As a student, you want to make sure you have enough cash to last the year, have all your necessary bills paid, and maybe even save for a special trip. It’s possible to do this if you have a few finance skills and a way to track your money. In other words, you might consider the power of budgeting.
Developing and maintaining a budget requires discipline, but once you know where you stand, financial stresses—like running out of money or accumulating debt—can be a whole lot easier to handle.
Why build a budget?
Tracking your spending can, of course, help you avoid running out of cash. But budgeting also helps you figure out where you might be spending unnecessarily so you can put that money toward savings goals—like a dream vacation or a car—instead.
“I write up my bills each month, figure out my paycheque, and compare what I need to what I have. Easy peasy, living’s easy,” says Melissa H., a fourth-year undergraduate at Memorial University of Newfoundland in Newfoundland and Labrador.
More than half of students across Canada responded to a recent survey by Student Health 101 saying they use a budget, and say it helps them manage their money by preventing them from overspending, plus helps them save for vacations and “rainy days.” Of those who don’t keep a budget, 35 percent of students say it’s because they’re too busy.
Luckily, there are a ton of free tools to help you build a budget without staring at a spreadsheet for hours.
If tracking your money with a pen and paper feels a little archaic, there are plenty of free apps and tools to help you develop and maintain a budget.
Mint organizes and categorizes your spending for you.
Fudget is a simple budget planner and personal finance tracker.
PocketGuard will automatically build a budget for you based on your income and your savings goals.
With Spendee, you can share wallets with your roommates to make splitting rent and groceries easier.
Building a budget
To get started, first determine your income. “Your cash flow may be supplemented by a part-time job, scholarships or grants, or your parents’ help,” says Kurt Rosentreter, a certified financial planner in Ontario. Make sure you’re taking everything into account (just don’t include uncertain sources of income, such as birthday money or a bonus from your boss).
“If you don’t have a consistent income via paycheque,”—say, if you occasionally pick up work shifts at your school but aren’t on a set schedule—“set an average for money earned by looking at past months,” says Amy Conrad, Program Director of CashCourse, an online money resource designed specifically for students.
Step 1: Categorize your cash
Before you get into the budget breakdown, look at your bank statements to get a feel for how you’re spending. “It’s frustrating to try to stick to a budget that’s completely different from your spending patterns,” Conrad says, who recommends categorizing your spending into chunks like groceries, eating out, or travel.
Step 2: Cut the stuff you don’t need
Most likely, you’ll realize there are some categories you can cut—or at least trim down. For example, if you’re paying for cable but only ever watch Netflix, you can probably ditch it.
Reprioritizing can also help you save some cash. Say you’re shelling out a large amount on eating out each month, but you also really love to cook. Start inviting friends over for meals instead, and put some of that cash toward that blender you’ve always wanted rather than a restaurant bill.
“I’m careful with money so I can have the things that matter to me, ” says Jesse E., a second-year student at the Ontario College of Art and Design.
- What recurring purchases aren’t really necessary? For example, can you make your morning coffee at home instead of going out for an expensive latte?
- Are you paying for subscriptions you don’t use? Even seemingly inexpensive subscriptions can add up (look out for online purchases that turn into monthly subscription services).
- Are you making a lot of unplanned purchases? “I tend to buy a lot of electronic items,” says Mitchell W., a student at St. Cloud State University in Minnesota. “Some things were an impulse purchase, and now I’m looking at myself saying, ‘Why did I ever buy that? I didn’t need it.’”
- Are you asking about student discounts and prices? “Amazon has a special discounted Prime membership. Microsoft has a student version of Office and it’s very well worth the effort! Cell phone companies and many others—my gym for example—also have student pricing. Check these out and save,” says Jeani K., a first-year online student at Shasta College in California.
Step 3: Set your goals
Once you have an idea of what you’re spending and what you can cut, you can budget for the things you need and value the most. Your budget should be divided into “fixed expenses”—the things you pay for every month, such as rent and your phone—and “discretionary expenses”—the remaining money you use for things like food, travel, clothes, and hobbies.
