Being a student also means being responsible for your own monthly expenses. Help yourself out by creating a budget. Make a list of all your monthly expenses, compare them with your incoming funds, and make sure the two balance out.
A budget takes the guesswork out of spending for you. It also helps you avoid the temptation to spend money on things you just don’t need. With a little research and a calculator, you’ll be well on your way to financial security in no time. Here are some budgeting strategies to get you started.
Determine your budget limit
The first thing you should do is find out much money you’ll have to work with each month. Make a list of all your income sources, determine the exact monthly amount for each, and add them up. Remember to include money from all sources – financial aid, work, scholarships, contributions from your family – it all counts. If you don’t have a figure in front of you, make a conservative estimate. If you’re not sure about a money source (like a job or scholarship you don’t have yet, for example), don’t factor it in. Don’t rely on credit cards either. If you have a student credit card, use it to pay for items you’ve already budgeted for.
Discover your current spending habits
Next, you need to get an accurate picture of your current spending habits. Don’t worry about prioritizing just yet (we’ll get to that in a minute). Write down the amount you spend each month for housing, food, movies with friends, car insurance, lattes, that candy bar you bought at the vending machine last week, everything. Check your latest bank account or credit card statement for a more accurate list; most people make a lot of little purchases without even thinking about it. Compare your total purchases to your budget limit – if the budget limit is lower than your total purchases, it’s time to cut back.
Prioritize your purchases
Major bills come first, the fun stuff is secondary. Take another look at the list you just made and start prioritizing. You need things like housing, food, transportation, and tuition money. You don’t need to go to the movies or eat at a fancy restaurant. As you might have guessed, balancing wants and needs isn’t an exact science – and that’s fine. No one’s expecting you to stay home every Friday night or never eat out again. Try to set aside a small chunk of your budget for entertainment or “impulse” buys. If you make sure all your purchases are thoughtful, you’ll only spend money on extra things when you really want them.
You can also save money by thinking outside the box. Sure, you need to get to class, but can you walk or ride your bike instead of driving? Can you ride the bus to save money on gas and parking fees? You need books, but can you buy them used instead of new, or borrow them from the library?
Create a budget and track your purchases
Now that you know what you want, what you need and what you have, it’s time to create a balanced budget. Your new list of expenses should add up to less than the total amount of money you have each month. Leave a little wiggle room for savings and unintended expenses; they have a way of creeping up on you, even when you plan ahead. You may want to keep a copy of your budget in your wallet or on your phone to remind yourself of your priorities. Don’t include any account or password information if you do this.
Track your purchases every month. This may seem like a lot of work, but if you make the effort to track all your payments, you’re way less likely to make frivolous ones. This can be as simple as monitoring your bank account and credit card statements frequently. You may also want to consider starting a “spending journal” and write down each purchase you make on your phone or a small notebook. This is an especially good strategy if you pay for a lot of things with cash.
If you’d like a little extra help, there are lots of great tools on the Web to help you get create and stick to a budget. Consider using a premade budgeting spreadsheet. Google Docs and Excel have free spreadsheet templates you can download, or you can use an online budgeting calculator.
Sticking to a budget
You’ve heard the metaphor before: budgeting is like dieting, and Americans suck at both. While there’s no substitute for good old-fashioned willpower, here are a few tips on staying true to your spending limits.
- Pay with cash. Set a weekly spending amount for yourself, and withdraw that amount in cash from an ATM every week. That’s your stipend; you can spend it how you like, but tell yourself that you won’t withdraw more if you run out. There are a couple reasons that this can help you stay under budget. First, handing over cash is a more visceral feeling than swiping plastic, so you’re psychologically more inclined to feel the tradeoff between the good you purchased and the money you handed over. Second, it’s easy to make a split-second decision to go over budget with a credit or debit card, but it takes more of a conscientious effort to withdraw from an ATM.
- Make room for impulse buys. Back to dieting – many people stay with diets longer if they can splurge every so often. The same holds true for money. Set aside an impulse buy fund, recognizing that you’ll probably want to spend on non-essentials and giving yourself space to do so.
- Be competitive. Make sticking to your budget a competition against yourself. Find a way to feel good about doing well (or, if it’s your thing, negative reinforcement has its benefits too). Even something as simple as a visual progress tracker can help (see: Jerry Seinfeld on not breaking the chain).
- Use social reinforcement. Tons of smartphone and web apps can help you stay on track. 43 Things offers an iPhone app that lets you enter and track your goals, and gives you some social reinforcement. There are any number of web apps to keep you motivated. My personal favorite is stickK, which lets you put money on the line. You enter a goal, designate a “referee,” and arrange for a predetermined amount to be donated to your least-favorite charity if you should slip.