Budgeting is important because it helps you maintain a balance between your earning and spending. It puts you on the path toward achieving financial goals while building good credit and avoiding debt.

  • Short-term benefits: Smart budgeting allows you to meet immediate needs like buying textbooks or paying your phone bill, as well as covering extracurricular items like going to a movie or taking a road trip.
  • Medium-term benefits: Build resources over time for bigger-ticket items like a new computer or money for summer travel.
  • Long-term benefits: Think beyond graduation. Budgeting all along can allow you to save, pay off student loans sooner and get a headstart on your retirement savings.
  • Timeless benefits: You can never know when an emergency will occur, but if you’ve given yourself a financial cushion through good budgeting, you can handle it better when an emergency does arise.

How to budget

The basics of budgeting are simple: track your income, your expenses and what’s left over—and then see what you can learn from the pattern. Keeping a close eye on where your money has gone helps you make wiser choices about where it should go.

Identify your resources

  • How much (if any) income will you be receiving from family or caregivers? Is it a fixed amount?
  • If you receive financial aid, will you receive a refund that you can apply to other expenses?
  • Do you have a job or jobs? What is the minimum income each job will provide after taxes and other withholdings? Never budget on the maximum!

Identify your expenses

  • What are your fixed expenses—ones which do not change month to month? Include all housing costs not covered by financial aid, as well as utility and credit card bills, and other monthly payments.
  • What are your flexible spending expenses? These include food not covered by a dining plan, clothing and leisure activities. These expenses add up faster than you think.
  • While monthly fixed expenses come with bills and reminders, flexible spending does not, so it’s up to you keep track yourself. Download a budgeting app, keep a tracking document on your laptop or carry a notebook.

Don’t forget savings

If you have more resources left after all your expenses are paid, it’s easy to think of the extra as just more spending money. But the best thing you can do financially is to save a little every single month. The amount you put away doesn’t matter; it all adds up. Saving offers an added sense of financial security and stability, while creating habits for a lifetime.

Know the difference between needs and wants

A good starting point for creating a budget is to designate needs vs. wants. Smart budgeting and following savings tips can mean that you won’t have to forgo some of your wants. But needs obviously get priority and every budget should cover those first.

  • Needs are things required for daily life—food, clothing, housing and unavoidable costs associated with being a student
  • Wants are things that you could do without if you had to

Set goals

Goals are important. They help you to refine your focus and plan a course of action to get the results you want.

  • Short-term goals: Getting through the month with the money you have
  • Medium-term goals: Purchases that will have a longer-lasting impact
  • Long-term goals: Leaving college in good financial heath or saving for the future

To what degree are you focused on short, medium, and long-range goals? How much of your budget is devoted to each? The more you have left after expenses each month, the more you can focus on other goals. If most of your income must go to short-term goals, even setting aside a small amount is a bonus.

Track your success

Every month or two, measure how well your income is balancing against your expenses, and whether or not you’ve been able to meet the goals you set for yourself. Did you stay on track? Was there a shortfall? Are there adjustments that need to be made going forward?

If your expenses outstrip your resources, you need to rethink your strategy. But if your monthly balance leaves you in the black—or better still, with income left over—keep up the good work. You’ll be glad you did.


What about after graduation?

Try the 50/20/30 strategy

One common methodology for creating a budget is the 50/20/30 strategy. This approach makes it simple, by dividing your expenses into three categories: fixed expenses, financial goals and flexible spending. We’ve applied it here for you.

  • Fixed expenses 50%: These unchanging costs should stay within 50% of your monthly income. Choose housing, transportation and monthly subscriptions you can afford to sustain without draining your wallet.
  • Financial goals 20%: Twenty percent of your income should go toward your financial goals. Whether you’re looking a year or a decade ahead, or just building a good cushion to have in times of emergency, this is not money that is going out—it’s money you’re holding onto.
  • Flexible spending 30%: Limiting your truly optional expenses to a fixed amount will help you understand which of your wants is most rewarding, while also encouraging you to get the most bang for your buck in how you shop, eat and play.

Tips for Budgeting

  • Overestimate your expenses. You can’t predict every expense that arises.
  • Underestimate your income. You might end up with a surplus!
  • If your fixed expenses are high, reconsider your expenses. Do you need to subscribe to both Netflix and Hulu?  
  • Once you’ve paid off your debt, transfer that same monthly amount into a savings account for a future goal.  
  • Consider a separate bank account for fixed costs and automatic payment plans, so your casual spending won’t leave you short for must-pay bills.
  • Don’t forget the little expenses that add up: clothing, ATM fees, dinner out, data overages and more.
  • Choose a record-keeping system: Whether it’s a notebook or an app, decide where your budget information will live and stick to it.
  • Make money management a routine: Review your spending patterns and records each week or bi-weekly at a set time.

External Resources

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