Budgeting in College
Aug. 4, 2015 Whitepaper

Educating the Next Generation: Budgeting In College

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College is an exciting time that provides students with an opportunity to grow, gain independence and transition into responsible, self-sufficient adults. 

Many college students are faced with financial challenges they must learn to navigate as they begin to become financially independent. Whether a student is well versed in personal financial matters or is just beginning to grasp financial concepts, it is important, at this stage in life, to learn how to budget.  

By creating a budget, a student can gain a better understanding of where his or her money goes and areas of spending that can be cut. In addition, a budget can help highlight the importance of being prepared for a financial emergency and can help the student develop a plan for saving.

There are many tools and strategies that can help students create a budget and track expenses.

Following are a few tips to help you get started:

Determine a time frame

It is important to identify a time period in which your budget will apply, this could be for a month, a semester or a year. Your time frame may depend on the timing of your financial aid, scholarship payments, paycheck, etc.

Choose a tool to help you manage

Track your income, expenses, progress, over/underspending and any changes that occur. Tools to help you track include pen and paper, the envelope system, mobile phone apps, spreadsheets, online budgeting sites and online banking sites. It is important to find a method that is easy and convenient to use.

Identify income

It is important to know how much money you have coming in each month in order to create a budget. As a student, you may not have a monthly income, or you have money from summer employment, scholarships or financial aid. Set a realistic budget sand stick to it to ensure you do not fall short at the end of your budget time frame.

Categorize expenses

Begin by recording ALL outgoing money. Bank statements, account transactions and credit card records can help you identify your expenses. Once you understand your spending, create categories for fixed expenses and variable expenses. Fixed expenses are fees you cannot adjust that are relatively the same each month. Fixed expenses often include rent, utilities and car payments. Variable expenses can vary greatly each month and often include expenses you have more control over. Variable expenses often include groceries, eating out, clothing and fuel.

Categorizing these expenses can help you identify areas where you can trim down your spending and where you may need to budget additional funds for future, anticipated expenses.

You may also categorize your spending according to “needs” and “wants.” The most important thing is to prioritize your expenses so you are able to pay for higher priority items first.

Save for emergencies

Emergency savings should be included as a fixed expense in any budget. Unexpected expenses, such as car repairs or medical bills, often arise at inopportune times, which is why it’s important to be prepared. Financial professionals often recommend you save enough in an emergency fund to cover three to six months’ worth of expenses.

Balance your budget

Compare your income to your expenses by subtracting expenses from income. A positive balance means you have more income than you are spending. This “extra” money should be allocated to savings, perhaps in an emergency fund or to save for a major purchase such as a new car. A negative balance means you are spending more than you have in income. If this is the case, it is important to look for areas where you can reduce your spending or increase your income.

Maintaining Budget

Budgets should be reviewed each month (even if your time frame is longer) in order to identify mistakes and correct them before moving on to the next month.

Other tips for creating and maintaining a successful budget include creating a routine, not buying on impulse, being aware of small expenditures and paying off your credit card on a monthly basis.

This document is for informational use only. Nothing in this publication is intended to constitute legal, tax, or investment advice. There is no guarantee that any claims made will come to pass. The information contained herein has been obtained from sources believed to be reliable, but Kaiser Hoffman does not warrant the accuracy of the information. Consult a financial, tax or legal professional for specific information related to your own situation.