It’s no secret that college students are usually low on cash and have difficulty staying away from debt or living paycheck to paycheck. While the ‘YOLO’ mindset is great for ensuring you don’t miss out on life experiences, finding balance is key. With most college bills being financed by student loans, it is essential to compose a plan to avoid being broke or in credit card debt. We’re providing a “budgeting 101 for students” guide—an overview of how you can set yourself up for success as a student and budget your way through college and beyond.
Develop a Delayed Gratification Mindset
Before creating a budget, you must understand the difference between wants and needs. An example of a need is money for food, rent, textbooks, and car insurance. On the other hand, a want can be defined as a Starbucks drink, the newest iPhone, and the biggest trend on TikTok Shop. By developing a delayed gratification mindset, you acknowledge that you deserve things you would like, but you must prioritize what you need to function over short-term satisfaction.
Keep a Budget
The first order of setting yourself up for success is defining your net income, which is the amount you earn after taxes are deducted. Then, you must list your monthly expenses, either fixed or variable. The difference between the two expense types is that fixed does not change, yet variable does. An example of a fixed expense is rent while a variable can be your electricity bill.
After your income and expenses are defined, you must deduct expenses from your net income. The remaining amounts leftover should be split up between savings and recreational spending. A common approach recommended by financial advisors to college students is the 50/30/20 rule. 50% of your income should be towards needs and obligations, 30% on wants/recreational activities, and 20% into savings.
Download a Budgeting App
Like many people, you might feel overwhelmed when it comes to managing and tracking your budget. A traditional approach would be to create a spreadsheet. However, in the age of improved and easy-to-use technology, we recommend using mobile apps. For example, the app Rocket Money puts all of your financial goals in one place. Rocket Money can link to your bank accounts, review spending, and credit card debt, and hold you accountable for going over budget. Subscription review is another feature offered by Rocket Money, which has saved millions of people money. Other than Rocket Money, there are many verified apps available to meet your needs.
Save for Emergencies
It is important to stress to all college students that saving for emergencies is a priority. Life is full of surprises– good and bad, and students must be ready to face them. While saving for a vacation or a concert ticket is appealing, there must be consideration for a rainy day.
Put an End to Impulse Spending
From TikTok shop to Amazon Prime, it has gotten easier for people to purchase what they want. TikTok shop and other social media platforms target you specifically to purchase items based on what you like and follow. Because of the tailored marketing of products and instant purchasing capabilities, many people may find themselves in credit card debt. When viewing content that entices you to make a purchase, ask yourself:
- What do I gain from buying this?
- Did I want this before seeing the advertisement?
- How often will I use this?
- Would it be better to put this money elsewhere?
Avoid Credit Card Debt
In order to have more room in the budget you are putting together, it is worth recognizing that you must avoid credit card debt. The delayed gratification mindset connects to this goal because people’s wants can lead to major impulsive purchases. Stacking up impulsive purchases can add thousands of dollars of interest and strip away your take-home pay. However, credit cards should be viewed as a tool to build your credit history.
Revisit Your Budget and Adjust When Needed
Budgets are always changing, and it’s perfectly fine for yours to change too. It’s normal for college students to realize that their budget might not be working as planned, especially if their income has changed. A review of your budget allows you to hold yourself accountable and serves as a reminder of your priorities.
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