After three years of college, I am now preparing for my senior year. I have certainly made my share of mistakes with money over this time, learning quite a bit about the importance of having an income and budgeting. Entering this summer, my priority was having a good time with friends and family while still making and saving money. Ultimately, this is the goal of budgeting. By knowing how much you are making and spending and how to adjust, you can enjoy yourself while minimizing financial worries.
Have an Income and Calculate It
You WILL be spending money in college. Having an income is not an advantage, but a necessity for most. It is what puts you in the position to form a strategy with your money. Without an income, it is impossible for your bank account to grow or sustain itself over time.
There are a variety of income methods that exist as options. They do not need to be year-round or even ones that advance your career. Making some money is better than making none at all, so remain willing to settle for some backup opportunities that may not have been your first option. Explore summer jobs, internships, freelancing, or part-time positions. Analyze your situation and decide what is best for you.
The next step is to calculate that income. Be aware of how much money you are making after taxes and keep tracks of your paychecks. If you are working hourly, figure out your average weekly or monthly earnings. Also, if you are getting paid in alternative ways, like through online sales or scattered freelancing deals, decide if tracking average income or individual payments are ideal. This will make it much easier to plan your strategy for spending and saving.
Know Your Expenses
You probably have a lot of expenses: Meal plans, room and board, school supplies, utility bills, insurance, transportation, eating out, clothing, groceries, gym memberships, online subscriptions, etc. Write them down alongside the amount you are spending on each in a place like a spreadsheet or notebook. This will make keeping track of them easy over time.
A portion of them are likely fixed, meaning you have no choice but to pay them on a regular basis. Others, however, are variable. This means that they differ depending on your decisions. As college students, the majority of the costs we pay are variable. We can cook more which saves on eating out, buy fewer snacks which saves on groceries, and walk to class which saves on transportation. Our day-to-day decisions add up, chipping away at our bank accounts without us even noticing.
Making small adjustments can allow you to cut unnecessary costs. First, analyzing your current expenses is crucial. Once you figure out what expenses you are paying, how much you are paying on each, and which ones are necessary, you can then decide which ones can be lowered. Think about what is most likely wasteful spending and try to limit the costs that are least beneficial. Your mental and physical well-being is most important, so keep the essentials and don’t overdo it. A happy medium certainly exists.
Once you take note of these adjustments, put them to fruition. You will notice that you are spending less each week, month, and semester. Cutting costs has the same effect as making money. When your bank account is no longer being weighed down by these adjusted expenses, you will thank yourself.
Ideally, you will have money left over after all of your expenses are paid. Your bank account should not be reaching a zero dollar balance, especially if you have an income and are careful with your expenses. The money you are making now is never guaranteed and having an amount that is available in case you need it is critical. Also, it is what will get you to grow your total balance. If you are making money and paying less than that amount in expenses, then that leftover amount should be increasing each time you get paid.
To ensure that you’re saving your money, put it in a savings account. Opening one with your bank is easy and you have the ability to deposit money, withdraw money, and transfer money to it from other accounts. It is a secure spot that lets you see your total amount that is being saved. A bit of monthly interest is helpful too. Most provide around 0.1% in interest and utilizing one that gives higher returns is a great long-term investment. You can use your other accounts for your expenses and leave this one to grow over time as you move in money. A common rule of thumb is to put between 10%-20% of your income into savings. However, saving more if you can do so will only help.
Remember, these tips are intended to help you save money and in turn become happier in the future. To put it simply, this means making money, paying less on things you do not want to pay for, and saving and growing the rest for when you need it. This does not mean, however, sacrificing a quality of life that is meaningful to you.
You can still buy your iced coffees before class, go on spring break with your friends, and grab that new pair of shoes. In fact, that is the point of budgeting and making money, especially in college. So please, follow these tips and help set yourself up for life in the future, but also don’t hesitate to enjoy their effects today.