Budget Your Money

Organize finances in ten fairly easy steps

It is shocking how many intelligent students don’t know how to get their finances under control. They may spend money they don’t have without realizing that they are going deeper and deeper into debt.

The one important rule is: Do NOT spend money you don’t have. 

I remember when my son was young and wanted me to buy something for him. I explained that we didn’t have A pair large pair of scissors seems to be about to cut a $20 bill.enough money.

“That’s no problem,’ he said, “Just go to the bank and get some more.” He hadn’t realized that you can only take money out of the bank if you have put that much into the bank. He had seen me getting cash out, but didn’t realize that the checks I put in the bank really were money.  But ALL of you should know this.

The picture represents cutting costs. In this website, we focusboth  on increasing your income and on decreasing your expenses.  These, along with keeping setting up and using a meaningful budget will be helpful for students who are getting deeper and deeper in debt.

This website includes ways to understand how your spending relates to your income. You need to know if you are spending so much that your expenses are higher than your income – meaning that your debt is building everyday. Your goal should be to have enough income and low enough expenses that you can increase your savings every day, working toward finishing college with little or no debt.

Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time.                     — Johann Wolfgang Goethe

Collect information before creating a Budget

You can work on th first five steps at the same time. The more seriously you treat these ideas, the more money you will save and that leads to finishing college with the lowest possible amount of debt. This is serious stuff.

Start with your Income

The first step :  List  your Total Income– for the entire school year. This isn’t something you should just guess at. Include your student aid, grants. loans, scholarship money, the savings you plan to use, how much your parents are expected to contribute (according to FAFSA – USA  form) loans, and any other sources of income. We will call this Total Income

Note: Talk to your parent about sending a set amount of money each month. It is hard for both you and your parents to just have you call home when you need money. Start with what the FAFSA calculated as your expected annual family contribution. Some families can afford a little more. Some really cannot send this much. Be realistic. They should also find it helpful to send a set amount each month.

Next: List Expenses: List Both what you already bought and what you will need to buy.

The second step.  List “ONE TIME ONLY” Expenses. Include a careful estimate of what you spent on your dorm room: pillows, sheets, bedspread, comforter, blankets, desk lamp, closet organizers, milk crates, book shelves, etc. Did you buy any larger items like a refrigerator or microwave, computer or computer accessories?  List what you spent on one-time purchases of office supplies: 3-hole punch, file box and file folders, stapler, scissors, desk drawer organizer, etc. Did you buy a winter coat or other clothing that will last for all four years?  A Backpack, shower caddy, under-bed storage bins, luggage,…. anything that you bought and expect to use all through college.

These one time only expenses need to be treated differently. Perhaps your parents helped pay for these in addition to what they plan to send you each month. Perhaps we can say they came out of your personal savings and high school graduation gifts – a one-time source of income. Perhaps you have a birthday coming up and can ask relatives who usually send a gift to please send money this year. Explain about your one-time only expenses. Now calculate One-Time-Only Expenses not covered.  If you decide you used your savings for this, remove savings  from your total Income.

If none of these are true, If your parents didn’t pay for these purchases, if it wasn’t covered by your savings, you will need to subtract all of your one-time only expenses from money you have available to spend for the first term. That will make things tough for you financially. If you have a scholarship find out how you can spend it. Many pay only for tuition, room and board (meal plan) and sometimes books. If your scholarship lets you withdraw cash as needed, you can spread out the cost of the ONE TIME ONLY purchases over the year. Otherwise, you must count it as first term expenses.  You would be spending money you don’t have.

The third step: List all your set expenses for each term. This means expenses that cannot be changed. Be sure to include
a. Tuition and fees
b. Housing
c. Meals if you are required to be on a standard meal plan.

You will NOT be able to save any money in this area.

The fourth step:  List or estimate all Variable Expenses for each term
a. Food – if your meal plan is not required or can be changed, other meals and snacks including going out to eat or ordering in Pizza, and food items bought to use in your room as tea, instant coffee, sugar, instant soup, etc.
b. BOOKS – a huge expense but one that can be changed
c. Clothes and shoes,
d. Personal items like toiletries, cost of doing laundry each term
e. Transportation per term: Do you have a car? Do you really need it? That costs a huge amount of money.
f. Cost of having and using a cell phone unless your parents are covering this for you.
g. Cost of getting your hair cut or nails done or other regular personal services.
h. Entertainment, gifts, and anything else not listed.

 Estimate how much you have already spent this term on these items. How much more will you need to spend to make it through the first term?

The fifth Step: Get a notebook for financial records. You might also get a small notebook to keep with your wallet so you can write down everything you spend.  Keep  a record of every penny  you  spend.  You might start the week with ten or twenty dollars (if you aren’t paying for individual meals.) At the end of the week, the cash you have left plus the record of your spending should add up to the money you had to start the week.

I imagine that you will discover you are already spending less. Recording your spending makes you more conscious when you are buying things you don’t really need. The same is true for keeping a record of everything you eat or drink. Most people recording what they eat, eat more healthy food and less junk food.

This will help you estimate how much you spent on these items in earlier weeks.  Now, you can begin planning how you can cut way back on these expenses.

The sixth step: Analyze the data you have collected

a. Write down in your notebook:

Income. Write down all the money you have available for the year.(You listed these earlier) Be sure that, if you spent all your savings on One Time Only expenses you no longer include that money in your Income.

Divide your income by two if your school is on the semester system – divide by three if on a trimester system. This is your TERM INCOME

b. SET EXPENSES:  List  SET expenses that you expect to have each term.  Check off those already paid by grants, student aid, scholarships, or you and your parents. They have probably all been paid.
…Tuition
… Room
…Meals (if you are on a meal plan),
Include Your One-time-Only expenses ONLY if not covered by your parents or your savings.

