Managing Your Expenses as a Student
Finding the willpower to set a budget every month while you’re a university student is one of the hardest things you’ll do during your academic career. Many students become reckless once they enroll at university and forget that they’re now responsible for their personal finances. Losing track of money or overspending on clothes or fun could not only put you in the red with mom and dad, but in extreme circumstances could result in you losing track of paying rent. If you don’t want to lose your first apartment or your relationship back home, it’s time to get your expenses in order so that you’re ready to go when the “real world” finally becomes a reality.
Analyze Your Monthly Income
Before you start setting up a budget for yourself you’re going to have to figure out how much money you have coming in each month. Most students get some type of check from their parents on a monthly basis and use it to help pay their bills. If you have a job as well, look at your last three pay stubs and take the average of all three to come up with a “middle ground” amount of money that you take home each month. With your total monthly income assessed you can break that money down into your monthly expenses.
Every budget contains two different aspects. There are bills that always come in at the same cost and then there are bills that fluctuate in cost and can’t be accounted for on a regular basis. The essential bills every month are things like your rent and phone/internet bill. Because those two items never fluctuate in cost, they’re very easy to deduct from your total monthly income. The “essentials” section isn’t to say that things like your electric bill and grocery spending aren’t important, it’s just that they can’t be accounted for accurately each month because they fluctuate. This calls for…
Extras include all other monthly expenses such as grocery bills, electric bills, filling your car with gas, etc. In order to account for these properly, the same as your pay stubs, take your last three monthly bills from each of these categories and find the average. Then, once the average of each of these bills has been found, add $10 to it to put it into your budget. This extra $10 helps account for any high cost months you encounter in any of the categories and if your electric bill is high one month and your groceries low, you have extra money that you can take from any of the categories to pay for the bill that ran high in any given month.
The most obvious next step is to take all of your expenses for each month and deduct them from your total monthly income. This is best done in an Excel spreadsheet each month with one column outlining how much you were anticipating to spend on each category and how much you actually spent. With all of your expenses deducted from your total monthly income in an “anticipated expenses” column, you can see how much money is left over to put into savings at the end of every month.
The money that’s left over in the “anticipated expenses” column in your Excel spreadsheet should be immediately transferred to your savings account. If you leave extra money sitting in your checking account, you’re more inclined to spend it thinking that it’s safe to spend. Should an emergency arise though and you need to pay more money for an electric bill or gas bill in any given month, without any money in reserve you won’t be able to pay your bills. If you’re struggling to get back on your feet after bad spending habits, don’t put too many “fun” expenses into your monthly spending Excel spreadsheet. This will lead to less and less being put away in your savings account and should those rainy day clouds roll through, you won’t have any money to pay your debts. Stay smart and plan ahead.
Written by Nick, a frequent contributor to 20smoney.com