Smart Budgeting for College Students
College: the time when we stretch our wings, learn to fly…and do some serious partying! All levity aside, college is an important time in any person’s life. It’s where we set the stage for the rest of our life and form habits that will serve us well (or ill) in the years to come.
Many will tell you that study habits are an important skill to cultivate. They might be. Some say your interpersonal skills will take you places. Uh-uh. Kindness, love, positive outlook? Maybe. Of course you shouldn’t be completely lacking in all these areas. But these things can be learned fairly easily at any time during your life. And hopefully, you’ve already been practicing these skills for the majority of your years.
The Importance of a Budgeting Skill
The most important habit to strengthen during your college years is BUDGETING. Though you may not feel that money is something you should be focused on – and you’re right, it’s not, you should be able to exercise at least a modicum of control over your cash on hand. That’s the important point: Control. Living within your means, saving for the future (not talking retirement – think car or trip), and not getting caught in the slippery slope of debt (credit card interest rates rank among the most insidious and evil forces in the universe…right behind sugar).
Self-Control is the Hardest Part
At its heart, budgeting isn’t a difficult thing. The really tricky part is self-control. Budgeting provides something we all want – money for the things we need when we need them – but does require that we sometimes go without the things we want. The nice thing is, if we do it right, we can eventually have both: the things we need AND the things we want. It just takes time.
That’s where the self-control comes in. We have to be able to wait and save for the wants while focusing squarely on the needs. And college is a perfect time to hone the budgeting skills because many of us still have a backup (our parents) to whom we can turn.
How To Do It
1) Separate needs from wants. This is definitely the hardest part of the whole process. Wants can suddenly become needs when the weekend looms large and you need to unwind. But partying is by no means more important than eating or having a place to sleep or being able to get to class. Needs are, for the most part, things that keep you alive and functioning in your environment. Food, shelter, utilities, transportation money, so you can get to class. Wants are everything else. You could still make it through college alive and with a decent GPA without that case of beer…it would be less fun but you could do it.
2) Money goes to the needs first. Whatever money you have coming in (thorough work or an allowance) you should use to pay for the needs first. Unless you’re really poor, you’ll have a bit of money left over after the needs are taken care of. This leftover money can be used or saved for wants.
That’s pretty much budgeting in a nutshell. The practice though, can take many forms and can be as complicated or as simple as you like. It can involve multiple bank accounts and lots of back-and-forth transfers or just a number of envelopes and a pile of cash. Cash is not recommended to college students – the envelope system is great, – but it’s just too easy to cheat (plus, there’s the whole security thing). The best method is somewhere in between complicated and simple while still making use of the basic concepts of the envelope system.
Basically, all money that comes in is deposited in a checking account. You can then use a budgeting app or financial tracking software (choose your favorite) to earmark (set aside within the checking account) money for the needs and wants for which you are saving. Again, that’s pretty much it. Some categories in budget may include: food (meals), rent, utilities, gas money, weekend money (this includes parties), travel (probably not other countries but maybe just taking road trips every once in a while) and snacks (some coffee and a muffin now and again). If you spend all the money in one of the “want” categories (i.e., weekend money or snacks), you resist the urge to take from one of the other categories (even if it’s a “want” category) so that you train yourself to spend within your means.
Make It More Simple
If it’s easier to think in terms of weekly expenses, divide your monthly expenses by four and save accordingly. Most bills are paid monthly so if you know that you need $100 a month for food, earmark $25 each week to that category. When the end of the month comes, write a check for the monthly amount and start saving again. It is really just that simple. It may take a few minutes each week – and some serious self-control the rest of the time – to get everything earmarked but it’s time well spent in the long run.
The college experience never comes around again but your money habits are with you for the rest of your life (like luggage). Take the time to build a good financial routine and your college years will be productive regardless of how much time you spend partying.