Add to this your estimate of what you already spend on variable items
and how much more you expect to need in this area for this term only.

Then we will do some math:

……A. When budgeting before a term begins: The Term Income —  The set expenses for each term  = money you can USUALLY spend each term on variable necessities.

Subtract the anticipated variable expenses and you have money you can spend for other things.

……B.  But if you have already begun the term, it is more complicated.
Add up the one-time-only expenses not covered + set expenses + what you already spent this term + what else you expect to spend on essentials this term.
Then subtract that amount from your Term Income
The answer is what you have left to spend for this term  
We really hope you have something left to spend.

Shocking, isn’t it. You may discover that you have already spent more than you had available for the entire term and there’s a long time to go. What can we do about this problem?

The Seventh Step:You must either increase your income or reduce your spending.

Three Ways to Increase your income.

1.  Get a job – on campus or off campus.

The on-campus Work-study jobs have the advantage that you can usually schedule your work around any required classes and you won’t need to work during  school vacations days. If you desperately need time to finish a paper, your job might be flexible enough to let you make up the time later. Ask about work-study jobs at the financial aid office. If none are available now, ask about getting one for the next term or next year.

If no jobs are available on campus, look for jobs near the campus. One possibility is a seasonal job. Check out stores that have big sales the day after Thanksgiving or for several weeks before Christmas. (For the before Christmas jobs, you might need to stick to working on weekends). You will have more success if you have had experience in this sort of work and know how to use a cash register.

2. Start your own business.  Think about skills you have that other students would pay for.

If this appeals to you, see   12 ways to start a business in college

3.  Get a scholarship. Get several Scholarships. You can really do this if you are organized.

1. Evaluate your potential for scholarships. You probably did that in high school. Talk to someone in the financial aid department about your problem and see if they can suggest scholarships for current students. Get a book on scholarships from the library or begin searching the Internet for scholarships.

2. Make a file for each scholarship you hope to apply for. Get the dates  when you can get an application form and the deadline for sending it in. Always send them in as early as possible. Some scholarship committees only read the first 100 applications received. Set a goal of applying for an average of one scholarship a week…. four a month. Stick to your goal and you may have money coming in. These will increase your income in the future.

Getting a job is the only way to get money to add to your income right now. You cannot include money you hope to earn or might get in a scholarship.

If you are running low on money, read:    Ten ways to Spend Less

The 8th Step: Create a budget you can afford for the remainder of this term.

1. List your income for this term
You can add anticipated income if you have a job and know what you expect as a salary.
Do NOT add income you hope to earn.  I recommend that a large part of that goes into savings.

2. List your set expenses  and money already spent.

3. List your revised version of anticipated additional expenses for the term.

4. Calculate : Term Income – the sum of set expenses, money spent and anticipated expenses for the term

We hope you come out with a little to spare. If so, try not to spend it. You need to start a savings account for unexpected expenses and emergencies.  Youmight lose or break your glasses. Your computer might need to be repaired.. etc.

The ninth step: Create  a Budget you can afford for future terms.

1. List your Income.

2. List set or anticipated expenses in several categories

Tuition and fees
Housing
Food    a. on a meal plan
.           b. Food off the meal plan
Books
Transportation
Clothes
Toiletries
Office Supplies
Services – like hair cutting
Laundry
Entertainment
MONTHLY SAVINGS: It’s smart to put aside $50 or more a month. $100 is better.
Other: If you have a loan, you might put aside $10-20 a month so you won’t need a loan in future years. If you get enough scholarships, and have money left over, save it to pay off your loans.

Too many people spend money they haven’t earned to buy things they don’t want to impress people they don’t like.                                —  Will Smith

The Tenth Step: Planning Ahead

1. If you don’t have a credit card, I’d recommend not getting one unless you really trust yourself to use it only when you can pay off the entire bill every month.  Too many students build up huge credit card debt buying things they really don’t need.

One problem with having a credit card is that other students expect you to pay the bill when you go out to eat. They will all tell you they’ll pay you back for their share. But they forget to include what they spent for a drink. They didn’t include their share of the tip, or they just don’t pay anything. Explain thay you only use it for emergencies.

If you do get a credit card, store it away in a secure place for emergencies. You might also take it out for a major shopping trip so you don’t need to carry too much cash.

If you have a credit card and owe money, you need to pay it off quickly and in the future, always pay if off each month. It is useful mainly for large emergency expenses. You’ve been in an accident and the car repairs cost $800.  A parent or grandparent is extremely sick, possibly dying and you need to fly home to see them. You have a toothache and no dental insurance and the dentist says you need a root canal for $1000. You might really NEED to use the credit card. But pay it off as quickly as possible. Hopefully you will have extra scholarship money you can use.

2. Use your computer for staying up-to-date on your budget.

Try to use Microsoft Money that might already be on your computer. Or you can go on-line and get Quicken – a simple version is free. You can list your budget categories or use those they suggest automatically. You can list the amount budgeted for each category. Then, daily or weekly you can enter what you spent in that category. You’ll be able to tell instantly when you need to cut back on expenses.

My husband has used Quicken ever since it came out but he uses the up-graded version that you need to pay for. This experience of using your computer for budgeting is also helpful for your future. If you keep track of your expenses this way, it will be  easier to calculate your income taxes.  If you learn to use this method of budgeting, you will be prepared to use it later for a small business.

If you didn’t read these earlier           12 ways to start a business in college

and what about Student Loans?     Spend Less: Ten ways to Reduce Your Expenses

Try this helpful website        www.Collegefinancecenter.org

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