If you are like most college students, you might not have a budget in place, or if you do have a budget you may find it hard to stick to. Budgeting is one of the most important ways to help you get on track and stay on track to achieve your financial goals. If you can learn to budget well early on, it can help you be prepared for when you begin paying on your student loans, have a mortgage payment due each month, or are trying to determine how much you can set aside for retirement while still paying the bills. So, how do you actually do that? What are some practical ways you can make changes to your budget…and stick to them?
- Estimate your current income and expenses
First, in order to have an idea of what you are currently spending, it is important to estimate where you are at financially. This will also help you see what you believe you are spending. You can come in and meet with one of our peer counselors to walk through this first step of the budgeting process together.
- Compare those estimates with reality
Once you have your estimates in place, compare those numbers to your actual income and expenses. If you use your debit card for everything, pull up your past 1 year’s worth of bank statements and average out what your monthly expenses and income were. Using a full year helps give the most accurate picture so that you can account for any extra income you may have from a summer job as well as increased or decreased expenses you’ve had in the past year. If you don’t use a debit card or have any past records of your finances, no worries. You can start keeping track through different websites, apps, receipts, or by writing it down. Some websites will allow you to manually enter in your expenses as well as link with your checking account. This can be a great tool especially if you use both cash and your debit card. One great website to use is www.mint.com.
- Set SMART goals
Having goals almost always helps us focus on what it is we are wanting. Setting financial coals can also help you stay on track in order to achieve your goal. Whether you are hoping to study abroad next semester, save enough money over the summer for next year’s tuition, or plan to backpack Europe after graduation, you need to have goals to help you achieve these dreams. The first part of making a SMART goal is to make sure it is Specific. If your goal is vague and has no direction, it will be hard to stick to. The next part is to make it Measurable. If you don’t know how much you are needing to have or how much you should be setting aside for a goal, that can make it difficult to contribute toward the funding of that goal. Having Achievable goals are also really important. You don’t want to set a goal that you know there is no way you can attain. Right along with being achievable, your goals need to be Realistic or Relevant. You want to make sure that the goal you have set is something that is actually what you want and something that makes sense for you personally. And the last part of making a SMART goal is to make sure it is Time-Sensitive. All goals typically have a date that you want to achieve them by. Having a set date for when you want to have the goal achieved or having a time increment where you will always save a specific amount of money will make planning for that goal so much easier. An example of a SMART goal is:
I will set aside $20 each week for 3 months to save $250 for my summer break trip to my Uncle’s house.
- Determine a budget that you want to stick to
After you have your goals in mind, you can start determining what you want your budget to look like. Just like your goals, you need to make sure your budget is realistic. If you cut out all of the fun stuff, it can make sticking to your budget extremely unsatisfying. Reducing your expenses will likely be more effective than completely cutting them out. Evaluate what is important to you, and allocate the amount of money you think is appropriate. Also, make sure you are setting aside money for savings. It is especially important that you have an emergency fund. If an expense comes up that you weren’t expecting, and the only money you have saved is for a fun trip, it is going to be a huge bummer to dig into that savings. But, if you have an emergency fund in place, you can be prepared for those unexpected expenses and not drain the funds you had been planning for your goals.
- Find the tools that will help you stick to your budget
If you found out that you spend $25 on coffee each week, one way to reduce this amount is to start making your coffee at home. Another option to reduce that expenditure would be to only go to a coffee shop 1-2 times a week instead of every morning. Although Redbox movies and vending machines typically don’t seem like much money, if you are a frequent visitor, that money can begin to add up. Ways to reduce this could be to borrow movies from friends and family, or bring snacks from home with you when you go to campus. ATM fees are one expense that can be avoided if you plan ahead properly. Pulling out money from your bank or getting cash back when you go to Walmart can help wipe-out those ATM fees that add up fast.
One area where a lot of students overspend is in eating out. It’s a great way to socialize with friends, and it is also super convenient when you don’t have the time to make a meal. One way to reduce this cost could be to prepare meals on the weekend for the week ahead. If you have quick meals that you can pull out of the freezer or fridge and heat up, it is a fast and cheaper solution than grabbing the 8th box of pizza in 2 weeks. Another option is to go places that have student discounts or send out coupons. Many restaurants have apps or will send emails that can help reduce the cost of going to eat there. The great part about living in a college town as a student is all of the discounts that are available. Check out the local restaurants to find out when and what deals they offer, and have your student ID handy!
If you spend a lot of time with your friends doing activities that cost money, let them know you’re wanting to save for a specific goal and offer some suggestions for a free activity you can do together. Or, if you’re both planning on going on the same trip, it is a great way to hold each other accountable to your savings goals. Another option some people like to use is the envelope method. Once you have figured out how much you are willing to allocate toward each category of your budget, put that amount of cash in an envelope so that you’ll know once the money is gone, you don’t have more money to spend for that particular area until the next month. Make sure you don’t lose it! www.mint.com can also help you keep track and send you updates when you are getting close to your spending allotment for the month.
- Revisit and update as your financial situation changes
Budgeting is not just a one-and-done thing. It is something that will continually need to be monitored and updated as your situation changes. If you get a raise at your job or move to a new place that is more expensive than the place you lived in last year, you will need to reflect those changes in a modified budget. Taking steps early on to reflect those changes will prevent you from running into the situation where you run out of money because you made the same amount each month but now had increased expenses.
Budgeting will take some discipline and habit, especially when you are first starting out. Over time, it will become more routine and manageable, so stick with it. If you would like help starting the budgeting process, please make an appointment with us. One of our peer counselors would love to meet with you and walk through these steps with you. For more information on budgeting, feel free to visit our website and click on the budgeting tab for a copy of our budgeting worksheet and other budgeting tips. Other topics we would be happy to assist you with include student loans, evaluating job offers and employee benefits, and credit. Make an appointment by going to www.ksu.edu/powercatfinancial to set up a free and confidential appointment.
Lindsay Adams – Peer Counselor II