Disclaimer: Nothing in this site should be considered authoritative financial advice. Your circumstances are unique and you may want to consult a financial advisor.
III. Continuing the Process: Budgeting & Saving
A. What is Budgeting?
Budgeting is used to see if what you have to spend is greater than or equal to what you spend. Once you create your budget, (using one of the sample budgeting forms or worksheets from below, for example) you will be able to see more clearly how your financial resources or wealth and expenses compare. However, there is another element to be considered before you start this process: time or more precisely, for what period of time are you measuring wealth versus expenses.
Once the element of time is added to the equation, wealth, while still a part of the planning part of budgeting, must be replaced by income for the period being measured. If your wealth is based on for example, savings, investments, inheritance or borrowings, you must consider how much you are willing to use for each period of time you are budgeting. Wealth then becomes income, once time is added to the budget. If your income is primarily based on earnings from work then someone else (your employer) determines how much you have to spend for a period of time.
The most useful periods of time to budget are:
- the length of time between paychecks if you work, or
- an academic term/year or a fixed period of time such as one month or one calendar year
The worksheets below are a good place to start. They are based on a period of one month, but can be easily adapted for any of the other periods of time.
B. Typical College Budget
- Calculate Income
Calculate your projected income by estimating the amount of money you will have to cover your expenses for the semester.
This includes savings, job earnings, financial aid, and any funds from parents.
TIP - Protect your future: Don't borrow more than you need. There is no need to be paying interest on those loans you borrowed
years after graduation for material things you could do without now. Find out: what is the interest on your loans?
TIP - If you're not working, consider working 15 hours a week which could earn you $100/week or more. In addition to providing
that income, your job could help you budget your time and build your skills and resume for your future career. Are you eligible
for Federal Work-Study?
- List Your Fixed Expenses
These expenses do not vary, such as tuition and fees, and students have no control over the cost. The University develops
standard budgets for categories of students represented within the school's population.
- List Variable Expenses
Variable expenses are subject to a certain amount of control from you. These include housing and meals, books and supplies,
transportation, personal expenses, insurance, and clothing.
- Total Expenses
Add your fixed expenses to your variable expenses to obtain your total expenses.
TIP - Be careful with credit cards! If you don't have the cash for the purchase, you probably can't afford it (and do you really
TIP - Don't use an ATM card for an individual purchase if a fee is involved. Do you really want to pay $2.25 for a $1.50 taco?
These little fees add up fast.
- Balancing Your Budget
Subtract your total expenses (Step 4) from your projected income (Step 1). If your estimated expenses are higher than your
projected income, you should find ways to reduce your spending.
TIP - Direct deposit! Direct deposit! A check in hand is easily spent. Have your earnings and any financial aid credits deposited
into your savings account, and take it out only when you need it.
- Identify Spending
Using your budget, identify your spending patterns. Where does your money really go? Write down within a week every item you
buy. Identify your NEEDS vs. WANTS and limit the wants. For each expenditure, ask yourself if you really need this. Think twice
about that new iPod that just came out, or a spring break trip that everyone else is taking, cigarettes, the latest cell
phone. Financial aid is intended to cover a modest student lifestyle, including your basics: tuition and fees, room and board,
books, and a small amount for personal expenses such as clothing, laundry, haircuts, long distance charges, an occasional movie
or dinner out.
TIP - Give yourself an allowance. Know what you can afford to spend for goodies each month and stick to it. Divide that into
weekly envelopes to help you stay within your budget.
Know your debt. Where does your debt come from? Student Loans, Credit Cards, Car payments? Go to NSLDS for a history of your
loans. Contact your loan servicer if you do not know the terms and details of the loan's repayment.
- Financial Planning. What's in your future?
Write down your short-term and long-term goals. Start by planning for one goal.
TIP - Saving money in and out of college. Establish your spending habits, control your impulses and bank the rest.
TIP - Tracking paperwork. Knowing where to find your financial records regularly will help you spot mistakes and be able
to successfully communicate with lenders.
TIP- Don't forget to figure in the value of education tax credits for tuition and fees paid, as well as the deduction for
student loan interest, which can partially offset the cost.
C. Saving for the Future
The key to saving money is spending less than you earn. This may seem like a basic concept, but many fall short of actually doing so. Below are some ideas on how to save more of your hard earned money.
- Save gas by taking public transportation, bike or carpool to work
- Have a garage sale
- Quit smoking
- Adjust your thermostat
- Downgrade your television, cell phone, or other services
- Take advantage of your employer's flexible spending account
- Use coupons or other promotional codes
- Buy in bulk
- Limit eating out, check and see if your city has a "Restaurant Week"
- Rent a movie instead of going to the theater. Catch a matinee.
- Share with friends. You can trade books, magazines, or movies
- Check out free things to do in your city for entertainment
- Take your lunch to work, drop your $4 latte habit
- Make a list BEFORE going to the store
- Pay bills on time in order to avoid late fees
- Get a library card
- Buy used (car, bike, lawn mower, etc). Check out ebay, craigslist, or similar sites
- Get a roommate or rent out a room
- Forgo your gym membership and run outside or exercise at home
- Use cash instead of credit cards for daily purchases
- Drink tap water instead of bottled
The best way to save money is to learn how to distinguish between your needs and wants. Impulse buying is the number one culprit of over spending. Take some time before making major purchases and try comparison shopping. Then pick out a few tips from the list above that will work for you and incorporate these money saving habits in your daily routine.