6 Tips for Setting a Budget as a Student
Managing your money on your own – how hard can that be? Pfft. Simple math. No problem. Right?!
Well, yeah. Until suddenly it seems like you owe more than you’ll make in your entire life AND your friends have stopped letting you mooch the last slice of pizza AND even the plasma center is turning you away.
Here’s how NOT to be that guy (or gal):
1. Factor big expenses out first. If you’re taking out a loan to pay for tuition, fees, and other school expenses, don’t be fooled: you’re not actually rich. Make a list of everything you know you’ll have to pay the school, including tuition, fees, room and board if you’re staying on campus, etc. and set that total amount aside. Estimate how much you’ll need for books (the school can give you an idea) and set that aside too. Whatever you have left afterwards is what you’ll realistically be working with.
2. Figure out your monthly income. What do you have coming in? If some of your dough shows up in a lump sum that’s meant to last over several months (like that student loan money), divide it by the number of months you have to rely on it and only “pay” yourself that much per month.
- What to count: any paychecks you’re pulling down, monthly support from mom & dad (thanks guys! send more!), and a month-sized slice of the money you have from student loans.
- What not to count: gift money (nice to get, but it’s not a sure thing), your credit card limit (it’s not free money), and winning the lottery (the odds just aren’t in your favor).
- It’s better to low-ball your income estimate than to be overconfident.
3. Figure out what you have to pay. What bills will you have each month?
- Focus on the bills you have to pay to somebody else. Unlike an allowance you pay yourself for food, fun, etc. these bills have real amounts, real deadlines, and a real impact on your credit.
- If you’re not staying in a dorm or at home, you’ll need to figure out how much your rent will cost. If electricity, water, internet and other amenities aren’t specifically included in your rental or dorm agreement, estimate how much you’ll need for those. Who’s paying your cell phone bill? Car note? Car insurance? Health insurance or healthcare costs?
- It’s better to estimate a little high when it comes to expenses.
4. Do the math. Income minus expenses equals the budget available to you during the month. Whatever’s left after you pay your bills is the money you’ll have for food, entertainment, personal expenses, savings and other miscellaneous costs. Prioritize how you want to spend your money, set goals and stick to your self-imposed limits.
5. Stick to “real” money. It can be tempting to turn to plastic when you’re running low on funds. The catch is that when you buy something with a credit card, you not only owe that money – you also owe interest, which means your debt can grow quickly. Only use a credit card if you’ve thought about how the purchase fits into your budget and you have a realistic plan for paying it off. Credit cards can be a life-saver for emergency expenses (like healthcare) but be careful what you define as an “emergency.”
6. Don’t set it and forget it. You and your budget need to be besties. Each time you get ready to spend money, ask yourself how the purchase fits into your budget. Review your budget each month to see if you need to adjust your estimates, and remember to think ahead so you can save for special expenses like Christmas gifts, spring break, etc.