit, there are companies such as CreditNerds which offers a unique, free credit repair service and works with creditors as well as credit bureaus to find and remove negative items on clients’ credit reports. Additionally, CreditNerds provides educational resources along with the credit audit to assist clients with expanding their credit knowledge.
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