Setting up a budget allows you to map out your monthly/weekly goals. It saves your money, time and keeps track of your progress. Note that budgeting does not have to be about perfection. You get better with budgeting once it become a regular habit – here is a common tip on how to budget:
The 50/30/20 budget
Allocate 50% of your budget to housing, transportation and insurance – the essentials. 30% of your income goes to your wants – eating out, travel, shopping etc. 20% of your budget goes into savings and debt.
It’s important to pay yourself each month. This means, calculate your savings and debt goals first and then count backwards about what you’d like to spend the remaining of your budget.
Necessary Monthly Expenses for College Students:
- Rent and Mortgage
- Homeowners Insurance, utilities (gas, electricity, water, garbage).
- Health insurance
- Car insurance
- Transportation costs (gas, parking, bus etc.)
- Household items
- Minimum debt repayments
Examples of non-necessary expenses include:
- Cell phone service
- Cable TV
- Gym membership
- Household furnishing
It’s important to know the most common types of insurance premiums too:
1) Auto insurance
2) Health insurance
3) Life insurance
4) Pet insurance
5) Renter’s insurance
Coming to savings
Give yourself a goal with saving. Also try contributing to a 401(k) plan to save for retirement. Saving for specific monetary goals can make budgeting easier:
- A replacement vehicle
- Upcoming vacation
- House downpayment
Here’s a brief overview of the various types of income and expenses you will need:
- Total Income: Includes any money you arrived at school with (e.g., money from family members and financial aid like grants), any refunds you receive from your financial aid office etc.
- Monthly Income: Recurring funds that you earn every month from a job or receive from other funding sources
- Fixed Expenses: Necessities with the same prices every month
- Variable Expenses: Necessities or wants with prices every month
- Emergency Fund: Keep some money aside to cover any unexpected or emergency situations, for example, medical bills; many students keep their emergency funds in their savings accounts
Build credit into your budget.
College is a great time to begin building credit with a credit card. Your budget should include any credit card payments you need to make. In general, you should be striving to keep your credit balance low.
Choose a credit card wisely. Many companies prey on students and new borrowers. Pay close attention to subjects like fees, interest rates, and incentives.
A common mistake would be signing up for on-campus credit card offers. Given that there are many offers to choose from – for example, such as cashback to travel rewards, be sure to shop around to find the card that is most suitable for your needs.
Building credit has a long-term budget payoff too. College students should understand that credit scores also can affect the ability to rent an apartment, lease a car and get the best auto insurance rates.