College Students: Practice Budgeting Now
Being a college student, money is tight. The reason isn’t necessarily because we do not spend our money wisely or because it’s all going towards our tuition either. It can simply be because we have to work low paying and low hours at part-time jobs/internships that accommodate our schedule, or we simply do not know how to budget our money wisely with long term goals in mind. Frankly, I’m still trying to figure this budget thing out and I’ve had 4 years in college to test it with my little checks. The most I’ve done is organize my bills (I’m still working on the savings part). Nonetheless, I have many ideas to choose from that may inspire you.
A budget includes a few components that work together in order to give you a sense of financial security, allow you to save for emergencies, save for major purchases or simply to keep track of bills. The components that I consider are: the actual budget, bill tracking, savings, and banking. I will discuss each in detail and give examples with worksheets for you to use on your own.
There are many ways to organize your money to make it work for what you want to spend it on. One of the ways that I appreciate is by using the 50/20/30 Budget. This budget requires you to divide your money percentage wise, where 50% goes towards essentials (utilities, phone, cable, etc.), 20% to the future (investment, retirement, long term savings) and 30% to your current lifestyle (entertainment, dining, recreation, etc.). This is a simple and clear cut way to set a budget, allowing you to fit unique expenses into a category.
*If you want to keep things simple, skip the next paragraph. If you want to consider a budget that encourages long-term investment, this is the part for you!*
The next budget I would recommend is the Dave Ramsey 7 Baby Steps which is something like a financial boot camp to get your finances into shape. Bare with me, it is quite long but worth following. Step #1 is to save $1,000 for an emergency fund before you move forward. Step #2 is to pay off all debt using the debt snowball concept. That concept is simply putting down more money than the minimum payment on your lowest debt each month until it is paid off. Go down the list in order from smallest amount due to highest, adding the amount paid to the previously paid off debt to the next one on the list. Step #3 is to save 3 to 6 months worth of expenses in case you lose your job. Hopefully, in that time frame a job will be found and bills will still be in good standing. Step #4 requires a 15% investment into an IRA and Pre-tax retirement plan. It’s never too early to start thinking about retirement. The earlier you do it, the more money you will have when the time comes. Step #5 is to put money towards college funds for your children (or future children). Step #6 is for home owners, to pay the mortgage off early. This will affect how much property taxes you pay and it eliminates one of your biggest expenses. The last step is to build wealth by spending wisely, eliminating spending on credit and giving back to charity. Like I said this was a long process but this budget is awesome for long-term investment and those with the patience and commitment.
This section is pretty easy. Just jot down all payments and track your balance. Many of the times, you will be motivated to continue since your progress is documented on paper. I use the bill tracker form below to track my debt in order to see the progress. Sometimes it can be discouraging to see the money leave your account every month with no additional motivation. This form shows that your payments are making a difference. Another form of tracking is expense tracking that shows you where your money is spent. This mentally discourages you from spending unnecessary funds. Do you have problems spending too much money? Try using paper cash only. As you see the physical money leaving your hands, you will be tempted to spend less. A way to keep up with this is the envelope system, where money is allocated to certain categories. With this system you can’t transfer money between categories but you can build up money throughout the months.
This is the easy part, because it’s self explanatory. Save money! The biggest problem is probably actually sticking to the plan and watching the money pile up! Personally I don’t have the self discipline but I’m trying! However, I have found a few savings plans that are definitely doable with results in no time. One that I like is the Christmas savings plan because it gets you thinking about the holidays early on and you’ll be in less debt during the post Christmas season. Next is a reverse bulk savings plan that encourages high savings amounts from the beginning for quick results. Lastly, is the 52 week savings that eases you into the habit of saving, and also into larger amounts each week. Here are a few examples below. My favorite is the biweekly savings because I can just deposit money each check. Here’s my Savings Worksheet* as well.
The last component to consider is your bank and the advantages it has to offer. For example, I bank with US Bank and they have a few benefits that I can couple with my budgeting goals. Their checking and savings account packages encourage savings by rewarding me with $50 every $1000 I save via direct deposit from my checking to savings account. Also, there are fee free and minimum free goal oriented savings accounts. You can determine the big purchase or occasion, set the goal amount and set the direct deposit days and amounts. This one particularly is a good place to start when getting used to saving with your bank due to the low restrictions. One other feature that I appreciate which is actually with PNC Bank is their Virtual Wallet. Especially for students, because the Virtual Wallet is free with the Student Checking account. This features allows you to use your checking account for savings as well. In case something comes up and you have to get access to the savings, you just transfer the amount from your “reserve” or “growth” account. The reserve is basically the savings and the growth is a savings section that earns interest.
Start Planning Now
Having a budget can actually be fun when you realize the progress that you can make in paying off debt, saving money and feeling more secure with your financial decisions. Take advantage of these resources and feel free to use my savings worksheet. As an added bonus, take a look at my Budget Worksheet* for a starting point in budgeting. It’s simple and straight forward. Also, I have additional resources on my Money Management Pinterest board. Check it out!
How do you budget your money? Share in the comments! Don’t forget to follow and be chic! 🙂
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