College is an opportune time to establish your independence, broaden your social circle, and find a career path. It is also the perfect time to begin building healthy financial habits; starting with a budget. Students often overlook the importance of preparing for their financial futures, and this guide will help students understand the value of a budget, as well as provide a walk through on tracking one’s income and expenses. College is often the precursor to an individual’s future, and this guide will help students create a successful budget, as well as identify areas for savings. In addition, this guide has also compiled some useful money-saving tips to help students begin investing. Here is a student guide to college life and budgeting.
College life is an exciting time for undergrads, and while you’re no longer living under the house rules of your parents, you might not be living with the security of their income either. Creating a budget is important, as this could be the lowest income earned period in your life. The current federal minimum wage in America is $7.25 an hour, with a full-time annual salary of $15,080. If you’re able to work evenings at a campus pub, movie theater, or retail store, you could be making $1,200/month, or less if you’re only able to work part-time. If you’re not relying on your parents or student loans for financing, you could be facing a tight fixed income that you’ll need to last you throughout the entire semester. Developing smart spending and saving habits now will help ease your transition into a financially sound life after college. If you cut back on a few things like dining out, and invest just $50 a month in a 0.01% interest savings account for four years, you could have $2,454.91 by the time you graduate!
There are several sources of income available for students to assist with college education expenses: A student loan is a loan given to students or parents, which is used to pay for the cost of education after high school. Generally, there are two types of loans available to you: Federal student loans, or loans funded by the Federal Government, and private student loans which are non-federal loans made by a lender such as a bank, credit union, school, or state agency.
Scholarships and grants are often referred to as “gift aid” and are forms of financial aid that do not have to be repaid. Scholarships are often merit-based awards and offered from all kinds of organizations. Scholarships are awarded for a number of things like strong academics, excelling at sports, or being a member of a religious denomination. Consult your financial aid office or career center for search tools and tips, and visit the US Department of Labor’s free scholarship search tool for scholarships and application deadlines.
Grants are need-based funds and often awarded to college students with financial need. A good first step to determine if you qualify for financial aid is to submit your free application for Federal Student Aid (FAFSA) to the US Department of Education. Grants can be awarded from the federal or state government, private or nonprofit organizations, or schools, and there are a number of resources and tips for applying available on the FAFSA website.
Federal work-study programs are available at an estimated 3,400 postsecondary institutions in the US, and employ students with financial need to assist with education expenses. Federal work-study program jobs could include tutoring elementary school students, working in your college mentor program, or emergency preparedness and response assistance. The program also strives to place students in work related to their field of study, whenever possible.
Another essential element included in a student guide to college life and budgeting is learning to craft a personal budget. Now that you’ve estimated your income for the semester, it is time to take a look at your college expenses. Students have a number of fixed expenses to take into account when planning a monthly budget. Your fixed expenses are necessities you know you will have to pay every month, beginning with your accommodations. Rent for housing is generally due between the first and fifth of the month, or room and board expenses if you’re living in a dorm. Plan for the cost of groceries if you’re living off campus, or a meal plan if you’re living in the dorms, and cost of gas and insurance if you have a car at school, or a monthly bus pass. Your phone bill is another monthly expense, and you should also budget for school supplies such as books, and a laptop computer. Your expenses and income may fluctuate from month to month, so it is best to reevaluate every semester.
Once you have a grasp on your fixed expenses, then you can compare this to your monthly income, giving you a better idea of your monthly budget. To calculate your budget, subtract the cost of your fixed expenses, and money you’ll be investing in your savings account each month from your total monthly income. This amount is defined as your discretionary income, or spending money that is left over after bills, taxes, investing, and spending on personal necessities have been paid. Your discretionary income is often spent on things for pleasure such as travel, entertainment, dining out, and new clothing. Keep in mind that while this income is available to spend on extracurricular activities, it is also money that could provide a much-needed cushion on expenses that follow graduation. It is never too early to start saving for the future, so here are some useful tips to help develop savvy saving habits today:
Having a credit card to start building a healthy credit history is smart, but having too many credit cards could lead to greater debt or make you vulnerable for fraud. Limit the number of credit cards you have to one or two low-interest cards, and pay them off each month, or keep a low balance of 20-30% of the credit limit.
Many universities now offer the option for students to rent their textbooks, in lieu of buying all materials. Choosing this option or purchasing e-textbooks can save you from high upfront costs at the beginning of each semester. If your books are not available for rent, buy them used and resell them to your college bookstore at the end of the semester, or online.
Dining out at restaurants or having a few drinks with your friends is always fun, but the bill adds up at the end of the month. Consider learning how to cook, and host a dinner party at your apartment instead. An easy way to split costs with guests is to host a potluck and have everyone bring their favorite dish and recipes to share!
If you’re planning on living solo, consider living with roommates instead. College is a time for socializing, and having a roommate or two will expand your social circle, and cut your rent and living expenses in half each month. If you find a roommate with a similar palette, you could save on groceries too!
Your wardrobe could also double overnight for free if your roommate and you share the same size clothing. Shopping at thrift stores instead of buying new clothes is also a good option to save, or host a clothing swap party with friends of all shapes and sizes. Have your friends and neighbors bring a set number of clothing items in good condition, and trade in clothing you never wear. This is an excellent excuse to clear your closet, and come home with new clothes without spending a dime.
Hold on tight to your college ID card; this piece of plastic is worth more than you might realize. Retailers like JCrew, Banana Republic, and Amazon.com offer discounts for students able to present their ID or an .edu email. Before you purchase your laptop, flash your student ID at Apple or Best Buy for student discounts. Sign up for Best Buy student deals, which is currently offering students $100 off all Macbooks and iMacs, and 20% off all countertop microwaves. Your student ID will also likely get you discounts at local eateries and businesses near campus, so keep it in a safe place in your wallet, and don’t hesitate to ask local establishments about their discount programs.
There are always free events for students happening all over campus, such as movie screenings in the auditorium, intramural sports, pizza nights, and volunteer opportunities. Consult your Student Activities Center for their calendar of events.
Tracking and managing your expenses with helpful apps can simplify the process and allow less room for discrepancies. Mint is a great app designed to securely connect with your bank account and automatically organize and categorize your spending habits. It offers suggestions for ways to cut back on areas your spending is high, and even breaks down transactions such as ATM fees, reminding you to limit those types of fees. Level Money is an app that automatically updates your discretionary income each day for real-time budget tracking. It allows you to view expenditures each day, and how much discretionary income you have left for the day, week, and month. To keep things simple, Left to Spend is an excellent app for users who just want to set a spending allowance, and track how much the budget has left. It’s a personal finance app stripped down to the basics, and prevents students from getting caught up in daily budgeting, when you can be studying for exams.
College is a time to learn and grow, and although you may hit a few bumps along the way, creating a budget ahead of time will help pave the way for successful financing. Research scholarship and grant options, as well as begin looking for part-time jobs that are available near campus. Start creating an estimate on your fixed income, and set money aside to invest in a savings account. Remember to cut back on unnecessary spending, and utilize expense tracking apps that can help you stick to your monthly budget. Do not make the mistake of winging your finances. Staying organized and creating a balanced budget will help you ace your financial future. It is all part of a student guide to college life and budgeting.
By Kara Tiernan