The college years can be the best of times and the worst of times. It's awesome to finally be on your own, making new friends, getting the education to embark in a career; and to party freely without the supervision of your parents J. It can be the worst of times as you see your bank account getting smaller, having to manage your financial aid funds, your personal funds and your school work all at the same time.
ONE: Whenever you notice you have more month than money it’s always best to track your spending. Where is my money going? The easiest and cheapest way is to take a notebook out and start listing everything you’re spending money on; and I mean everything. From every day necessities to small splurges that can often go unnoticed such as coffee, snacks and liquor/cigarettes. If you have a bank account go ahead and pull past bank statements and see what you've been spending on outside of basic necessities; eating out? Cable? Internet? Expensive cell phone package? Some budgeting templates can be found under my ‘Credit Building' tab.
TWO: Create a budget. Just as you have an outline of what you must do to graduate in your degree of choice, you also need an outline of how to manage the money that is coming in on a monthly basis. It should include the total amount of money coming in from all sources – scholarship, part time job, parents, etc; as well as an ‘outline’ on what you should be spending it on. Necessities come first of course; followed by ‘extras’. The #1 rule of budgeting is to ensure you always have more income than expenses. So, if you notice those ‘extras’ that you've listed in Step #1, are cutting into your income; you have 2 options:
THREE: Start cutting. This is the perfect time in your life to learn how to separate ‘wants’ from ‘needs’. No matter what stage you are in life, there will always be something you cannot afford; it’s best to learn that lesson now. This is not to say you cannot have fun; by all means enjoy your college years! But, do so by eliminating unnecessary expenses that hinder you from truly making this time of your life enjoyable; namely from being broke J. The key is to save and then splurge. Cutting expenses doesn't always have to involve eliminating; for example:
- Prior to buying books for the class, wait until you get the syllabus to see if you really need the book.
- Find someone that has just taken the class and do a book exchange.
- If you’re purchasing your books; rent them instead.
- Evaluate your meal plan; does it fit your needs or did you get a bigger plan than what you are actually consuming – meaning you’re wasting money each month.
- Use that Student ID! There are discounts for students everywhere you go – the movies, the bus, car insurance, health insurance, restaurants, airfare, train, etc – you name it; make sure you ask before you spend. Identify the places that will allow you to get more bang for your college buck. If they don’t discount; patronize a business that does.
- Leave your car at home. Campus life is all about walk ability; and public transportation is pretty rampant. Why add on car insurance, gas and maintenance to an already strained budget; you’ll be able to get around just fine.
- Take advantage of free college events. Colleges and universities are known to hold a variety of free social events, some even come with free food!
FOUR: Earn more money. This is an option if your schedule permits. I’d think carefully about this one, as your ability to meet your educational requirements is way more important than ‘living large’. If it’s necessary to take on a part time job just to meet basic needs, then please make sure it’s one that will accommodate your school schedule. A campus position is a good place to start. And if you do find a position off campus, see if they offer tuition assistance as one of their benefits; every little bit helps!
FIVE: Develop a Money Mindset. This means that once you know what you make, how much your expenses are, you've cut some of your ‘extras’ and/or have taken on a part time job; your mindset should switch from spending ALL of your money left over after expenses, to starting to establish a savings, making sure all of your bills are paid on time. If you don’t have a bank account, this is the perfect time to open one and actually learn how to balance your account. Establishing a money mindset is all about being aware of your InCOME in comparison to your OutGO, and making the necessary changes to retain as much of your InCOME as possible.
SIX: Use credit cards wisely. Most suggest to avoid credit cards completely, but college is the perfect time to start building credit. Remember, however, that your credit card is not there to support your lifestyle or extend your income. Use it for emergencies only and only spend what you can pay back right away or at the very least in 3 months. Make sure you select the right card; you want one that does not have an annual fee and a relatively low interest rate. Going back to Step 5; before swiping your card your Money Mindset should kick in and ask: “Is this truly an emergency?” “Would I go to a bank and borrow money to pay for this?” “How can I plan for this type of expense/emergency in the future?” The best place to go to find a student loan credit card is www.bankrate.com. If you’re turned down for an unsecured credit card; check out your bank’s secured credit card option, this is when you have to put down a security deposit that equals the amount of the credit you’ll be extended. If you’re using a credit union, they’ll often approve you based on the amount you have in your savings account. NEVER use the cash advance option with your credit cards. The interest rates are horrible and you may be charged an additional fee as well.
SEVEN: Only borrow what you need. Discuss your financial aid with your F.A. officer so that you’re aware of any scholarships or grants you may be eligible for. Find out what type of aid you are receiving – free or those that have to be paid back – and what requirements are needed to keep receiving those free aid funds; find out what interest rates are tied the loan portion of your financial aid. Find out how close you are to your aggregate loan limits to ensure you have enough money available to complete your degree, declining your ‘refund’ check so that those funds are available to you in the future. Do everything possible to learn your loan obligations.
EIGHT: Now that you have everything mapped out, the next step is to automate it. There are some great apps that allow you to stay within your budget, track your spending, and alert you when your bank accounts are nearing a $0 balance;
- My favorite one happens to be YNAB (You Need A Budget). It works on both your desktop and your mobile device, which can be synced together and is super easy to use. They offer live classes on everything from creating and sticking to a budget, how to properly use your credit cards, and more! (Note: it’s not free at $60 for the desktop software).
- My next favorite is Mint.com/Mint Bills; it’s free! One of my favorite features on Mint.com is Cash vs Credit. It lets you compare your credit card balances to the amount of cash you have to pay them off; how cool is that?! Mint Bills is a payment and bill tracker app that alerts you when bills are due, when they have been paid and if they are past due. It allows you to make payments via the app as well; used together with Mint.com they’re a powerhouse.
- For assistance with finding the cheapest textbooks around, check out TextbookMe. It allows you to search for your textbooks at various retailers to find the cheapest price out there. So, if book swapping or book renting is not an option this definitely comes in handy.
- For assistance in paying off your student loans I have two options: Debt Payoff Planner (Android) or Tuition.io. Debt Payoff Planner is for any type of debt and assists in helping to find the best method to pay off your debts; providing the dates the debt will be paid off based on your monthly payment amounts. Tuition.io is specifically for organizing your student loan debt. It allows you to view all of your loans – both federal and private – in one place; view your balance and payment history, determine alternative repayment options that may be available to you and providing the pros and cons of each.
NINE: Monitor for continued success! Very rarely do our income and expenses remain the same month after month; year after year, especially on a college budget. Monitor your budget often, especially when unexpected money is received or unexpected expenses arise to make sure your dollars are working in your behalf.
TEN: Ask for help! There are tons of free resources available from your parents, the financial aid administrator, your resident adviser, your local member of the National Association of Credit Counselors (nacc.org) If you find yourself in financial duress, reach out and speak with someone.
Hope this helps! If you have any specific questions on budgeting during your college years; feel free to contact me.