How to Create a Successful Budget while in College
Creating a budget while in college is a great way to track spending and understand where your money goes. Here’s how you can start budgeting now and work toward your bigger financial goals.
1. Know your cash flow
As the first step in creating your budget, you’ll want to calculate your net income, which is the amount of money you earn less taxes. If you receive a regular paycheck through your employer, regardless of whether you’re part-time or full-time, the amount deposited into your checking account is your net income.
If you don’t have regular monthly income, it may make sense to build your budget around the academic semester—for example, when you have refunds from financial aid or income saved from a summer job.
Be prepared for unexpected expenses by building up a bit of savings that you can rely on. Once you have your budget, build in a 10% cushion. If you have an unexpected health bill or your car requires an unexpected repair, this cushion can help reduce the stress and cost of these events.
2. 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.
3. 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.
4. 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.
5. Apply for Scholarships
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
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