Creating a Budget: Managing Your Finances in College
The life of a college student is the start of a whole new journey. You’re living more on your own than ever before, you’re making your own schedule, you’re meeting new people from different backgrounds, and you’re even making some big financial decisions. When it comes to finances in college, it is important to start budgeting as early as Freshman year. Learning how to budget early on gives you a better shot at financial success for years to come. Budgeting will help you maintain a more wholesome work-life balance, steer clear of a common stressor for most college students, and even help you make life choices after college. At NSHSS, we believe that budgeting is an essential part of growing up, and it only gets easier the sooner you start. Here are some ways you can create a budget that will work for you!
Budget Before You Begin
The hardest part of any new habit is the beginning. For some, budgeting is a scary task meant only for adults with mortgages and car payments. But budgeting can encompass large and small finances. In fact, if you can master your budget on a small scale, you will learn life-long lessons on how to budget your growing finances in the future. That is why you should begin budgeting as early as high school or Freshman year of college. Taking into account where your money is going, should go, and should not go, is the key. Even if it seems silly to budget for a pair of shoes or a new bookbag, it is imperative to how you view the concept of expenditures, and essentials versus nonessentials, which we will cover shortly.
Track Your Spending
Any adult will tell you that the more expenditures you have, the harder it is to track where your money is going. In college, you will be surprised at all the places your money goes. Even if it is not coming directly from your own bank account, everything from renting textbooks, paying for extracurricular club dues, eating at the dining halls around campus, and buying new clothes for the changing seasons all play a part in the finances of a college student. Sometimes students may not see as many results by simply tracking their own spending in college. If you want to see an example of a bigger budget, talk to your parents or guardians about how their money for your college expenses are being handled. You can even track the balance on your student ID card, looking at how much each item at the dining hall costs, versus. how much it costs to print a class mid-term paper at the library. These small ways of tracking your expenses will open your eyes to the way that money moves throughout our lives.
Essentials vs. Nonessentials
Defining the difference between essentials and nonessentials can be tricky. The first thing to understand is that these terms can be interchangeable, depending on how your life changes throughout the year. For instance, if you are playing soccer at school and you always want a Gatorade after a practice or a game, it might seem simple to pay for them regularly throughout the season. According to most big-box retailers, an 8-pack of Gatorade bottles is approximately $7.88 per pack. So let’s say each weekend, you buy one pack for the week at the grocery store. That’s $31.52 before tax. After tax, that comes to roughly $33.00 per month. Now let’s say that the season has ended and you no longer are attending practices every night—thus you have no immediate need for the Gatorade. But you still go to the same store every weekend. At the store, during the season, you spent roughly $70.00 on groceries each week. That is $280.00 per month. By eliminating the expenditure of the 8-pack of Gatorade bottles, you bring your monthly grocery bill down to $247.00 per month. This may not seem like such a big change, but the more you budget with these two categories in mind, the more your bills will decrease in size. Little things do add up. Deciding between essentials and nonessentials is entirely up to you, but making that distinction every month will be critical to saving money every year.
Understanding Credit Cards
Depending on who you ask, the opinion on credit cards will be drastically different. Some people might say that they could not live without them. Others might argue that they are harmful financial traps that are far too easy to fall into and extremely difficult to crawl back out of. Both of these opinions can be true. The reason for this is that credit cards are meant to help, but their function can become very fraught with their ingeniously designed ease-of-use. In today’s economy, college students may have a different relationship with credit card companies than their parents. But it is important to understand the value of them when you begin looking past graduation. Things like leasing cars, renting an apartment, or putting a down payment on a house will require a good credit score. That is where the very safe, heavily monitored use of your credit card can come in handy. This is not to say that everybody should go out and apply for a credit card. As a young college student, you must talk to your parents or guardians before choosing to get a credit card. As stated, for some, they can be a lifesaver, but for others they can only lead to tricky financial hurdles. You must be vigilant, skeptical, and never grow dependent on them. If you feel you do not trust yourself with a credit card, then it is best to wait before signing up. There are plenty of other ways to help you budget for success.
Expect the Unexpected
Budgeting is all about planning for the future, whether that means tomorrow or five years from now. Our future is of course unpredictable, but finances can actually be quite predictable, as long as you keep your eye on them. If you begin each semester by looking at what you might need soon, compared to what you already have, and compared to what you did not use last semester, you can begin to predict the best way to build your latest budget. By strategizing your budget around the expected, you can prepare your finances for the unexpected things that crop up throughout the year. For instance, if you have a car on campus, it is always important to budget for any unexpected repairs that come up. If you are a part of a fraternity or sorority, you should be able to plan for the dues required each semester. But perhaps your sorority sister or fraternity brother invites you to a concert happening right off campus, that is where your budget will come in handy so that you can know for sure that you can handle the unexpected expense. If, at that time, your car is showing signs of needing new tires, perhaps it is wise to save that concert money for the new tires. These might seem like easy, even obvious scenarios, but they are merely meant to highlight just how easily your budget can change, and how tracking it can prepare you for all the expenses that crop up.
The Pendulum Always Swings
When learning to budget, it’s important to understand a fundamental truth about money: it is always going to come and go in your life. Whether you’re 21 or 71, money should never be something you base all of your decisions on. Sometimes your expenses will be down and you will be able to save quite well. Other times, there will be unexpected expenses related to your car or home. That is where that earlier savings will come in handy. Your relationship with money should involve understanding, patience, and vigilance. By staying financially vigilant, you will have a much easier time saving for the unexpected events in your life. Nowadays, keeping our money tucked under the mattress is not very practical nowadays. Our money can faciscilate a comfortable, even safe life. But that does not mean you should not keep careful track of it at all times. You should depend on it, but never assume it will always be there and be left untouched. If you have a big expense come up, try and be ready for it. ‘Even if it takes out a sizable piece of your savings, that is okay. The pendulum always swings. You can always earn back the money you spent. It may take a lot of time and a great amount of patience. But if you budget carefully, you can be prepared for anything.
The concept of money can be scary to some people. That is why we at NSHSS believe in educating students about the power of budgeting and the wisdom of saving. If you are curious about some of the other ways to help you handle your college finances, check out our other blogs on ways to save. We want you to have a bright, financially-friendly future, and it all starts with you!