Smart College Student Finances How to Budget, Save and Spend Wisely in School

A college night on the town: dinner, then a few drinks and maybe a late-night concert. The next morning reality sets in with a notice from the bank about an overdrawn checking account. Students may have a hard time juggling life, school and financial commitments, but creating a personal budget while in college can make finding a balance easier. With smart planning, students can pay their tuition and rent while still enjoying nights out with friends. Learn the ins and outs of setting up a student budget, what it takes to stick to it and how use the power of credit cards wisely here.

50 percent of four-year students and 58 percent of two-year students are stressed about whether or not they will have enough money to last through the semester. (U.S. News & World Report)

69 percent of college seniors reported having student debt when they graduated in 2014, with an average of $28,950 in debt per student. (Institute for College Access & Success)

60 percent of community college students have set up budgets to manage their finances, compared to just 39 percent of those who attend four-year colleges. (U.S. News & World Report)

Student Budgeting: Breaking Down the Process

The first step to becoming financially successful is to create a budget. As with good performance in the classroom, it requires organization. Smart planning can give students a clear picture of how much money is coming in and out of their bank account at any given time. The following guide helps college students get organized, with a template to help get a budget started and gives resources for saving and tracking money.

Planning Stage: Pre-Budget 101

“The more students can control a small income and spending, the better off they will be with larger incomes after college.”

Herbert Rotich, Director of Financial Aid at Spring Arbor University

Before diving in and creating a budget, it’s important to have an accurate idea about income and expenses. Crunching all the numbers can seem like a daunting task, but once students get into the habit of maintaining a budget it will alleviate the stress associated with bills and cash flow. Read on to learn how to set up a budget, including planning and adjusting to spending and saving.

Know what’s coming in

The first step is to identify how much money will be coming in and when it will be available. Students should make a list of income sources — jobs, credits from financial aid being applied to tuition, family contributions, etc. — and make a note of when these payments are received. If uncertain about the timing of incoming money, like a scholarship payment or reimbursement, they should not include it in the budget. If income amounts vary, as with work paychecks, they should underestimate them on the budget, because it’s better to have more than initially expected than less.

Know what’s going out

“Students should write down every expenditure — giving every dollar a name — so that they know where their money is going,” Rotich says.

Once expected monthly income is established, experts advise writing down expenses for up to a month. Create categories for these expenses, including fixed (rent, tuition, insurance, car payment) and flexible (groceries, utilities, clothing, entertainment). When making estimates about flexible expenses, it’s better to overestimate how much money will be needed, rather than scrambling to find extra funds for things like higher utility bills during the winter months.

“Also, students should write down every expenditure — giving every dollar a name — so that they know where their money is going.”

Know when to change

Finances are subject to change, so students should review how much they expected to spend versus how much they actually spent each month. Students who spent less money than anticipated should use those extra funds in a way that benefits their bottom line, such as putting them in savings or paying down a credit card balance. Conversely, if they find they spent too much, they should find ways to cut what goes out each month, keeping in mind that a little savings can go a long way. For example, students who usually buy lunch on campus every day can save a significant amount of money by making meals at home and taking them to campus.

Know what’s important

Students should set aside extra money each month for an emergency fund, instead of using extra cash to pay for flexible expenses. Having at least a few hundred dollars set aside for car repairs and other unforeseen financial emergencies means students won’t have to take money away from their regular monthly bills to cover problems.

Know the tools

“There are budget tools online that students can use like Mint.com and EveryDollar.com, or they can use free, readily available budget sheets online,” Rotich advises.

When working on a budget, students should create a system and stick to it, whether it means using a budgeting app, spreadsheet, or just pen and paper. If students have questions, Rotich recommends visiting their school’s financial aid office, using online resources like the tracking tools mentioned above or reading financial books, including “Financial Peace University” by Dave Ramsey.

Useful Tools: A Starter Budget Template for Students

Creating a budget can take a little time, but this starter budget tool makes it easy. Students can plug in their numbers and see how their calculations stack up, comparing what they expect to spend to what they actually spend for a month.

