While you’re in college, you’ll need to learn how to manage your finances, plan for changes, and prepare for the unexpected. Budgeting will help you build decision-making skills and help you reach your financial and academic goals.
- Overestimate your expenses.
It’s better to overestimate your expenses and then underspend and end up with a surplus.
- Underestimate your income.
It’s better to end up with an unexpected cash surplus rather than a budget shortfall.
- Differentiate between needs and wants.
One benefit of budgeting is that it helps you determine if you have the resources to spend on items that you want versus those you need.
- Involve your family in the budget planning process.
Determine how much income will be available from family sources such as parents or a spouse. Discuss how financial decisions will be made.
- Prepare for the unexpected by setting saving goals to build an emergency fund.
Budgeting will help you cover unusual expenses and plan for changes that may happen while you’re in school.
Planning to move off campus? Short-term budgeting goals for the year can include saving for the rent deposit and furniture for your new apartment.
Starting an internship next semester? Adjust your budget to save for buying new clothes to wear to work and paying increased transportation costs.
Finishing school in the next year? Budget to include job search expenses such as résumé preparation, travel to interviews and job fairs, and professional exam fees. Also, you may need to think about how you will manage your money between leaving school and finding a job—this is a time when an emergency fund can really help out.
- Expect the unexpected.
Your emergency fund should be used for expenses that fall outside the categories of annual and periodic bills. Redefine your notion of “unexpected” bills to encompass these unforeseen events rather than more common but infrequent expenses. The good news is that if you do not use your emergency fund, you will have savings—which should always be a priority when managing your finances. And, if you do not have to use your emergency fund, you may avoid unnecessary borrowing.
- Only borrow what you need.
If your living expenses are not going to be as high as the amount on your award letter, you have the right to turn down the loan or to request a lower loan amount. If you have any questions or don’t understand what types of loans are in your award letter, contact your adviser. Always ask questions and be an informed borrower. Make sure you understand what you’re receiving and the repayment terms.