Regardless of how you feel or what you’ve been told, this is a must have life talk. It’s not and should not be considered a taboo subject. Budgeting is tough and sticking to it is even tougher. Take care of your future by anticipating your expenses. Your freshman year in high school is the perfect time to start planning your college budget.
How to Budget for College Students
One of the best ways to start and stay on your budget is to track your expenses. Start early like your senior year in high school. The earlier you start the more financial savvy you will be. Your budget goal is to have more income at the end of your budget than expenses.
Questions to ask:
- Who and how will you be paying for college?
- What expenses will you have?
- When to file FAFSA?
- Should I have a credit card and/or bank account?
- How much will room and board cost?
- Transportation?
Paying for College
Fill out the FAFSA! You may qualify for grants and/or student loans. Either way, fill it out. Going to college on grants is a huge debt relief to you and your financial supporter (usually parents). If you don’t have to take out loans, then don’t. Financial aid is divvied out each semester. Most students do go ahead and take out student loans even if they receive grants, it’s a way to help pay expenses that you incur during the semester. Also, you will have to maintain a 3.25 GPA (Grade Point Average) in order to keep your student financial aid. However, you need to know that you are expected to start paying on student loans after college graduation or if you quit school. Don’t falter on your student loans, they will take your income tax refund if you do. If you find yourself in a financial crunch after graduation, then apply for a forbearance or deferment.
Scholarships are the next best way to pay for college. Like FAFSA grants, they don’t have to be paid back. They also require that you maintain a certain GPA, each one will differ on their requirements. Talk to your high school counselor. They will help you find all the right scholarships that you can apply for.
Choosing an affordable college/university is also something you should consider. By affordable, I mean one that is generous with their financial aid and will cover most of your tuition and costs. At this point, you may even want to consider a vocational or tech school.
Instead of a regular job, apply for a work-study job. When you fill out the FAFSA make sure you check the box that allows you to apply for this. You’re not guaranteed a job through this program and you’ll have to still apply for a job. However, you may need all the financial help you can get, so this is a great option.
Families are known to save for their child’s college fund. If this is your case, then tap into this savings rather than borrowing from student loans. According to Sallie Mae, the typical family covers 43% of the college costs.
Expenses
Here is a small list of the most common expenses that you will incur: rent, utilities, transportation (public transport or car payment and insurance), tuition, books and supplies, food, cell phone (unless you are on your parents plan), household (like cleaning and hygiene items; if you live on your own) and entertainment or travel.
When to File FAFSA?
When to file for FAFSA will be determined by when you decide to go to college. If you know that you are going right after high school, then this will should happen during your senior year. Otherwise, file for FAFSA as soon as you know that you are going to attend college.
Should I have a credit card and/or bank account?
That’s totally up to you. According to Sallie Mae, 56% of college students have a credit card. I have to say that it is much easier and quicker to pay your bills with a credit or debit card, especially when paying online. Some online bills will let you pay with your bank account, so you will need to know your bank’s routing number and your bank account number. If you or your parents are apprehensive about you having a credit or debit card and/or a bank account, then you can always get a pre-paid card.
Your parents may prefer that you use their bank debit or credit card. If that’s the case, ask them to put you on as an authorized user and this will help you start building your credit.
Pre-Paid Cards:
- Netspend – It’s both a Visa or Mastercard and accepted by all retailers. No activation fees. You can have your paycheck set up for auto deposit and if you do this and your deposit is more than $500 monthly there are no fees.
- Bluebird – It’s an American Express and may not be accepted by all retailers. There are no monthly fees for this card. Purchase at Wal-Mart.
- Chase Liquid – It’s a Visa card and is accepted by all retailers. There is a $4.95 monthly fee. You can get this card online or at a Chase bank.
How much will room and board cost?
Room and board costs will depend greatly on which college you attend, whether you live at home, on-campus or off-campus.
The average cost for in-state residents of Texas is $11,832 for room and board to live on-campus. Good news, your utilities, cable and internet are included in your cost of living on campus, unless you’re in an on-campus apartment.
Compare that to the cost of living off campus, the medium monthly expenses cost about is $2,172 for a semester total of $13,032.
How much will transportation costs?
Public transportation to and from college will depend on where you live and the proximity of your housing to the college. You can ride a bicycle if you want to keep your costs way cheap. You can share rides with other students like a carpool with 4-5 other students that can share a similar schedule with you. The local bus will usually give students at 15-20% discount with a proper college ID. Bus rates will differ according to which bus company is transporting in your location.
If you own your own car then you’ll need have expenses like a car payment (unless you have been generously given a car by a relative), car insurance, gas and routine maintenance like oil changes. A car payment and insurance will also differ depending on the year model of your car, and whether its new or used.
When your income is more than your expenses, you are doing it right. Every time you get paid, if there’s an overage on your income or money still in the bank then put the extra money into your savings or put it back for extra expenses.
When your expenses are more than your income, then your spending more than you are making. A negative bank account comes with some major overdraft bank fees. The average overdraft fee or return fee is $30 per item. Review your budget daily when you are first starting. Then you can review it weekly or every time you get paid. Use extra money to do things like change the oil in your car, things that you don’t have to do on a monthly basis. Take a moment or two or even three and ask yourself, ‘Do I need this?’ if the answer is no, then don’t make the purchase. If you need it, ask yourself, ‘Can I afford this?’ If the answer is no, then save up till you can afford it. If the answer is yes, then make the purchase. Make sure your purchase is not an emotional purchase but a necessity.
Expenses
Some expenses will fluctuate, and some will stay the same. Your utilities such as electric and water will fluctuate each month. Your rent, car payment and insurance will stay the same each month. These are also your priority expenses and must be paid first.