Expert Reminder: Remember to over-estimate what’s going out and underestimate what’s coming in.

Projected Monthly Expenses
Actual Monthly Spending
Difference
School Expenses
Tuition Fees Books Supplies
Lodging & Utilities
Mortgage/rent Water bill Energy bill (gas and electric) Homeowners or renter’s insurance Other
Debts
Student loan payments Consumer debt payments (credit cards) Other
Charitable Giving
Faith organization Community organization Other
Transportation
Car payment Car insurance Gas Car maintenance/repairs Public transportation Parking Other
Communication
Cell phone monthly plan Internet Communication devices Other
Child Expenses
Babysitters Day/After School Care Summer Camp School Expenses Extra-Curricular Activities
Entertainment
Movies MP3s/CDs Video games Concerts Eating out Going out with friends Entertaining friends Other
Personal Expenses
Personal products Clothing Salon services Other
Food & Household Expenses
Groceries Household goods Other
Gifts
For friends For family
Medical Expenses
Medical insurance Doctor copays Prescriptions Other
Pet Expenses
Veterinary expenses Food Boarding Other
TOTAL BUDGET

Staying on Budget: Steps for Saving

When juggling numerous monthly expenses, it can be difficult to actually get into the habit of saving money for a rainy day. Some college students may think building up their savings is something they can worry about when they’ve started their careers, after graduation. However, getting in the habit of saving now can give students a head start when building a nest egg and ensuring funds are available when emergencies come up. Follow the tips below to start saving money.

1 Borrow entertainment, or get it free
Instead of subscribing to Netflix, Hulu or cable, save money on entertainment by borrowing movies and television shows from friends or roommates. Head to the library to find a new book instead of buying the latest bestsellers.
2 Get used textbooks
Whenever possible, borrow textbooks from the campus or public library, or shop around for the best used book prices. Sell old textbooks that won’t be used again.
3 Utilize the
meal plan
When paying for a meal plan, use it as much as possible rather than buying food off campus. Cut back on pricey barista beverages to save that meal plan money for food; getting a coffee maker and blender at home is a more budget friendly way to satisfy caffeine or smoothie cravings.
4 Ditch
the car
Vehicle expenses can eat up a huge part of students’ income. Finding alternative transportation, like using the campus bus system or public transit can eliminate the need for a car. Walking or riding a bike whenever possible also saves money, and is a good way to exercise.
5 Shop around
for banks
Although they may not seem like a big deal, banking fees can add up over time. Find a bank that doesn’t charge students for account fees and keep ATM withdrawals to a minimum.
6 Be frugal
at the store
Being frugal when shopping is a great way to save money. Buy discounted or used items, like cool thrift store clothes or consignment furniture. When grocery shopping, use coupons and check out store circulars to find weekly sales. Buying items in bulk and sharing a subscription to stores like Sam’s Club and Costco can also help students save.
7 Graduate
early
Tuition and fees are students’ biggest expenses, and are usually what they worry about most. Try taking extra classes each semester to graduate early. Even finishing school one semester ahead of schedule can significantly reduce student loans. Graduating early is also a chance to get out into the workforce more quickly.
8 Use the school’s fitness center
If you work out regularly, consider using the gym on campus rather than joining a gym and paying membership fees. Often students can use the gym at school for free or at a significantly reduced rate.

Use Credit Wisely: Understanding Credit Cards

“Essentially, students need to be smart about how they use credit cards and always pay off credit cards if they have the money to do so.”

Herbert Rotich

Credit cards can be a savior or a nightmare for college students. They can help students build good credit for the future, but they can also wreak havoc on finances if they are abused. While credit cards can be a lifeline in the event of an emergency, out-of-control spending can sink students’ financially for years to come.

Although having a credit card is a big responsibility, many people don’t understand them. To help simplify credit, this section addresses some frequently asked questions that anyone in the market for a credit card should know the answers to.

What is a student credit card?

Student credit cards are not much different from regular credit cards. They typically carry a smaller balance, meaning students can’t purchase too much on them. Some companies offer student credit cards that have added benefits above what rewards for good grades or paying their bills on time. Other cards may offer students cash back on certain purchases.

