One crucial task not tobe overlooked when you start college is to create a sensible budget. Now thatyou are operating independently and out on your own, taking control of yourfinances is paramount. Creating and sticking to a budget can ensure you have enoughmoney left for each month's expenses. It can also help with future goals likegraduating debt-free.
In this article, we willgo over how to prepare for college budgeting with some step by step methods tofollow. This way, you will have a realistic idea of what you can afford andavoid any stress that comes along with having a financial crisis.
1. Figure out Where Your Funds
Are Coming From
The first thing you needto do is figure out your funding situation. If you are receiving financial aid,you need to know how it will be disbursed. Typically, the college will get thefinds which will go toward your tuition and room and board. If you will bereceiving funds from private loans, there may be a different funding schedulethan federal financial aid, so make sure you know when and how the money willbe doled out.
Now is also the time tohave a discussion with your parents or relatives about any money they plan touse to help you pay for school. Find out exactly who is planning on paying forcertain college expenses and how. Discuss any 529 plans your parents haveinvested in, and whether they will be covering any of your costs out of pocket.Figure out if you will need to get a job to cover some of your own financialresponsibilities.
You will also want tofind out if your parents plan to claim you on their tax return as a dependent,or whether you will be responsible for filing your own taxes this year. Yourtax status will determine who will be filling out the FAFSA form in the future.
This is also the time tobring up a credit card or bank account. Depending upon your age, you may need aco-signer. While it's nearly impossible to get by without a debit or creditcard, you will also want to bring up any guidelines or ground rules about howyou plan to use the card. You don't want to find yourself in more debt than youcan handle.
While discussions aboutmoney can be awkward, it is crucial that you talk about the situation togetherso that everyone is in the loop and knows what the expectations are. This way,you know exactly how and when your expenses will be met.
2. List All Your Expenses
You will want to jotdown a list of all your anticipated expenses. There are lots of little thingsthat can add up quickly, so it's vital that you are as thorough as possibleduring this step. It can help to make two lists. The first list is for all theexpenses that will be paid through student loans or financial aid. The secondlist is for expenses that will be paid from your personal savings, a part-timejob, or from your parents or some other source. With this two-list system, itcan be easier to track your expenses, so you know exactly what to expect.
When listing yourexpenses, there are a few essential categories you won't want to overlook:
Textbooks and Supplies
Books can eat up a significant chunk of your budget. According to the college board, the average cost of books and supplies in 2019 was around $1240 a year for students attending both public and private four-year institutions You will also want to plan for expenses like paper, pens, binders, a laptop, backpack, and printer.
Room and Board
Will you be living instudent housing and using a meal plan, or are you renting a private apartmentand shopping for groceries yourself? Either way, you will want to make sure youhave factored in any reoccurring monthly expenses. If you plan to live in anapartment, you may also need to plan to pay for utilities like electricity,heat, and cable or WIFI.
Clothing
If you are attending aschool where the climate is different, have you planned for expenses likewinter boots and snow parkas? Likewise, if you are going to the sunny south,you will want to budget for warm-weather clothes. Keep in mind you will need atleast one professional outfit for job fairs and other more formal functions.
Transportation
How do you plan to getaround campus or town? Will you need to travel to and from your job? Will youuse public transportation or ride a bike? If you must have a vehicle, you willwant to budget in monthly expenses like insurance, fuel, and an emergencymaintenance fund.
Entertainment and Discretionary Funds
You should plan at leasta small amount of money for entertainment like going to the movies oroccasional social activities. You may need a haircut or find yourself having totake an UBER unexpectedly. Will you want to pay for a plane ticket to travelhome for the holidays? Is there someone you want to purchase a gift for? Allthese unexpected expenses will come up, so it's best to be prepared for them bysetting some cash aside in a savings account so you can be ready for anysurprises.
3. Keep Track
of Your Spending
The whole idea of abudget is to live below your means and be able to cover your expenses. You willwant to keep track of money coming in and going out regularly. You don't haveto fill out complex accounting worksheets every day; any basic budgeting appwill do as long as it affords you a way to track your spending.
You might choose to useyour bank's online portal to keep track of what is happening with your budget.You can also do it the old fashioned way with a pen and a notebook or takeadvantage of online tools like Mintor QuickBooks. As long as it is manageable for you,that's what counts.
Once you see where yourmoney is going, you can attempt to find ways to reduce expenses or save more.You may notice patterns that are getting in the way of savings, like a $4 a dayStarbucks habit or one too many evenings out with friends. Once you identifywhere your cash is trickling away, you can take steps to do somethingproductive about it. If you still find you don't have enough at the end of themonth, you may need to increase your hours at work or reduce some of yourdiscretionary spending even further.
Final Thoughts
Establishing a solidbudget will keep you afloat during college and help you save for the future.Instead of wondering how you are going to afford certain expenses, you will beable to anticipate them ahead of time and determine the best way to cover themwithout stress.
A healthy grasp of your money situation can also help you set goals like saving for life after graduation or paying off student loans.
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