This ” Budgeting For Students: A Step-By-Step Guideline ” post comes from our guest blogger. Tina Roth is a personal finance blogger. Her Finance Blog was created to inspire people to explore more on frugal living and especially, to help you craft a financial secure life. This post contains affiliate links/ads. See disclosure policy.
For most of the college-goers ‘budgeting’ is the least loved word. It means a restriction on their lives (i.e. having no fun and entertainment). Of course, many of these students hate to lead such a life; however, it is a wrong notion.
Just think about budgeting from a different angle. It is actually a plan that will keep track of where your money goes. Pretty much, it will do a 24×7 monitoring of your spending. With a budget, you will be able to stay aligned with your goals and, possibly, create a bright financial scenario. Without a budget, you are more likely to cross your income limit and find yourself on a rocky terrain after graduation.
After you make budgeting a habit to keep yourself on track with your financial objectives, it will earn you following benefits or help you determine:
- Where you spend every dollar you earn
- Where you spend more every month
- How you deal with financial emergencies
- How much you manage to save in every month
Creating a budget is lot easier than sticking to it. Many get frustrated and give it up after a short time as they feel like birds with wings clipped. If you are a financially wise person and think that budgeting will be a good guidance in your life, you must have certain goals in your mind. Depending on time, your usual goals can be categorized into short-term, medium-term, and long-term goals.
Preparing a list of short-term goals is very easy as you are more aware of your immediate needs than looking into your future needs. However, when you master the art of budgeting, you will find yourself more efficient at preparing your remote goals. Budgeting helps you identify and assess your resources and it helps you make a plan about how you could put those to good use.
Budgeting for Students – A Step-by-Step Guideline
Get started and you will find preparing a budget easier than what you expect. If you are using a notebook and pen, you may have to use a few pages as several important items could accidently be excluded. The basic goals for creating a budget are as follows:
- Assessing your monthly income
- Identifying how much you need for monthly living
- Making a comparison between income and expense
- Either making a cut on your budget or earning more
- Skewing extra money to saving or making debt payment
- Always living below your means
Assessing Your Monthly Income
To start with budgeting means that you need to figure out the sources of your monthly income. In addition, not only do you need to figure out those sources but you also need to determine how much you are receiving from each of those sources. Income may come from different sources that include:
- Earning from a full-time job
- Earning from a part-time job
- Financial help from your parents and/or other family members
- Financial aid in terms of grants, scholarships etc
Identifying how much you need for monthly living
After you are done with income assessment from different sources, figure out your average monthly expenses. Some expenses like rent, car payment, insurance, utility bill, tuition fees etc. are fixed-type expenses. Some monthly expenses do fluctuate from month to month. These fluctuating expenses include food, transportation, laundry bills, gift purchase, books and supplies, etc.
Making a comparison between income and expenses
Now you have a list of your monthly income sources and possible expense categories where your expenses fall under. It’s now the right time to compare income and expenses to figure out if there is any area where you are overspending. If possible, size it down. If your income is more than your expenses, it will earn you surplus that you can direct towards clearing dues or saving.
Either cutting your budget or earning more
If your spending tends to be more than your income, you may end up incurring debts. Small amount adds up and makes a big total that you may find hard to pay off. There are two ways to save you from going to this situation – cutting your expenses or earning more.
In some cases, if you are a college student and are trying to focus on your education, you may be less likely to have enough time to get a part-time job or doing some side hustles to make money. Therefore, the alternative option (i.e. cutting your expenses) makes a far better choice for you. Though you are less likely to slash fixed expenses, you may or will be more than comfortable slashing some of your variable expenses.
Skewing extra money to saving or making debt payment
After making adjustments to bring expenses to track, you will need to calculate how much you can save every month. What will you do with the disposable income that is obtained after deducting expenses from earning? Always think of what you need to do with your savings before you make any movements. You can pay off your debt, if you have any, save money in the bank, invest in the stock market, etc.
Living below your means
If your expenses outpace your earning, you may find yourself addressing your needs using debts. If you don’t control your spending habit, these debts will start snowballing over time to make a big sum. Debt is frustrating for a student who is already on an educational loan. So, it is best to think wisely on how you can manage your monthly expenses so that you can walk like a free bird out of cage after graduation. A proper budget will definitely help you in this regard.
