College Students: Here’s Your Cheat Sheet to Budgeting 101

A female student carries books on a college campus
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As if writing papers and studying for exams weren’t enough, there’s one more thing college students should  add to their workloads: budgeting.

A budget is the system that tracks what money comes in and what money goes out. It can keep you from getting in the red, spending more cash than you have available.

And let’s face it, once your parents are no longer in charge of keeping you alive from day to day, money becomes pretty important. That mini-fridge isn’t going to restock itself.

You don’t want cluelessness about money management to cause you to struggle to meet basic needs — or get you kicked out of school for coming up short on tuition payments.

Starting a budget isn’t something to delay until you graduate and begin your first full-time, professional gig. Though budgeting for college students may be a little different from how your future self will manage money, developing smart financial habits now is the best move to make.

Budgeting for College Students: Where to Begin

Budgeting involves tracking your income and expenses. Let’s focus on the income first.

Part of the tradeoff of a college education is sacrificing a few income-earning years to earn a degree. This means many students have limited money coming in. Still, you’ve got to work with what you’ve got.

Take Inventory of All Income Sources

Take a moment to think about all the money you have coming in. This could include:

  • Wages from a part-time job
  • Money from a side gig, like tutoring
  • A resident assistant stipend
  • Student loan, scholarship or grant
  • Money from a 529 plan
  • Money from a traditional savings account
  • Allowance from parents

Evaluate the Frequency of Income Disbursements

You may have a combination of income sources — and how you get paid from one may differ from how you get paid from another. It’s important to take into account how often you get paid from these various sources.

For example, if you have a student loan or scholarship, your school will receive the funding first to cover your tuition and fees and then issue you a check at the start of the semester for any money left over.

You’ll want to make that money last. When creating a monthly budget, take the overall amount and divide it by the number of months you want those funds to cover in order to come up with your monthly income.

If you have a part-time job, on the other hand, you might get paid every week or every other week. Add up how much you earn from the paychecks you get each month.

Now, you may have income that comes more irregularly — tips from a server job, random side gig income or money your parents send you from time to time. If this is income you rely on, you’ll want to figure out the average amount coming from these sources every month. Tally up the total over the past few months and then divide that by the number of months to get your average.

In months that you receive more money than average, set the extra aside — creating what’s called a sinking fund. During lean months where you bring in less, you can pull from your sinking fund to cover expenses.

Talk to Your Parents About Expected Financial Contributions

If your parents are providing financial support for you in school, it’s important to be on the same page with them about those contributions. You want to know if they’ll be sending you money on a regular basis, giving you a certain amount only at the beginning of the semester or just making themselves available to bail you out in an emergency.

Not all parents are able to (or choose to) financially support their college-aged children. Being an adult means shouldering the responsibility of providing for yourself, so any parental aid should be met with gratitude.

Plan On How You’ll Spend Money On and Off Campus

Close-up of hipster woman attending college holding books, notebooks and pens
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The next step in budgeting for college students is listing all your anticipated expenses. Don’t forget to include what you plan to add to your savings. (Yes, budgeting for college students includes putting money in savings, even if it’s just a few bucks a month.)

Spending Categories for College Students

Begin by brainstorming all your relevant spending and savings categories. Your expenditures could include:

  • Tuition and fees
  • Books
  • School supplies
  • Housing (campus housing or off-campus rent)
  • Food (college meal plan or groceries)
  • Restaurants and bars
  • Entertainment
  • Personal expenses
  • Clothing
  • Utilities
  • Laundry
  • Transportation
  • Cell phone bill
  • Internet bill
  • Insurance (auto, renters and/or medical)
  • Credit card bill
  • Emergency fund
  • Short-term savings
  • Long-term savings

Estimating Your Anticipated Spending

If you’ve been in college for a few months or more, you can review your past bank statements or go through receipts to get a baseline idea of how much you normally spend in each category. You can create your budget based on those amounts, making any necessary adjustments (like cutting back on middle-of-the-night pizza deliveries).

