The most beneficial assignment in preparing for your college financial needs is creating a college budget. In fact, it’s probably one of the most powerful tools in the entire financial planning industry. But for college students it is particularly significant. By creating a college budget you will experience a greater freedom in your finances than many of your peers. Here are some of the basics you need to know for creating your college budget.
Creating a College Budget: Why?
Creating a college budget gives great financial freedom. When many people hear the term budget, they automatically think of restraint. They automatically think of what they can not do. But a budget is the exact opposite. A budget is a financial plan that is designed to guide your spending and saving to reach your designated goal. The goal of your budget may change over time, as will your budget, but the usefulness of a budget will remain. Once you have created your budget, you will experience greater freedom in your spending routines, because you will know that your spending is in line with your financial goals.
Creating a College Budget: How?
So, let’s get down to the basics of starting a budget. There are three steps needed to develop your college budget.
Track your Income and Spending – This first step may sound simple, but after years of financial advising, we are still amazed at how many people have no idea where their money goes. So the first step to take is to track your income and spending. How much money do you make each and every month? How much money do you need to pay the bills? How much money do you spend on coffee? You want to track every penny. Once you have tracked your income and spending, you need to move on to the next step.
Establish your Goal – You need to determine your goal. Here are a few good goals for college students: graduate college with no/low student debt, live off my summer income, pay for my car, etc. This list could go on and on. Your goal is your financial dream. But we want to move it from a dream…to a plan…to your reality.
Plan your Budget – Now that you have tracked your income and expenses and have decided your goal, it’s time to craft your plan. Start with income. What is you total income? This may not be steady income, but rather a lump sum.
Next, determine your goal. Let’s take one college student’s goal. They said that they wanted to live two semesters (Fall and Spring) on money they had raised over the summer. They had raised roughly $2400.00 while working during the summer (Income). This was important to them because they wanted to avoid consumer debt (Goal). Here were their spending needs: Gas to commute to college ($309.00), car insurance ($783.00), coffee ($468.00), school supplies ($60.00), and allowance ($780.00). Some of the expenses in these categories are set in stone, while others may be a bit more flexible. This student’s plan works. Their income and spending aligned to meet their goal. Success!
Creating a College Budget: Success!
Now that you have your budget, there is still some work to be done. You need to evaluate your spending to ensure you are staying true to your plan. Many people fall short in this area. They forget to check in with their plan and make corrections. What good does a budget do, if you do not compare it with your income and spending? None! However, if you check in with your plan and ensure you are following it, you will experience great financial freedom, and you will be establishing a discipline that will benefit you for the rest of your life!
Do you have a College Budget? If not, why not start today to create a college budget for your college financial needs. If you do, you are already at the head of your class.