Living on a Budget
How to balance your income with your living expenses
College is a time for learning not only in the classroom but also in the real world. It’s the first time in most students’ lives when they are fully responsible for handling their own finances. One of the most important lessons for students to learn is how to make a budget, and there’s never a better time than right now to get started.
Making a Budget
A budget is nothing more than a comparison between your expenses and the money that you have to pay for your expenses. Track all of your spending and income over the course of one month. Be diligent and write everything down. For one-time expenses like tuition, divide by 12 to find the monthly cost. Do the same for all income that isn’t earned on a monthly basis.
Next, all you have to do is plug some numbers into a simple equation and you have yourself a rudimentary budget:
- Add up your monthly income. Monthly wages from employment + student loans + scholarships + savings + other sources of income (e.g. parental contribution, gifts).
- Add up your monthly expenses. Tuition + books and school supplies + rent and utilities + other bills (e.g. credit card, cell phone) + travel + food + entertainment + miscellaneous.
- Subtract expenses from income. If you have a negative number, you need to balance your budget.
You probably didn’t need a website to tell you how to figure out if you are losing money each month, but, if you’re like most college students, there’s a good chance you haven’t been paying close attention to how you spend your money. Take a close look at all your receipts from the past month. You may be surprised to see where your money is going.
Balancing Your Budget
If you wound up with a negative number from the equation above, you need to balance your budget or you will soon be broke or in debt trouble. You have two options: you can either decrease your expenses or increase your income. It’s not as hard as you might think to fix an unbalanced budget. If you can decrease your expenses by a mere $3 a day (the price of one gourmet coffee), you’ll save over $1,000 a year.
If you ended up with a number that’s positive, you have a bit of a cushion each month. It might be a good idea to start a savings account with this money so that you have money available in an emergency situation. It’s recommended that you put three to six months’ worth of living expenses aside in case of emergency, although this isn’t always possible for college students.