Creating a College Budget that Works
If you are not sure where to start when building a budget for college, you are not alone. Managing finances while in college can be a life stress yet with proper planning and an eye for detail you can effectively create a workable budget. Below you will find a guide for college students and adults to help build and keep a budget to keep your finances in check.
What is your timeframe? Meaning, are you budgeting for a month, for a quarter, or for an academic year? Most students find it easiest to manage a budget on a monthly basis while keeping a twelve-month cycle in the background. The eye on short term details will help the yearly activities better come into focus. When building your twelve-month budget, make sure to keep in mind various time-based expenses (books at the beginning of each semester, holidays, seasonal changes, travel, etc.).
What are the tools of the trade? In other words, how do you bring a budget to life? Some people are most comfortable with paper and pencil while others prefer to utilize a web-based application, government tools, or our Monthly college budget template. There is no universal answer for budgeting but attempting to keep it all in your head is a sure-fire way to set yourself up for failure.
What are the components of building a budget? As simple as it sounds, it really comes down to money coming into your bank account and money being spent from your bank account. The money coming into your account is known as income and can come from a variety of sources: a job, tax refund, support from family, financial aid credits, scholarships, grant, work study, and other sources. As you look at your total income for a given year, it is now important to assess the timing. In other words, you may only have a tax refund applicable in a single installment in April while a job will provide income throughout the year. When building your budget, determine a realistic income number and the timing of those deposits as a primary step in the process.
Next, you will want to examine the money being spent from your account known as expenses or expenditures. By capturing everything you currently spend along with likely expenses will help you mesh your budget with known income. If you are building a budget leading up to a transition to college, you will want to understand any and all specific expenses associated with college life that needs to be taken into consideration. Common expenses that need to be considered may include: tuition, fees, books, supplies, equipment, home furnishings, utilities, food, entertainment, travel, rent, transportation, insurance, and discretionary spending.
Now that I understand my expenses, what do I do next? The next important component of building a budget is to cluster expenses by type. There are two primary types of expense you will want to address: fixed expenses and variable expenses. A fixed expense is the type of payment that tends not to change over time and is often not negotiable. Common types of fixed expenses are things like rent, mortgage, tuition, insurance, and car loan payments. While a line item like rent may not be negotiable with your landlord, it is possible to source a different place to live or to simply adjust your living arrangement (ie. take on a roommate) to help mitigate a fixed expenditure. The other type of expense is known as a variable expense as it can change from month to month. Examples of variable expenses may include groceries, entertainment, and travel. These items are discretionary and will fluctuate depending on your decisions month to month.
What happens if unexpected things come up? When it comes to building a working budget, plan on the unexpected. In other words, build up a savings account for the day when your car needs work or for an unexpected trip to an urgent care facility. If you have properly planned ahead and built a cushion in your savings account, the unplanned events in life will be more easily navigated. Failing to plan is effectively planning to fail when it comes to building a budget.
Putting the pieces together. Now that you have a good understanding of your income and expenses, you will need to determine the difference month to month. A surplus of income will be moved into your savings account while a deficit will require additional planning. If you find your expenses consistently exceed your income, you will need to adjust your fixed and variable expenses or determine if there are ways to increase your income to balance your budget. Plan on revisiting your budget a few times a month to make sure you are on track to successfully complete the current month and have an idea of what is coming in the months to come.
How can I reduce the cost of college? It is possible to minimize the cost of college through a bit of planning and have addressed a few options below for your consideration.
The cost of attending college can vary significantly depending on the school’s tuition, fees, financial aid package, and living expenses. You may be able to find a great college that has more affordable tuition plus a robust financial aid package that still provides an academic fit for you. Learn more by investing time with MatchCollege today. A full list of thousands of colleges, universities, career colleges, and community colleges is at your fingertips to help with the research process.
Many students have earned college credits based on prior work experience or life experience. Credits are not granted without merit, so plan on asking your school if it is possible to ‘test-out’ of a class. If granted the option, you may not only avoid paying for duplicate course work you will earn credits moving quicker along your educational path. Your life experience is valuable and may be used to earn college credits, as well. Make sure to schedule a time with the school’s administrative team and help determine which, if any, classes you can skip based on your unique experience.
It is not uncommon for schools to charge a flat-rate per semester, regardless of the number of classes taken by a student. If this is the case with your school, it makes sense to maximize the number of credits in a semester to help compress your timeframe and possibly make your time in college more affordable.
Another option that is become more and more mainstream is the notion of a combined degree program. These type of programs allow a student to move through a program quicker by clustering classes on the way to earning a degree. Ask your school what options exist for a combined degree program early in the admission process.
Discounts may be available at your college or university if you are an adult learner, you have family that works at the school, you have family that graduated from the school, multiple family members currently attend the school, or if you are involved in student government at your school.
In the past, the cost of healthcare was a significant financial consideration for students and families. With new programs available for students through the Affordability Care Act, it is possible to save even more money for quality healthcare.
Depending on where you attend college, you may experience a higher cost for housing than anticipated. In order to keep your housing costs in check, consider sharing a house, condo, or apartment to help keep the cost of rent down. You may also want to think about being a resident advisor while attending school. These programs are designed to help offset on-campus living by working in a residence hall. Lastly, if you decide to attend school near home it may make sense to live with friends or family to save on housing expenses.
Working to pay your way through college is a growing trend for many students. Presuming your class schedules do not conflict with your work schedule, this may be a great way to pay as you go instead of incurring significant student loan debt. Utilize your school’s placement office or work-study program to maximize the time spent outside of class earning money for college.