How to Budget as a College Student
Budgeting as a college student is more critical than ever, especially given the rising education costs. According to a 2024 report by Sallie Mae, families reported spending an average of $28,409 on college in the academic year 2023-24. This blog will guide you through budgeting as a college student, focusing on the 50/30/20 rule and how to manage your finances effectively, along with tips and tricks for effectively managing your money. After all, those midnight snacks and takeout nights aren’t impossible- they just have to be done wisely.
Table of Contents
Why Budgeting is Important as a College Student
With families covering half of their college expenses out of pocket, learning to budget is essential for financial well-being. A study conducted in 2020 found that 40% of full-time undergraduate college students were employed compared to 43% in 2015. In 2018, 81% of part-time students were employed versus 85% in 2000. In addition, the average income for an 18-22-year-old is around $15-18 an hour, compared to the median average across the US, $30/hour.
Depending on your unique situation, you're probably not swimming in cash right now between classes, extracurriculars, and helping out at home. That's why it's crucial to get smart about budgeting what you do have. The upside? College life might actually give you a bit of a break with fewer bills. So, now's the perfect time to master managing your money.
1. Financial Awareness
Budgeting helps students understand their financial situation, including income sources, fixed expenses, and variable costs. This awareness is the first step toward financial responsibility.
2. Avoiding Debt
With the rising education costs, students are more likely to incur debt. Remember, according to the 2024 report by Sallie Mae, families spent an average of $28,409 on college in the academic year 2023-24. Budgeting can help students minimize the amount they need to borrow, reducing future financial burdens.
3. Prioritizing Expenses
College life comes with various expenses, from tuition and books to social activities and personal needs. Budgeting helps students prioritize essential costs over discretionary spending.
4. Building Good Habits
Learning to budget in college sets the foundation for good financial habits that will benefit students throughout their lives. It teaches essential skills such as saving, investing, and living within one's means.
5. Emergency Preparedness
Having a budget allows students to set aside money for unexpected expenses, such as medical emergencies or urgent travel, reducing financial stress during challenging times.
6. Achieving Financial Goals
Whether saving for a car, a study-abroad program, or even post-graduation plans, budgeting helps students set and achieve financial goals.
7. Enhancing Financial Literacy
Budgeting is an educational experience that enhances financial literacy. It teaches students about interest rates, the importance of credit scores, and the benefits of saving and investing, which are valuable life skills.
Types of Common Income and Expenses
- Total Income: Money from family, financial aid, and work.
- Monthly Income: Recurring funds earned each month.
- Fixed Expenses: Necessities with consistent prices (e.g., rent, utilities).
- Variable Expenses: Monthly costs vary (e.g., eating out, entertainment).
How to Budget in College: A 3-Step Guide
1. Break Down Your Total Income
First, you need to know how much money you're working with. This isn't just about that part-time job you've got; it's the financial picture.
- Family Contributions: If your parents or other family members are helping you out, add that to your total income.
- Financial Aid: This includes scholarships, grants, and loans. Just remember, loans have to be paid back eventually!
- Part-time Jobs or Gigs: Whether you're working in a coffee shop or freelancing online, this is probably your most regular source of income.
Add all these up to get a clear idea of your monthly income. This is your financial playground—let's make the most of it!
2. Assess and Categorize Your Expenses
Now, let's talk about where that money is going. You'll want to list out all your expenses and split them into two categories:
- Needs: These are your non-negotiables. Think rent, tuition, groceries, and utilities.
- Wants: This is the fun stuff—eating out, concerts, shopping sprees, you name it.
Knowing the difference between the two is key to not blowing your budget.
3. Crunch the Numbers
Time for some basic math. Take your total monthly income and subtract your total monthly expenses. If you end up with a positive number, you're doing great! If it's negative, don't freak out—this is your wake-up call to cut back on some of those "wants" or find ways to boost your income.
4. Create a Budget Using the 50/30/20 Rule
Now your income and expenses are laid out, so what's next? It's time to make a budget that you can actually stick to. The 50/30/20 rule is a solid guideline:
- 50% on Needs: Half of your income should cover the essentials like rent, food, and bills.
- 30% on Wants: This is your fun money, but keep it within limits.
- 20% into Savings or Debt Repayment: Future you will thank you for this. Whether saving for a rainy day or paying down a student loan, make this a habit.
And there you have it! You're now armed with the basics to take control of your financial life in college.
Tips for Saving Money
- Rent Textbooks: Save money by renting textbooks or buying e-books.
- Cook at Home: Cut costs by cooking at home instead of eating out.
- Use Student Discounts: Many businesses offer student discounts on various products and services.
- Budgeting Apps: Apps can help you track your spending by connecting directly through your bank account(s), credit cards, and more!
- Spreadsheets: Use Excel or Google Sheets to create a detailed budget.
- Banking Apps: Banks such as Peoples Security Bank & Trust usually have a convenient app to manage your student checking and savings accounts in one place. Some apps have capabilities for automatic bill pay, allowing you more control and flexibility in making payments on time. These banking apps may even offer discounts or coupons to get the best deals at places you’re already shopping, even in the form of cashback directly in your account.
If you're a college student under 22 years of age in Pennsylvania, New York, or New Jersey, it's worth considering opening a student checking account to manage your money. With options such as digital banking, bill pay, mobile deposit, ATM access, and unlimited check writing, Peoples Security Bank & Trust’s Student Saver account makes managing your finances easy.
Contact us today or visit one of our 39 branches across Pennsylvania, New York, and New Jersey today.
Peoples Security Bank & Trust offers a convenient mobile banking app available on the App Store and Google Play for Apple and Android/Google devices. Manage your balance, deposits, checks, bill pay, discounts, and more, all from the comfort of your home. Have control over your finances 24/7 and feel secure when it comes to budgeting as a college student.
Conclusion
With the average annual cost of college hitting $28,409, understanding how to manage your money is more than just a good idea; it's essential for your financial well-being.
We've covered everything from knowing your income and expenses to setting up a budget that works for you. And remember, this isn't about cutting out all the fun from your life. It's about ensuring you can enjoy those late-night snacks and spontaneous outings without worrying about money later.
With all the tools and tips we've discussed, like budgeting apps, spreadsheets, and even features from your bank's app, you've got everything you need to take control of your finances.