Young, fabulous, and not so broke: 4 student budgeting tips
No matter if you're considering heading back to school or if you're already a student, creating a budget might not be your number-one priority. But it should be right up there. Duck9.com, a website for student finances, reports that 38 percent of college dropouts leave school due to debt or financial pressure. Even then, new grads may not be in the clear. Two out of five Americans with federal student debt can't make their monthly payments, Mark Kantrowitz of Fastweb.com reported to Bloomberg in October 2011. If you're a college student, are you doomed to poverty until you graduate and maybe even beyond?
Young, fabulous…and solvent?
College students don't have to be broke. A simple, smart budget can help you navigate the choppy waters of student financial management. But budgets can be so boring, right? True, budgeting may not be as much fun as spring break in Fort Lauderdale, but being organized and having a plan can make budgeting nearly painless.
Tip 1: Put your sweat into a summer job
If you're planning on heading back to school in the near future or already attending full-time, your top source of income could be the money you make during the summer. That's the advice of Melissa Joy, CFS, who works as the Director of Investments & Client Service for the Center for Financial Planning in Southfield, Michigan.
"Calculate the amount of money you'll make in the summer and set a target for savings by the end of the time that you're working," she says. "Set up a savings account to hold this pool of money." That means you need to avoid the temptation of summer road trips and big financial moves while you're in school. Your impulse may be to take a break from hard work and kick back in the summer, but summer is the time to work those extra shifts while you still can--and put it all into savings.
Tip 2: Keep yourself honest
Once you've got some money to work with, you need to decide how you'll spend it--and keep it. Anyone can make a basic budget, but it's hard to stick to it when friends come calling for nights out. Tom Kokis, the Director of Student Financial Literacy at Berkeley College, suggests a more formal budget than something doodled in the back of your history notebook. "Keep all your receipts and categorize them for budgeting purposes," he says. "No expense is too small to be included. Use a spreadsheet to itemize your categories of income and expenditures for easy accounting." Keep your categories simple, starting with three or four at first. Good ones to start with: books, entertainment, personal expenses (haircuts, toiletries, etc) and food.
Joy suggests that free personal finance programs like Mint.com which can make it easy to get a visual record of your spending. This is the time to be surprised at the amount of money you spend on pumpkin lattes.
Tip 3: Make a financial commitment to yourself
Once you've got an idea of your spending, you've got the power to change places where you may be leaking--or hemorrhaging--money. Decide what's reasonable and what's not, and then make it your goal not to spend over your budget. Ways to keep track of your spending include:
- The tried-and-true envelope system: Determine what you'll spend in the month for each budget item and put those amounts in cash in separate envelopes. When an envelope is empty, your spending in that category is done for the month.
- Use your smart phone to keep yourself money smart--and honest: There are several apps that will allow you to instantaneously track your spending and keep a running total for each of your budget categories.
Tip 4: Pay yourself
Once you have a savings account, to safeguard your summer savings and perhaps financial aid, Joy recommends setting up a bi-weekly payment plan that works like a paycheck. She notes that it's a strategy that takes discipline, but adds: "If you have a trusted relative like a parent, you can ask their help in safeguarding the savings account from whims and out-of-budget expenditures."
If you're just finding it impossible to make ends meet, it's time to consider getting a year-round job. If you already have a regular job, you're in a great position because you can use your wages in your budget and sock extra money aside in a savings account. Your extra money could be from your summer job, gifts or financial aid. It should always be your goal to come out a little ahead at the end of the month--even a $5 surplus is something to celebrate.
Of course, keeping a budget isn't all about taking all the fun out of your life--a little work/study/life balance can go a long way to help you de-stress. But what's one thing that's really stressful? An empty bank-account. Learning to keep spending under control now is a skill you'll use for the rest of your life--many students learn this skill in college.