As a student trying to be a “debt-free scholar”, one of your biggest financial friends should be your budget.
Unfortunately, many college students view budgets just as they do taxes – as financial nuisances to be avoided if possible. If you truly want to become financially free, however, you need to learn to budget successfully.
Follow the six tips mentioned here, and you will be well on your way.
1. Budget Realistically
If you have never successfully used a budget, don’t set yourself up for failure by creating unreasonably high goals when you start. For instance, a person who normally spends hundreds of dollars a month on coffee should not suddenly set his budget to only allow for five dollars a month. A rule like that is almost certain to be broken.
Instead, make your budget reasonably similar to your current spending patterns and change it slowly – over the period of a few months.
2. Know Why You Budget
Motivation is an important key to successful budgeting. If you are simply keeping a budget because a friend said it was “a good idea”, you are not likely to keep budgeting for long.
Before you start budgeting, answer the important question: “Why?”
Depending on your situation, the answer could be to pay off debt, save for retirement, or get more control over your money.
3. Save For Your Future
When you create your budget categories, remember to allocate as much money as possible for savings.
Although retirement may seem far in the distant future, it will come all to quickly if you do not start saving now. If you just put aside a little money during the early years of college, it will multiply exponentially by the time you retire. If, however, you do not invest early, you will have to save much more later on with less result.
Obviously, for many debt free college students saving money may seem impossible. However, if you eliminate all unnecessary expenses, you can almost always save something.
Saving even just a penny per month is better than saving nothing.
4. Budget Luxury Items
To make you budget achievable, you need to dedicate a certain amount of money to spending.
Depending on how much money you spend currently, the amount funneled to this fund will vary.
When setting your budget, be careful to avoid setting this category either unrealistically low or extravagantly high. Look for the happy middle.
Once your discretionary spending limit is set, determine to never spend more – even if your favorite store has a 60% off sale.
5. Prepare For Emergencies
Car breakdown. Computer failure. Bicycle theft. Though never planned, unexpected emergencies should be anticipated in a budget. If you have every penny of you money dedicated to some use, what will you do in an emergency?
The key is an “emergency fund”.
Built up over a period of months, this budget category should always have about a thousand dollars. Then, when an emergency comes it will not break the bank – just the emergency fund.
Always work hard to keep this fund full and ready for action.
6. Watch The Little Things
The biggest, most deadly danger to your new budget seems small and insignificant. Little expenses are actually public enemy number one.
Two dollars for candy, three for a snack, and you will soon be faced with a budget collapse.
As one of my favorite authors, J. C. Ryle, said, “A small leak will sink a great ship, and a small spark will kindle a great fire.”
Beware of the little expenses that are not included in your budget!
By following these six tips for budgeting, you are well on your way to being a debt-free and financially-free student!
Do you use a budget?
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I was thirty years old when I started keeping a written budget. After a couple of months, I realized that I was almost never “broke”. Then it occurred to me that all those years in college when I thought that I was, I wasn’t. I could have achieved much more than I did financially. If you think you’re a “poor college student”, try keeping a written budget for a few months and see if you stil think so. You might be surprised at just how much money you actually have.
You may be tempted to give up on a written budget in the first couple of months, but don’t. Make adjustments. If something isn’t working for you, try something else. Just don’t give up.
@ daniel
Very good point! A budget does help you realize how much money you really do have and where it is going.
Thank you!
Great suggestions, Nate. A budget can be a lifesaver for a student trying to make ends meet. Two additional thoughts –
Creating a budget almost always starts by tracking what you are actually spending. Often students (and many others) have no idea what they are really spending. It’s hard to create a realistic budget without knowing where your money is going. So a good beginning is to just keep track of spending for a while – then to think about how to make adjustments to make it all work.
Secondly, for students trying to live on a budget – especially a tight one – I’d suggest talking to other students and finding those who are also budgeting. Having a sympathetic ear and some support is helpful. Students may be pleasantly surprised to find how many other students are also trying to live more reasonably. It helps to know you’re not alone.
Great post.
Great advice- particularly point 5.
Great tips, but the most basic and best financial advise anyone could get is simply, “if you don’t need it, then don’t buy it.” If you’re not gonna’ die, starve, or use it later on then forget about it. Save the left over money to see the world or as you say, retirement (though inflation will probably chew it apart).
I think the greatest budgeting tool college students can use during college is paying for things using cash. This forces them to stay on budget and usually helps them to spend less (because it is easier to spend “fake” money with a credit card).