The Student’s Guide to Budgeting in College
Your spending habits — what you buy and how you choose to pay for those things — impact not only your current financial situation but also your future finances. This includes what types of loans you may qualify for and your ability to meet emergency expenses.
By becoming financially literate, you can create and sustain a college budget that helps you accomplish key goals.
This in-depth guide offers essential tips for putting together a college student budget. You’ll learn money-saving strategies and see a sample budget for college students.
Why Is a College Student Budget Important?
According to the College Board, the average debt level of four-year college graduates in 2019–20 who took out student loans was $28,400. Additionally, in a 2021 Sallie Mae report, the average amount of money borrowed through credit cards by students was $1,309.
Altogether, students who borrow money to help pay for college owe around $30,000. Combined with rising interest rates, this amount of debt can take years to pay off. It can also hinder personal growth and limit your professional opportunities.
Fortunately, students can greatly reduce this potential financial strain by learning to budget with careful regard to their needs, limitations, and goals.
How to Budget in College: 4-Step Guide
Follow the steps below to learn how to budget as a college student and save money.
Step 1: Break Down Your Total Income
The first step to making an effective college student budget is breaking down your income. Your income each term may be influenced by three factors, according to the Federal Student Aid Office:
- Financial contributions from family members put toward your educational expenses
- Financial aid that you can apply toward tuition and fees, such as scholarships, grants, and student loans
- Your pay from a part-time job or federal work-study job and how many hours you work per week
If you accepted more loans, grants, or scholarships than you needed to cover tuition, room and board, and facilities fees, your school’s financial aid office should give you a refund for the excess amount, usually in the form of direct deposit or a check.
You can save refunds in your bank account or apply them toward textbooks and other education-related expenses. Check your student bill to make sure everything has been paid for before you spend any refund money.
Step 2: Assess and Categorize Your Expenses
To assess your financial situation, log in to your bank or credit union’s website. Here, you can review your spending and earnings over the past month.
Referring to this statement, you can then make a list of all the things you spend money on in a typical month and the average cost of each item. Make sure you categorize these expenses, tagging everything as either a “necessity” or a “want.”
For example, a daily cup of coffee from Starbucks would be considered a want, whereas a 30-day supply of a prescription medicine you take would be considered a need.
Step 3: Crunch the Numbers
Now that you’ve organized your expenses, it’s time to crunch the numbers. Start by adding all your expenses together. Then, subtract that number from your monthly income.
If the final number you get is negative, that means that you’re spending more money than you make each month. If the number is positive, you have extra money to spend or put toward your savings and emergency fund.
Step 4: Create a College Student Budget
Now that you’ve calculated all the numbers, look through your expenses to see what items you can adjust or cut from your list.
For instance, if you’re spending $50 a month at the movie theater and you’re spending far more than you earn, consider cutting back on this “want” to balance your budget. Many people use the 50/30/20 rule, which calls for putting 50% of your total after-tax income toward needs, 30% toward wants, and 20% toward savings and other financial goals.
This step takes the longest, but getting your finances under control is definitely worth the effort.
You can read the full article by Chinh Ngo here.