The Student's Guide to Money Management - Budgeting

College is a financially difficult time for many full-time students. You probably have significant education expenses, are likely to work a limited number of hours at a relatively low-paying job, and may often be tempted to splurge on the fun that's a natural part of college life.

Money management can be challenging for people of all income levels, but the less money you make, the more important it becomes to stay in control of your money and keep track of every expenditure. I'm not suggesting that high-income earners don't have to be financially responsible, but let's face it - a student usually needs to keep even more careful tabs on every dollar or they may just run out of money before their expenses are paid for.

Every one should take responsibility for their own financial well-being, and that starts with basic money management by budgeting, controlling debt, saving, and investing.

Having a budget may not sound glamorous, but it's a must for good money management. And a budget really isn't as restrictive as it sounds, it just means that you are in control of your money, rather than you being controlled by how much is left in your bank account after the bills are paid.

Some people, usually those without a budget, like to live it up until they run out of cash every month, and then they can't afford to do anything until next payday. How glamorous is it when somebody is dead-broke and tagging along, hoping that a kind soul in the group will buy them a beer or a sandwich? Not very. Avoid this situation by knowing exactly how much income you have to work with and how much your bills are going to cost you.



Your budget should include all your income, such as:

• your paycheck
• scholarships, grants, student loans
• support from parents or family
• college savings plan or other investment withdrawals
• any other income

And all your expenses, such as:

• tuition
• books
• lab fees
• rent or dorm fees
• food
• utilities
• insurance
• car or other debt payments
• entertainment
• membership dues
• savings
• any other expenses

Some of your income and expenses may not occur monthly, like your tuition bill or financial aid payments, so it may be easier and more accurate to draw up an annual budget and divide by twelve to get your average monthly budget.
Certain expenses are also likely to vary each month, such as your heating bill, food costs, or entertainment spending. It's generally easiest to start drawing your budget by listing all of your fixed income and expenses first. Then you can punch in your estimates on the variable expenses.

It's okay to guess if you're not sure, but it's generally safest to overestimate your expenses and underestimate your income. Many have been shocked at their first paycheck after seeing how big a bite the tax man actually takes. And most of us tend to forget about those little daily expenses that add up quickly. It'll be a pleasant surprise if you end up with more than you need at the end of the month, better than the other way around and having less than you hoped for!

You'll get a better idea of your actual income and expenses after a few months of practice, but it's important to allow a little flexibility in your budget. Life isn't predictable and things will come up. It takes time and experience to accurately figure out how much it will cost to live each month, and even then you'll have to adjust your budget when your income or expenses fluctuate.

Realistic is important to developing a budget you can live with. Sure, it may be possible to survive on $50 worth of groceries a month. But would you really be happy if you had to live solely on hot dogs, ramen noodles, and eggs for the next four years? Probably not. There may be some months when you have to cut back on some expenses - and buying inexpensive food is one of the easiest ways to save - but don't set yourself up for failure or suffering. A little sacrifice will probably be necessary, but don't suffer!

Entertainment is another flexible expense, and it's usually one of the first things to look at if you need to cut back your expenses. Everyone needs leisure time, but you really don't have to spend any money at all to relax and have fun. Parks, the library, and free concerts offer no-cost ways to spend an afternoon. And if you are going to pay for entertainment, steer towards places that offer student discounts.

It's not a good feeling when you realize that your expenses exceed your income, but it's not always as painful as it sounds. Giving up one relatively small daily habit can easily save you $100 or more a month. Skip the gourmet coffee shop and enjoy some home-brewed java, or pack a lunch instead of eating out - it can mean the difference between having enough or going into debt. And it's really not that hard once you get used to it.

Writing a budget is not a one-time thing, and it's not set in stone. It is likely to take a few months of tweaking to get a flexible, realistic budget drawn up, especially if you're away from home for the first time. You may have to take on extra hours at work or cut some expenses, but it's better to find out as soon as possible if you're coming up short each month.