Your future self will benefit if you create a plan for managing your money while still in college. You’ll have lower bills, less stress and fewer impulsive purchases stealing from your paycheck when you use a budgeted system for managing your money. It doesn’t mean you’ll be stuck in a box because of your budget; instead, it allows you to spend on things that bring you joy without feeling guilty, since you’ve already planned for those purchases within the confines of your budget.
When I was in college, I thought budgeting meant writing down my bills on a notepad. I wrote down my rent, my phone bill, and the bills for my internet service provider. That was all I did to budget. I didn’t keep track of anything; I was just hoping that the amount in my bank account would last until the following month.
A good budget is like having rules in a game before you’ve played.
Your Spending Plan is First (Not Third)
Before you can think about your income, you must develop your spending plan. This should not be a reaction; it should be a plan that has been developed proactively.
The first step in developing a spending plan is to write down everything you believe you will spend during the upcoming month: rent, utilities, groceries, dining out, and all of those small expenses that seem insignificant but end up eating major dollars away from your account.
In the beginning, when you’re trying to create a spending plan, you are going to feel uncomfortable. You’re probably going to be wrong when estimating your monthly expenses, but that is a normal part of the learning process. After you’ve created a spending plan for a couple of months, you’ll notice that you will have developed patterns for your spending and you’ll have a better idea of the amount of funds that are necessary for you each month.
If you have a job, that is great! Figure out how often you get paid, then just multiply your average paycheck by the number of paydays in that month (e.g. if you only get paid twice, just take your Average Paycheck x 2), however, if that particular month has three paydays, then just consider that an extra paycheck and not as a reason to go crazy with spending.
If you do not have a job that pays you a straight weekly or biweekly check, you can still consider that you will have some income just in a different format; whether it is from a monthly allowance or a savings account that you have been gradually depleting from. For example: if you have received a loan that needs to last you for a semester or a full year, take the total amount you were given each month and divide it by the amount of months you will need it for. That will give you your “monthly income” amount, even though it may not feel like a true income.
One last piece of advice, when you do receive a rough amount of money (like a student loan) that all came in one lump sum, remember that this is not “free money” you should use immediately. It would be recommended to put that lump sum into a savings account and then move the fixed amount that you have calculated into your checking account each month. Otherwise, the money can be used much faster than expected!
And what happens if your budgeted expenses exceed your income? Well, that is termed as “deficit” – a big fluorescent “warning” sign flashing bright red in front of your eyes!
All you can do is make more money or spend less – the only two options available to you that will keep you out of credit card debt. The instant you choose neither option, credit card debt crashes your party – and then you are in “damage control,” not “budgeting.”
At the end of every month, go through your budget and see where your real expenses were.
Perhaps certain grocery items were cheaper than you expected or maybe your restaurant estimates tripled. Getting this insight is not a failure, it is simply feedback.
You would then take this feedback and adjust the following month’s budget by lowering the amount you estimated for the item that was less expensive and increasing the amount for the item that was more expensive. After a few iterations of this process, your budget will become eerily accurate, almost seeming to read your mind.
Budgeting does not constrain you; budgeting is for the purpose of being deliberate.
You will enjoy going out for food, enjoying experiences, or travelling even more when your budget states you can spend money on these things. If these types of activities aren’t in your budget, it is far easier to say no to those expenses as the decision is already made for you based on deliberate planning.
Budgeting does not eliminate all of the impulse purchases; however, it does eliminate most of them. And as a general rule of thumb, impulse purchases are often the things we later regret.
Good money habits will not appear after you have graduated. They develop now month by month through basic budgeting and making sincere adjustments. Start out messy, improve, be consistent.
That’s how college-you quietly sets up adult-you for a much smoother ride.
