Many people don’t talk much about money management, even though it’s essential to understand and get a handle on as early as possible. As a college student, your financials will probably not look spectacular but getting started with managing your money properly is an essential skill regardless of your age. Follow the easy five steps below to start your own money management system:
Have a Method of Recording Your Budget
There are many different methods of recording your budget. Find one that fits your lifestyle and is easy for you to continuously use. Many people like using Excel or Google Sheets and creating either a simple list or a unique tracking system. Electronic platforms like Mint.com, YNAB, PocketGuard, and others are great for people who want their budgets on the go. A third option is an old-fashion pen and paper. This is a great option for people who are new to budgeting and the complexities of it. Taking some time to write everything down the first time you budget. This gives you a moment to truly think about how you would like to manage your money.
Organize your budget monthly. At the beginning of every month, take 30 minutes to go through your proposed budget as well as look at the last month’s budget to see if there is anything that needs to be adjusted.
Write Out All Sources of Income
Start your tracking with all your sources of income. Knowing what’s coming in is vital since it shows you the maximum amount of money you can spend that month.
Some sources of income college students might have include:
- Money from parents or family members
- Wages from a job
- Scholarship or grant money
- Money from financial aid/loans
Money sources can fluctuate from month to month, so monitor what’s coming in every month and adjust as necessary.
Expenses, Expenses, Expenses
Directly under your income, write down every expense that you have into 2 categories:
- Necessary Expenses: These expenses are vital to your survival and success at college. They can include a phone bill, food, gas, electricity, water, clothes, school supplies, tuition, etc. Evaluate these to ensure that you truly need them.
- Desired Expenses: These expenses are ones that you want to take on for your personal entertainment. For example, Netflix is great to avoid boredom but not necessary to live so it would be in the desired expense category.
Analyze and Revise
Subtract your expenses from your income.
If you get a positive number: You are making more money than you are spending. Feel free to put the extra money in a reserve for “rainy days” or maybe consider investing it.
If you get a negative number: You are spending more than you are earning. You will have to do some revision on your budget:
- Examine the desired expenses first. Get rid of as many unnecessary expenses as you can. Don’t feel pressured to take out all unnecessary expenses at once, keep some fun activities to keep you from boredom. Test out the revised budget to see if small reductions help get you to a positive number first.
- If you can’t trim any more desired expenses, scrutinize your necessary expenses. Are there any ways you can decrease these expenses? For example, using coupons to lower your monthly food bill or eventually moving to a cheaper place to save on rent.
- Lastly, if you still have a negative number and can’t reduce expenses anymore, try increasing your income to cover your expenses. See if you can get a work-study job on campus, or working in restaurants can offer you tips to take home the same day to cover smaller expenses like gas, groceries, or a much needed night out with friends.
Stick to It
Sticking to a strict budget can be hard for any college student. So, start small – try to implement your budget one month at a time at first. After that month, go over it to see if you meet your expectations or if you didn’t. Think about how it made you feel to limit yourself or did you feel more organized and in control of your money. Understand your feelings towards money and you will be able to fully develop a money managing system of your very own.