As a college student, you’ll experience a number of firsts when you go off to school, likely including managing your own money for the first time. Whether your income comes from an allowance from your parents, a part-time job, work-study, scholarships, or something else, you’ll quickly discover that you need to get the most from your dollars.
This means learning how to budget as a college student. Successful budgeting is a skill that will serve you well throughout your life, so it’s important to develop smart money habits early on.
With everything else college students have to deal with, learning to manage a budget can seem daunting and overwhelming at first. However, you’ll quickly find that a proper college student budget can actually relieve anxiety in your life, as you’ll always know how much money you have and what it's being used for. This leaves you free to concentrate on your college studies and extracurricular activities.
The first step in creating your college budget is determining how much money you have to work with on a monthly basis. It’s a good idea to use a budgeting app or start a spreadsheet and add a line for each income source you have, whether that’s a job, your parents, a student loan, or a scholarship or grant.
For each income source you enter into the spreadsheet, note how much money you receive from it on a monthly basis. As a college student, some of your income sources might come to you as an annual lump sum, such as from a scholarship, or seasonally, such as from a summer job. For these, take the annual amount you receive and divide it by twelve. Doing this ensures that you spread out the income evenly over the course of the entire year, rather than using it up early and leaving yourself short for the final months.
Once you’ve entered all of your income sources and their amounts into your budget spreadsheet, add the amounts up and note the total at the bottom. This sum is the total funds you have to work with in your monthly college budget.
Once you’ve assessed all of your income sources, it’s time to look at your expenses and break them up into categories: needs vs. wants and fixed vs. variable.
First, separate your expenses into needs vs. wants. Needs are going to be the expenses that you must spend money on, while wants are the expenses you’d like to spend money on but could also get by just fine without.
For college students, good examples of needs are going to be things you either need to survive or must spend money on for school reasons:
The wants in your budget, on the other hand, are going to be the things you would like to spend money on if you can afford them, but don’t absolutely need to:
Once you’ve categorized all of your expenses into wants and needs, you can then further break this section of your college budget up into fixed expenses and variable expenses.
Fixed expenses don’t vary much in cost from month to month, making them a “fixed” amount in your budget. With fixed expenses, you know exactly what to expect each month, which makes them easy to plan around.
These are a few examples of fixed expenses that college students typically need to include in their budget:
When building a budget, it can be helpful to start with your fixed needs because you know both what they’re going to cost and that you’re going to have to pay for them.
While fixed expenses are predictable, variable expenses vary in cost from month to month. Depending on the expense, this variance could be substantial or just enough that you can’t quite consider the cost fixed.
When budgeting for variable expenses, it’s better to be conservative and estimate for the largest amount you think the expense could cost in a typical month. If the expense comes in for less, the surplus funds can either go toward your savings or wants you previously thought were outside of the budget.
These are a few examples of variable expenses college students commonly need to include in their budget:
Once you’ve assessed your income and categorized all of your expenses, it’s time to create your college budget. A common budgeting rule many people follow is called the “50/30/20 rule.” Using this rule means that 50 percent of your income goes toward needs, 30 percent toward wants, and 20 percent toward savings.
Under this type of budget, the first step is to total up the expenses you decided were needs—the budget items you must have. Now compare this sum to 50 percent of your income. Are your total needs higher or lower than 50 percent of your income? If equal or lower, then your budget is off to a good start.
If the total cost of your needs is higher, however, you might need to re-evaluate your college budget. Are there needs in your budget that could truly be categorized as wants instead? Or perhaps there’s a way to reduce the cost of some of your needs. For example, perhaps the grocery budget could be tightened up a bit.
Of course, it might also be that you can’t get the total cost of your needs any lower. In this case, you’ll need to look for ways to increase your income. Perhaps you could pick up a part-time job, or maybe there’s some additional financial aid you could apply for.
Once your needs are in-line with 50 percent of your income, you can take a look at your wants. Does the total cost of your wants equal 30 percent or less of your income? If the cost of your wants is too high, it’s easier to trim these expenses down as you can get by without them. Simply decide which are higher priorities and make cuts until the cost of your wants is equal to 30 percent or less of your income. Any remaining wants will need to wait until you’re able to increase your income.
Finally, the remaining 20 percent of your income can go toward your savings. Initially, this will need to go toward an emergency fund, but eventually you can start putting your savings toward short-term goals like a car purchase, or even long-term goals like retirement.
When creating and revising your budget, it can be helpful to do the work within a budgeting app or program. There are many options available for this purpose, and some of the best can be the mobile app provided by your bank or financial institution.
The Hancock Whitney mobile app, for example, has all the budgeting tools you’ll need built right in. It can be ideal to review your accounts within the same app that you use to monitor and revise your monthly budget.
Doing so allows you to categorize your purchases and expenditures and monitor your surpluses and shortfalls (and decide how to handle them) in real time. For more information on how to get the most out of the budgeting tools found in your mobile banking app, contact Hancock Whitney today.
It’s important to stress that an emergency fund should be the first thing you apply your budget savings toward. Emergency funds are important for everyone to have, but they can be especially important for college students, who tend to have limited or restricted incomes due to their studies and school responsibilities.
Your emergency fund should have enough money in it to cover at least three to six months of your expenses that are categorized as needs. The point of an emergency fund is to cover shortfalls in your budget caused by unexpected expenses (such as medical emergencies or car repairs) or decreases in your monthly income, such as job loss.
You can also keep your emergency fund savings in a high-yield savings account from Hancock Whitney. With this type of account, you benefit from a higher interest rate to grow your savings over time.
Having a sufficient emergency fund in the right type of account can cover your necessary costs while you either adjust your budget, get past the unexpected cost, or restore your income. An emergency fund is an important part of every college student’s budget.
Every budget should be reviewed monthly. If you find that you’re coming up with regular shortfalls or surpluses, you can catch them in your budget review and revise your monthly budget accordingly.
The tools you use to monitor your budget are as important as the budget itself. Hancock Whitney’s checking and savings accounts make it easy to monitor your money and track your budget. All your account information is immediately available, allowing you to clearly track your cashflow and whether your budget is working for you.
Contact Hancock Whitney today to set up the accounts you’ll need to enable your financial freedom and put your college budget into action.