5 Tips to Keep Your Student Budget on Track

A recent poll by a National Student Money Survey revealed 71% of students wished they'd had a better financial education before going to college. If you are headed off to college and wondering how to create a budget, you're definitely not alone. The study also found 59% have thought about dropping out of college, with 36% seriously considering it, due to financial problems. With the right preparation, you can start your college career on the right foot by creating a budget to help manage your finances. A budget is important for your financial stability, so you can pay common expenses and save money for future milestones, like moving to a new city after college. As you develop good spending and saving habits throughout your 20s and beyond, you can work toward bigger goals, such as paying off student loan debt, saving for a down payment on a home or saving for retirement. There are many ways to create a budget, including using a budgeting app that connects to your bank accounts or making a spreadsheet with an easy online template. You can also learn more from our blog, How to Track Your Spending in Today’s Modern World, which can help you stay on budget. Whichever resource you choose, remember to stick to it and hold yourself accountable so you can achieve your money goals. Here are five steps to help you create an effective student budget.

1. Determine Your Net Income

The first step in creating your budget is to calculate your net income, which is the amount of money you earn less taxes. If you receive a regular paycheck through your employer, regardless of whether you work part-time or full-time, the amount deposited into your checking account is your net income. You might also have additional income from grants, scholarships, loans or a monthly allowance from your parents or guardians. The amount of money you bring in each month is an essential part of your budget and creates the foundation for how much you can afford to spend. If you’re an hourly employee and your hours vary, try to figure out an average amount that you can generally count on each month. It’s better to go with a conservative average so you don’t risk overspending. If you’re self-employed, you’ll want to subtract taxes from your paycheck and save them in a separate account so you’re not surprised by a big tax bill at the end of the year. You can use the IRS tax withholding estimator to estimate how much tax you’ll be required to pay in a year, then divide by 12 to get a monthly tax estimate.

2. List All Your Monthly Expenses

Next, you’ll want to list all of your monthly expenses. Here are some common college expenses:

  • School supplies (such as textbooks and electronics)
  • ​Rent or room and board
  • Groceries
  • Dining 
  • Travel
  • Gym membership
  • Household goods
  • Phone, internet and monthly streaming subscriptions
  • Transportation (such as gas, train tickets and bus fares)
  • Loan payments (such as student, auto and personal)
  • Insurance (such as health, rental and auto)
  • Utilities (such as electricity, water and gas)
  • Miscellaneous (such as gifts, entertainment and apparel)
  • And while deposits into a savings account aren’t an expense, it is smart to include savings so you remember to put money aside for future goals or emergencies.

3. Organize Your Expenses into Fixed and Variable Categories

After you’ve listed your monthly expenses, it’s time to organize them into fixed and variable categories.

  • Fixed expenses are costs that are predictable and don’t change often, like rent/room and board, health insurance and loan payments.

  • Variable expenses are more flexible and can change from month-to-month like transportation and groceries and often include wants, like a gym membership, travel, dining out and entertainment purchases.

If your income were to decrease, you may need to cut costs. For instance, you can cancel your gym membership, postpone a vacation or reduce your takeout spending without much fallout. But you’re likely always going to have to pay for your housing costs, room and board, transportation and insurance. You can also review and download some great tools and resources for free from our partner Balance Financial at sdccu.balancepro.org. This will help you uncover the areas where you really want to focus and identify what your next steps should be.

4. Calculate Your Average Monthly Cost for Each Expense

Once you categorize your fixed and variable expenses, list how much you spend on each expense per month. Refer to your bank and credit card statements to get accurate amounts. Most fixed expenses are the same amount each month, making it easy to put a dollar amount to the cost. For instance, your rent/room and board, meal plan, insurance and phone bills will likely cost the same each month. Even some variable expenses may also have a set cost every month, such as your gym membership or internet service. However, some fixed and variable expenses don’t have preset costs. If you rent your own apartment off campus and incur utility expenses, such as gas and electric, the cost often fluctuates month-to-month depending on the season. The same goes for your groceries, takeout and household goods. For any categories where your spending varies from month-to-month, you will need to do some math to determine the average monthly cost. The calculation is pretty simple, you will want to add up three months of spending for a total expense and then divide by three. You may want to round the total up to increments of five or ten. If your three-month average spending on groceries is $133, you may want to set the spending limit to $135 or $140.

5. Make Adjustments

The last step in your budgeting process is to compare all the numbers you’ve gathered. Look at your net income compared to your monthly expenses and see if you have enough money coming in each month to cover all your costs. During this step, don’t panic if you see yourself in the red, because this will help you make adjustments to afford your lifestyle. While you can consider ways to make more money, like picking up more hours at work if available, you should also think about ways you can cut costs. This may include decreasing the amount of money you spend on variable expenses, such as takeout orders and streaming subscriptions that you don’t need or use regularly. When you go grocery shopping, clip digital coupons ahead of time and opt for generic store-brand items versus name-brand to save extra money. You may also want to adjust some fixed expenses. If you’re looking to move, find an apartment with cheaper rent, or more roommates to share the costs. And if you have money left over after creating your budget, consider putting it toward any outstanding debt, like a lingering credit card balance, or use it to start saving it for the future. For more tips on how to live below your means, see our blog Seven Ways to Stop Living Paycheck-to-Paycheck.

Next Steps

Now that you’ve taken the first big step and finished creating your budget, it’s important to stick to it. Following your budget while in college can help you stay out of debt or pay off debts sooner and graduate with strong financial habits to help you achieve long-term life goals. To stay on track, hold yourself accountable by setting up reminders to log expenses into your budget every day, or at least weekly. If you’re not sure where to start, SDCCU offers great online tools to help you track spending. If you’re a SDCCU account holder, you can access your accounts quickly, easily and securely through Internet Branch online and mobile banking. Haven't enrolled yet? Enroll now. Review your account summary, transaction history, copies of paid checks and your monthly eStatements. View and order checks, pay bills with Bill Payer Plus™ and more. You can also download your account history data to Quicken®.  To access additional resources, click the “Financial Tips” tile in the right panel in Internet Branch. This will take you to the Financial Knowledge page on sdccu.com, which is where you can find a wealth of information to help you track spending and start saving, including Online Financial Calculators. You can use the Savings Calculators to help determine how much you should put away, how often and how long it will take you to reach your goal.

Visit our Financial Knowledge Blog to learn more tips on setting up a solid financial future or join us for Financial Wellness Wednesdays.