However, if you’re brand new to school, you probably have no clue what you’re likely to spend. To give you an idea, the College Board has estimated undergrad budgets which break down the average expected costs for students during the 2018-2019 school year, depending on the type of school.

  • A student commuting to a local two-year college:
    • $3,660 on tuition
    • $8,660 on room and board
    • $1,440 on books
    • $1,800 on transportation
    • $2,370 on other expenses
  • An in-state student living on campus at a four-year public college:
    • $10,230 on tuition
    • $11,140 on room and board
    • $1,240 on books
    • $1,160 on transportation
    • $2,120 on other expenses
  • An out-of-state student living on campus at a four-year public college:
    • $26,290 on tuition
    • $11,140 on room and board
    • $1,240 on books
    • $1,160 on transportation
    • $2,120 on other expenses
  • A student living on campus at a four-year private college:
    • $35,830 on tuition
    • $12,680 on room and board
    • $1,240 on books
    • $1,050 on transportation
    • $1,700 on other expenses

Of course, your expenses will vary based on where you attend college, what city you live in, what financial aid you qualify for and other circumstances unique to you. Check with your college’s financial aid office for information about estimated costs.

If you live off campus, pay special attention to what you’ll have to shell out for rent — and start roommate shopping. According to Apartment List, the national median cost of rent in February 2019 was $946 a month for a one-bedroom and $1,174 a month for a two-bedroom. Split that two-bedroom cost with a roommate, and you’d be paying $587 per month.

You also gotta eat. If you choose not to sign up for one of your school’s meal plan options, you need to budget for groceries. According to the United States Department of Agriculture, an adult between 19 and 50 can expect to spend between $165.80 and $369 per month on food depending on how thrifty or how liberal they are with their grocery budget.

Use Saving Tactics to Lower Your Costs

These cost estimates are here to give you an idea of how much you might spend, but there are dozens of ways you can reduce your expenses.

You can buy used textbooks from former students, use public transportation, attend free events for entertainment (college campuses have them all the time) and show your college ID any place that offers student discounts.

Check out our post on how to save money in college for detailed advice on how to save on tuition, books, housing, food, transportation, entertainment and more.

Find a Budgeting Method That Works for You

Just like budgeting for anyone else, budgeting for college students means choosing a budgeting style. Below are three popular approaches.

Zero-Based Budgeting

Zero-based budgeting is a precise budgeting method where your total income equals your total expenses (including savings). In other words, your budget should balance out to $0 at the end of the month.

That doesn’t mean you need to spend every dollar you get your hands on. Remember, it’s important to put money in a savings account to fund that spring break trip or a new laptop or to build up an emergency fund. With a zero-based budget, you just want to have a plan for every dollar.

Percentage-Based Budgeting

U.S. Senator Elizabeth Warren and her daughter Amelia Warren Tyagi popularized the 50/30/20 budget in their book “All Your Worth: The Ultimate Lifetime Money Plan.” This method is a prime example of percentage-based budgeting. 50/30/20 budgeters spend 50% of their income on essentials (like housing and food), 30% on discretionary personal spending (AKA all the fun stuff) and 20% on financial goals (like saving).

As a college student, you might want to tweak the ratios a bit. Maybe 70% of your income goes to essentials and you allocate 15% for financial goals and another 15% toward personal spending.

A percentage-based budget makes sure you cover the necessary basics without sacrificing saving and having some fun. You don’t have to track every dollar, as long as you make sure to stay within the spending limits for each of the three categories — needs, wants and goals.

Cash Envelope System

A woman budgeting with the cash envelopes method
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The cash envelope system is a way to help you stick to your budget by restricting your spending on variable expenses. Even with a budget in college, it might be tempting to spend too much on football tickets or Uber Eats or alcohol.

