College is an incredible experience — even if it does have a “double-edged sword” vibe. Learning something you’re passionate about, completing a degree, and beginning your career in the best position possible are all well worth a good old four-year collegiate effort. However, those aforementioned pros come with some cons as well.
For instance, college is known for hefty workloads, late nights spent studying, and unstable finances. Between the overwhelming costs of tuition and the lack of sustainable income, college can be a financial nightmare.
While it’s difficult to find a way to completely eliminate the financial concerns of attending college, keeping a strict budget while on campus can go a long way towards ameliorating financial strain throughout your academic journey.
Why Budgeting in College is Important
Collective student loans have risen 116% over the last decade, reaching a staggering $1.5 trillion dollars in recent years. With so much money being borrowed, it’s absolutely essential that students invest in the benefits that budgeting can offer, including:
Avoiding Unnecessary Expenses
Budgeting helps you separate wants from needs. This allows you to identify expenses that absolutely must be paid — things like tuition, housing, and food — and are thus worthy of taking out a student loan.
At the same time, it helps you identify unnecessary expenses — like eating out, going to the movies, or other recreational spending — that can be avoided if you don’t have the cash.
Helping You Stay Healthy
There’s no doubt that school is stressful, and the crushing weight of tens of thousands of dollars of debt only adds to that burden. Studies show that 68% of students literally lose sleep over school-associated stress. Many of them turning to things like substance abuse to help them cope with insomnia.
Keeping a budget can help to reduce stress by providing a sense of organization, understanding, and consistency within your finances.
Teaching You Valuable Life Skills
Budgeting isn’t a skill that will ever become dated. After college, as you start your career, buy a house, have a family, prepare for retirement, and so on, the ability to maintain a budget will ensure that your expenses are properly covered at all times.
Taking the time while you’re in college to learn how to properly budget and handle your money can help you hone your financial skills — skills that will serve you far into the future.
Fostering a Healthy Financial Future
Finally, budgeting in college can put you in the best position possible post-school.
Rather than racking up debt and wasting money in the present — all of which will have to be paid back with interest in the future — a college budget helps you control your spending and create the healthiest financial situation possible when you start your career.
With less debt, you’ll be able to do things like save for a downpayment on a house, maintain a better credit score, and create an emergency fund without juggling excessive debt-related payments in the process.
How to Set Up a College Budget
If you’re nodding your head in approval but you aren’t sure exactly where to start, here are a few tips to set up your first budget while in college:
Start With the Basics
Before you get too far into the weeds, start by creating a simple budget. This can be done with two basic steps:
- Track all of your income: Add up every source of income you have available so that you know exactly how much money you’re working with on a weekly or monthly basis. This can be tricky, especially if you’re dividing a college loan over the course of your school year or career, or you’re working with part-time or seasonal income, but it’s an important starting point in the process.
- Calculate your expenses: Next, figure out each and every major expense that you have. Again, this can be tricky if you’re considering tuition or other costs that come in lump sums, but do your best to break down roughly what you need to spend on a weekly or monthly basis over the course of each year. It can be helpful to group smaller-yet-significant expenses, such as eating out or other discretionary spending, into single, estimated categories — $100 a month for entertainment, for instance.
Once you have these two foundational elements, you can see estimations of how much money you have and how much you spend. At this point, you’ve created the foundation for your budget.
Refine Your Budget
With your basic budget laid out, look for ways that you can sharpen and improve it. For instance, while you may understand what your actual income is at the moment, it may be worth looking into financial aid options, especially if you’re a first-generation college student who may have more opportunities, or picking up a side gig in order to increase your overall cash flow.
It’s also important to identify the wants versus the needs within your expenses. What items are absolutely essential and what can be eliminated if necessary? For example, lodging is an essential expense. However, a discretionary fund created to cover drinking costs is something that can be cut out entirely if you’re in a financial pinch. It can even help you avoid some of the risks inherent in drinking on campus.
Another option would be to comb over your essential expenses and see where you can cut things down. For instance, if you live in a dorm, you may be able to trim your lodging costs by moving off-campus. Even off-campus there may be ways that you can invest in a more energy-efficient house — think LED light bulbs, sealing cracks, or using cold water to wash your clothes — that can reduce your living expenses.
Budgeting While Going to College
From learning life skills to securing your financial future, budgeting is an essential activity while attending college. It’s understandable if the severe lack of income and excessive debt makes you want to throw your hands up and give up on the entire budgeting process from the get-go.
Nevertheless, the truth is, college is one of the most important times to track your expenses, limit your debt, and set yourself up for as promising a financial future as possible. So put in the effort now to establish good habits. You won’t regret it down the road.