- Going home to visit parents
- Parking – $40-$2,500 per semester
- School supplies – $1,230-$1,390 books and supplies
- Extracurricular activities
- Living expenses – $12,000 – $18,000 for a 9-month period according to the College Board
- Clothes
- Dorm room items
- Entertainment
- Class fees – testing fees
Prioritize your Expenses
Top 3 priorities:
- Rent
- Car – payment, insurance or transportation
- Food
Reminder:
- Cell phone
- Household
- Savings/emergency fund
- Entertainment or travel
Once you’ve graduated college or if you experience a move then make sure you re-evaluate your budget and include retirement
Choosing a Tool
Choosing a tool can be a daunting task, especially if you’ve never had to budget.
- Use pen and paper – make your own spreadsheet
- Envelope method
- Apps
- Microsoft Excel spreadsheet
- Your bank has tools
Where to start
Start with your income. First, you need to know how much money you can make as a college student. Will it be minimal wage? How many hours will you be able to work full-time or just part-time? Will you have other income from parents or side jobs?
Pen and Paper Spreadsheet
Putting your budget into writing makes it more real. Don’t bet suckered into the thought that you can keep track of everything in your mind.
Make bullets for your list. Here’s an example:
January 2020 Income – $3,000
Monthly Expenses Weekly Expenses
- Rent – $750 √ pd 1/1/20 Utilities – $150
- Car – $250 Gas – $50 total ($200)
- Car insurance $150 Food – $50 total ($200)
- Cell phone – $100 Household items – $20
- Savings – $300 Entertainment – $50
Balance – $620
This is just an example. Your income and/or expenses may be more or less depending on your wages and hours you worked. Once each item has been paid then check it off your list and put date paid beside it. If you’ll notice the balance is $620, if you are lucky to have such an overage then at the end of the pay period but this money into savings. You may want to take a trip during spring break or take some time off during the holidays.
Your monthly savings rule should equal 10% of your earned income. Entertainment means eating out, movies, night clubs, pretty much anything you do socially with friends.
Envelope Method
The envelop method is exactly what it sounds like. This one is best when used with a cash only basis, for those people who work for cash only like babysitters or lawncare. Buy a box of envelope (the size is your choice) label each one with an expense. Starting with your priorities, each time you get paid distribute the money into the envelopes. When you have the set amount in each priority then start distributing to the remainders.
Apps
Top 6 Apps for budgeting:
- Mint
- Fudget
- PocketGuard
- Clarity
- Goodbudget
- Microsoft Excel
Mint
The leading app for budgeting. Use with iOS and Android. This app brings together all your information including your credit score. On Google Play, this app is rated 4.5 out of 5 stars. On the Apple App Store, this app is rated 4.7 out of 5 stars.
Fudget
This app is very popular. Use with iOS and Android. It has many amazing features like user friendly, recurring budget (means you don’t have to enter everything repeatedly each month) and one tap adding. On the Apple App Store, this app is rated 4.8 out of 5 stars. On Google Play, this app is rated almost 5 out of 5 stars.
PocketGuard
With this app you can pay bills and manage multiple accounts. Use with iOS and Android. On the Apple App Store, this app is rated 4.7 out of 5 stars. On Google Play, this app is rated 4 stars out of 5.
Clarity
With this app you can plan your budget, manage expenses and track spending. On the Apple App Store, this app is rated 4.7 out of 5 stars. On Google Play, this app is rated 4 out of 5 stars.
Goodbudget
Use with iOS and Android. This app has real-time tracking. Always stay on top of where your money is going. On the Apple App Store, this app is rated 4.7 out of 5 stars. On Google Play, this app is rated 4 out of 5 stars.
Microsoft Excel Spreadsheet
If you are Microsoft savvy, you can customize your excel spreadsheet cells. You can keep yearly totals by adding multiple tabs and selecting ‘all’ at one time.
This is my go-to method. I love this method and since I get paid a monthly salary it works well for my needs. My income doesn’t change for an entire year. I’ve been budgeting for many years, so I don’t categorize my expenses any longer. I list all my bills, most of them are setup for auto draft, then I know how much I have left to spend for the rest of the month.
Bank Tools/Apps
Signing up for auto draft on your top priorities, is a good idea. Set these up to come out of your bank account the day you get paid. Having them come out asap will ensure that they are paid. This will help you know that you can’t overspend, thank goodness.
Tips to sticking to a budget
Don’t spend what you don’t have.
When you go to the grocery store make a list and buy only what’s on the list or use the Wal-Mart grocery pickup and then you aren’t tempted when you grace every isle in the store. Plan meals and prepare ahead, eat leftovers or freeze for later in the month when money may be tight. Eating healthy doesn’t have to be expensive, buy only what you need and will eat. #1,2
Use discount cards that are offered by several grocery stores. #6 Use discounts like club cards, loyalty cards or coupons from Kroger and Safeway. If you are buying in bulk, then use Sam’s and Costco.
Shop only with cash. Go through the ATM at your bank (no fees) and get out the amount that you have budgeted and only spend that amount. You have a calculator on your phone so use it that way you know how much money is in your buggy.
Cut bad habits. Do you really need that expensive coffee every morning or can you purchase a coffee maker and brew it yourself? Do you really need to drink pop all the time or should you be drinking water?
Give yourself a weekly allowance and stick to it. Don’t purchase items that aren’t a necessity until you’ve paid all your monthly bills and expenses.
Set short term goals. Balance your budget daily, weekly, biweekly and monthly. Stay on top of your spending habits and know where you are money wise. Track your income and expenses.