How can I choose the right credit card?

Like with any other financial decision, it’s important for students to do research when looking for a credit card. They should take certain factors into account, such as interest rates, annual fees, late payment fees and penalties for going over the credit limit when comparing cards.

What is a balance transfer?

A balance transfer is when a person moves a balance from one credit card to another. This may be a good idea for someone who wants to close a card with a high interest rate and transfer the balance to a card with a lower one. However, most credit card companies charge a fee for balance transfers.

What does APR mean?

APR, or annual percentage rate, refers to the yearly interest rate that is applied when cards carry a balance. These rates can change from one year to the next. In addition, one card may carry multiple APRs, such as one rate for purchases and another rate for cash advances or balance transfers.

What is a grace period?

A grace period is the amount of time a consumer has to pay off a credit card balance before interest charges are applied.

What is the difference between a secured and an unsecured credit card?

Secured credit cards require users to make deposits as collateral for the credit limit. For example, if the credit limit of a secured card is $2,000, the cardholder would be required to pay $2,000. Unsecured cards on the other hand, do not require collateral. Both kinds of cards may have interest and annual fees.

Resources for Student Financial Management

Money management can be complicated, but there are many resources that students can use to get a better understanding of budgeting, saving and using credit. From financial tips for freshmen to advice from the U.S. Department of Education, the following resources can help students manage their funds.

Budgeting 5 Awesome Apps for Setting a College Student Budget

This blog article from Rasmussen College provides a succinct overview of top money management apps and their features.

Budgeting Tips – Federal Student Aid

The U.S. Department of Education provides practical budgeting tips for students who may not be used to managing their own finances.

Creating Your Budget – Federal Student Aid

The U.S. Department of Education also has information on how students can create a budget, review monthly income and expenses, and save money for emergencies.

Six College Budget Busters Every Student Should Avoid

This Fox Business article warns about things that can derail a student’s budgeting goals.

Take Charge of Your Finances: A Guide for Students

From credit cards to managing money, college students can find out if they’re on track with their finances here.

Credit Cards 5 Tips for Your First College Credit Card

This USA Today College article is focused on teaching students how to build credit responsibly.

6 Tips to Help Students Avoid College Credit Card Debt

Potential and current students should consider sending this Ebony Magazine article to their parents, as it advises them on student credit card options.

College Credit for Life Video Toolkit

A student-focused program from the National Foundation for Credit Counseling that includes real-life scenarios, preparing students to use credit to transition from college into the real world.

Credit Card Tips for College Students

Consumers Union offers students advice on what to look for in a credit card, emphasizing what the terms and conditions really mean.

Saving Money America Saves Events and Campaigns

A nonprofit group motivating individuals and organizations to save money using crowdsourcing, America Saves hosts financial Tweet Chats, Facebook events, webinars and the annual America Saves Week campaign.

5 Simple Ways to Save Money as a New College Student

U.S. News & World Report gives some good advice to students who are learning how to save for the first time, covering topics like why they should open a bank account.

FDIC Learning Bank

This government entity provides information on using money wisely and how different types of bank accounts work. They also have a “Money Smart” savings program designed specifically for young adults.

Money-Saving Tips for College Students

Whitworth College gives a school’s perspective on how to save money on student budget items, such as entertainment and food.

Tips for Teaching Students About Saving and Investing

There are a variety of savings options beyond the standard savings account. The U.S. Securities and Exchange Commission explains investments like stocks, bonds and mutual funds on this student page.

Smart Spending 40 Money Management Tips for Students

The tips presented here are about getting financial aid, finding employment, making investments, cutting expenses and managing debt.

FDIC Money Smart Podcast Network

Students can get information on the go with this FDIC podcast series, which highlights basics of banking, budgeting and borrowing in a detailed, yet easy to listen to format.

Jump Start “Reality Check”

This calculator will help students understand how much their ideal lifestyle will cost and how much income they need to afford their current and future priorities.

The New Freshman 15: Financial Tips for College Students

By linking college spending habits to long-term financial health, this Daily Finance page helps college students get off to a good start financially.