Here’s how this system works:

  1. Determine spending limits for your variable expenses, like food and entertainment. (Pay fixed costs, like rent or your phone bill, the way you normally would. Don’t include those expenses in this system.)

  2. Stuff cash in labeled envelopes to match those spending limits.

  3. Only use the cash envelopes when you’re out shopping.

  4. Once an envelope is empty, no more spending in that category until it’s time to replenish the envelopes.

If carrying around a ton of cash when you’re rooming with a relative stranger makes you nervous, you can digitize the system with apps like Mvelopes or Goodbudget.

Alternatively, you can use gift cards in place of cash envelopes. For example, if your grocery budget is $200 a month, you could put that money on a gift card from your local grocery chain or from a superstore chain such as Walmart or Target. Then you’d just use that card for all your grocery shopping for the month.

You could get gift cards for movie theaters, clothing stores or restaurants to cover various areas of your budget. Just make sure you don’t have to pay a service fee to purchase or maintain the gift card. You’ll also want to know if your card expires.

Four Tips to Mastering Budgeting for College Students

Anyone just starting a budget will need some time to adjust to a new money management system. There may be a lot of trial and error in your first couple of months. That’s totally fine.

Here are some tips to going from Budgeting 101 to doctorate-level smarts.  

1. Be Flexible

A budget guides your financial life, but don’t treat it as if it’s set-in-stone. Every student’s budget is bound to change.

Some months may come with more expenses — like at the beginning of the semester when you have classes to pay for and books to purchase. Moving to a new apartment or having your roommate drop out of school mid-semester could shake up your cost of living.

The summer months might be flush with extra income if you land a paid internship or seasonal job — or you could find yourself struggling to pay for summer courses that your financial aid package didn’t cover.

All this is to say, as a student, you’re likely going to need to regularly adjust your budget.

2. Don’t Skip Out on Saving

When you’re making a limited amount of money in college, you might be tempted to forgo saving. Don’t.

Money in an emergency fund will reduce the financial panic when unexpected expenses pop up and help you cover anticipated items like books at the beginning of the semester or a plane ticket home for the holidays.

Factor saving into your budget. Even a small amount each month is better than nothing.

3. Embrace Budgeting Tools

Afraid you’ll flub your budget? There are various tools to help.

If you’re a fan of spreadsheets, you can access budgeting spreadsheets online for free from sites like Spreadsheet123 or Smartsheet.

Microsoft Excel also has budgeting templates specifically for college students. (Fun fact: College students can get Excel and other Microsoft Office software for free with a valid school email address.)

If you’d rather track your money with an app, some of our favorite budgeting apps include Mint, EveryDollar and You Need a Budget.

Students who find themselves indulging in too much online shopping might benefit from downloading Icebox, a free Google Chrome extension that puts a self-imposed freeze on online purchases.

4. Treat Credit Cards Responsibly

Thanks to legislation protecting young adults from credit card marketing, you shouldn’t be bombarded with credit card offers at every school function. Still, you may have considered opening a credit card account if you don’t have one already.

Having a credit card in college can be a positive thing if you’re responsible about your spending.  Only use the card for items you can afford to pay off fully and on time each month. This will help you establish a positive credit score.

Having good credit plays an important role in renting an apartment, getting an auto loan, buying a house and sometimes even getting a job.

One component of your credit score is the length of your credit history. Opening a credit account in college and using it responsibly will give you an advantage compared to if you waited. However, it’s important to note that you must have a cosigner sign off on your credit card application if you’re under 21 and have limited income.

The Importance of Budgeting for College Students

While creating and sticking to a budget might be an extra task added onto an already busy workload, creating good money management habits now can set you up for a great financial future.

If you’re stuck paying back student loans after graduation, you’ll have a handle on how to manage your money to get on a successful debt repayment plan ASAP. You’ll graduate not only ready to start your career but with the know-how to make the most of all the money you’ll earn.

Nicole Dow is a senior writer at The Penny Hoarder.