College is a time for learning. You’ll have new classes, new friends, and a new way of life. It’s an awesome transition from childhood to adulthood.
Now that you’re not under your parents’ roof, you’re probably managing more money than you’ve ever managed before. Financial freedom is great, but it comes with a lot of responsibility.
If you’re looking for help in managing your finances, you’ve come to the right place. Read on to learn how to start to manage your finances as a college student.
Create a Budget
The first thing you need to do as a college student is to create a budget. A budget is good for a number of things. For one, it can help you understand how much money comes in and goes out on a regular basis. It can also help you keep a better eye on charges you may be unaware of, like subscriptions you don’t use. More importantly, however, it can help you change that balance to increase your savings.
Here are tips to guide your budget creation.
Use a Financial Planning App
Have you ever heard an older person talk about “balancing their checkbook”? That’s how people kept track of their finances in days of yore. They would manually keep track of the money that came in and went out of their bank account. Then, they’d regularly compare that to their bank statements to keep track of their finances and ensure that their statement was correct.
These days, there’s an app for that. You no longer need to keep painstaking track of your financial situation. By using a 3rd party financial app, you can pull your various bank accounts, credit cards, loans, and more into a single place and monitor transactions at any given moment.
Draft a Budget
Now that you’re in tune with your income and expenses, it’s time to create your first draft at a budget. Think about your goal with your budget.
Are you looking to maintain your savings? You’ll want to cap your budget at exactly your monthly income. Are you looking to grow your savings? Bring your total budget down a bit lower than your income and store the rest for the future.
Once you’ve determined an overall budget amount, you’ll need to divide it into categories. There are a few ways to do this. If you’re using a financial planning app, many will recommend spending by category based on your average monthly spend over the past several months.
If you’re going at it alone, you can look at the percentage breakdown of your monthly spending. For instance, if you spend an average of 25% each month on groceries, calculate 25% of your total budget amount and designate that as your grocery budget. Do this for all regular spending categories.
Your budget will likely fluctuate from month to month, just as your income may. If you know that you tend to spend more in summer and be a bit more pennywise in winter, account for that. In addition, if you expect a one-off payment to come in a certain month, such as Education Credits (IRS Form 8863) during tax season, decide ahead of time how you’d like to manage that money.
Stick to It
Now, for the hard part. It’s time to stick to your budget. We know; it’s easier said than done. Think critically about purchases before you commit to them. How do they fit into your budget? Does the value of the purchase account for the portion of your budget it requires?
After a few months of budgeting, revisit your breakdown. Do you have consistent overspending in any categories? Is there consistent underspending in others? If so, you may want to shift budget allocation from one place to another.
Remember that the point of a budget is not to completely squelch your lifestyle. You may have lofty savings goals, but a budget that’s too restrictive is going to be impossible to stick to—and it’s going to make you miserable. Find a budget that works for a lifestyle you’re comfortable with and that will work for you long-term.
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