Questions to ask yourself:
- Are you earning more than you’re spending? If so, what savings goals can you set?
- If you’re spending more than you’re earning, where can you make cuts to get your budget in balance?
The other element of budgeting is saving, which can feel challenging when you don’t have a lot of cash to work with. “Saving even small amounts as early as possible is important,” says Conrad. It helps to think about saving for short-, medium-, and long-term goals, says Rosentreter.
“A lot of my friends only look at their money from a current standpoint,” says Andrew B., a fourth-year student at Wilfred Laurier University in Ontario. “They don’t realize that budgeting is an essential tool for planning for the future.”
For example, if you want to go on a spring break trip with your friends this year, figure out how much you need to save each month until then. In the long-term, you might want to buy a car when you graduate. “Working backwards makes big purchases feel bite-size,” Rosentreter says.
To make saving clearer, set up different savings accounts for different goals—you might have one as an emergency fund and another for that big vacation. “This gets you thinking in silos—different pools of money for different purposes,” says Rosentreter.
It’s OK to set your initial savings goals relatively small, says Conrad. The important thing is that you get into the habit. How you save is up to you and your goals, but the earlier and more regularly you save, the better off you’ll be when you hit a big milestone, like graduating and wanting to move to a new city or province. Try one of these methods:
- Save 10 bucks per week.
- Save 10 percent of every monthly paycheque.
- Save half of every financial gift you receive (say, for birthdays or graduations).
“Keeping a budget helps me save up enough for emergencies or for special things like trips, concerts, etc.,” says Kayla C., a recent graduate of Queen’s University in Ontario.
Just because you’re living within a budget doesn’t mean you can’t do anything fun. Actually, quite the opposite: “It would be much easier to travel if I were more responsible with my disposable income,” says Melissa H., a fourth-year undergraduate at Memorial University of Newfoundland in Newfoundland and Labrador.
To keep this in check:
- Look for free events on campus.
- Always ask if there’s a student discount before you pay—you’d be surprised how many stores offer savings with your student ID.
- Break your “fun stuff” budget into weekly increments instead of monthly. “This will help limit the tendency to spend more at the beginning of the month and then feel deprived by the time the month is over,” says Conrad.
Budgeting can feel a bit overwhelming, but it helps to remember that budgets aren’t written in stone. Be realistic when evaluating your spending habits and revise your budget as needed. Keep detailed records of your earnings and expenses, and review your budget every few months to gauge whether your spending and saving goals make sense. With time, sticking with a budget will feel like a healthy habit that helps you do what you need to do while also saving for those things you want.GET HELP OR FIND OUT MORE
Amy Conrad, Program Director, CashCourse, National Endowment for Financial Education, Denver, Colorado.
Kurt Rosentreter, Certified Financial Planner, Ontario.
CashCourse. (n.d.). Retrieved from www.cashcourse.org/student/Financial-Tools/Budgets
Craig, G. (n.d.). Free From Broke. Retrieved from https://freefrombroke.com.
Getting Finances Done. (2010). Two common objections to using a cash budget. Retrieved from https://www.gettingfinancesdone.com
Government of Canada. Financial Consumer Agency of Canada. (2018). Budgeting for student life. Retrieved from: https://www.canada.ca/en/financial-consumer-agency/services/budget-student-life.html
Government of Canada. Financial Consumer Agency of Canada. (2018). Your Financial Toolkit. Retrieved from: https://www.canada.ca/en/financial-consumer-agency/services/financial-toolkit.html
Money Under 30. (n.d.). Retrieved from https://www.moneyunder30.com Phillyburbs. (n.d.). Does that make $ense? Do budgets work? Retrieved from https://www.phillyburbs.com
Student Health 101 survey, July 2012.
Student Health 101 survey, May 2017.
Rosenberg, E., (2018, April 8). The 8 best budgeting apps to download in 2018. The Balance. Retrieved from www.thebalance.com/best-budgeting-apps-4159414
Vega, C. (2018, January 18). Saving for your dream vacation? Here are the best budget apps to help you. Digital Trends. Retrieved from www.digitaltrends.com/mobile/best-budget-apps/