Learn the Basics of Budgeting, Saving and Spending
Are you one of the many students who are working in addition to going to school? If you are earning an income, you probably have many ideas of how you’d like to spend your money. Maybe you’d like to buy a new pair of jeans, have pizza with your friends on Friday night, or get that new video game that just came out. Maybe you have a lifelong bucket list that includes dreams of traveling to Italy, purchasing a new car, or paying off your student loans as soon as possible.
Learning to budget while in college sets you up for success after you graduate. Get in the habit of budgeting now to assist you in achieving your current and future goals. The Financial Aid Office hopes that you can put money aside for life necessities and goals, while also having some money available to spend on personal wish-list items. Let’s talk about how to make this happen for you!
Income is how much money you have coming into your bank account. This could be your bi-weekly paycheck from your employer, gift money or funds from family members. Start by adding up your total income. This will show you how much you have to start with before deciding how you’re going to use it.
Needs are different than wants or desires. For example: you need to pay rent so you have a place to stay. That’s different than wanting to have cable or a Netflix account. You may want cable, but it’s not a life necessity. Think about the difference between needs and wants, and consider all the necessities you have in your life. Maybe you have to pay rent, get groceries, buy books for class, pay a utility bill, or submit a car payment.
Next, subtract the cost of your necessities from your income. If you find that you don’t have a lot of cash left over for spending or saving, we encourage you to check our Cutting-Costs for College Students section.
Having remaining funds after subtracting your necessities allows you to save for your goals and spend reasonably on wish-list items. Research says that 70 percent of students from Minnesota graduated with some amount of debt in 2014. Saving now is critical so you can make that student loan payment after you graduate, pay for that new car, or save for that trip to Italy.
Take some time to determine your saving goals. Are they long term (i.e., paying off my college loans in 10 years)? Are they short term (i.e., buying a new laptop for the next school year)? Decide what percent of your remaining funds you’d like to allocate to these saving goals. Then, put the money away! Don’t look at it! Remind yourself that it’s not available to you until you’ve saved up enough to pay for your goal.
What’s remaining is your spending money. Come up with a wish list of what you’d like to spend it on. Maybe pizza on Friday night, going to see a movie on the weekend, or purchasing those new shoes you saw at the mall. Consider how much your wish-list items cost, and determine priorities.