Navigating the financial side of college is difficult for many young adults. The National Student Financial Wellness Study revealed that a staggering 70% of college students experience stress regarding their finances. This doesn’t come as much of a surprise, as newly graduated high school students transition from home life into a situation where they are responsible for their financial well-being. This is especially applicable for students who borrow in the form of student loans. These added responsibilities can leave students feeling stranded and misguided. How is a newly graduated teenager supposed to be financially secure and enjoy college without guidance? We all like to enjoy entertainment and leisure activities with our friends, especially in college. So, how do college students budget effectively while ensuring a comfortable college life? The answer may be different for every student, but adopting the correct habits financially can greatly improve your college experience.
Creating a Budgeting Plan
When approaching any situation, it’s often useful to take a step back and try to understand the bigger picture. Newly independent college students might not yet have developed a structure for monitoring income and expenditures. Delving into your financial situation and seeing numbers on a spreadsheet is a crucial first step to creating a budget. Mobile apps like Rocket Money offer a convenient way to track income and expenses. Tracking income and expenses will allow you to figure out your priorities, and to better plan for the long term. This gives you a better idea of using your time and prioritizing suitable activities, like jobs, study groups, and socializing.
Another option for college students is a more hands-on approach. Creating an online spreadsheet can be a great way to give yourself a clearer picture of your financial health and help you become more familiar with it. Calculate your net income and decide on a budgeting frequency that suits your lifestyle, monthly or weekly. Monthly budgeting is often the preferred choice due to its simplicity and effectiveness. Planning proactively in this way can help avoid mistakes that can harm your financial balance. You will see if your income/expenses are sustainable during this process, such as if you are paying for too many subscription services, or if you have spent too little money on school supplies.
List and categorize all of your expenses, such as: rent, tuition, groceries, school supplies, gym memberships, loan payments, transportation, entertainment. Categorizing your expenses into fixed and variable will help you understand where your money goes each month and where you can cut back. For example, while rent and loan payments are a set price and do not typically change, you can save money on groceries, gym memberships, or transportation by seeking cheaper alternatives or utilizing student discounts.
Applying the 50-30-20 Rule
A general guideline is the 50-30-20 Rule: allocate 50% of your budget to needs, 30% to wants, and 20% to savings. This balance encourages structured spending while allowing room for enjoyment and financial growth. You are not a machine, so leave room to spend on stuff you want to improve your life, such as subscription services or a night out with friends.
Here is a simple example budget sheet for college students we have made and the steps for using it. Following these steps can be one way to help you manage your budget in a structured way.
- Fill in Your Income: Write down how much money you earn from different sources every month, such as a job or scholarships.
- List Your Regular Bills: Write down costs that don’t change much, like rent or your phone bill.
- Track Your Spending: Note how much you spend on things that vary, like eating out or buying clothes.
- Do the Math: The budget sheet adds your expenses (Fixed + Variable) and income.
- Check Your Balance: See if you have money left over or need to spend more. This helps you decide whether to cut back on spending or find ways to make more money. If the cell in the sheet is red, that means you are spending more than you are earning and losing money.
Budgeting as a college student can seem scary, but it’s an invaluable skill laying the foundation for your financial future. The goal isn’t just to make ends meet and live without financial stress. Your journey toward financial well-being starts today because the sooner you start, the more time you have to succeed. Taking proactive steps today sets you up for a brighter, more financially secure future.