Budgeting 101

College is a critical time to establish your independence, broaden your social circle and set out on a career path. It is also the perfect time to develop healthy financial habits, especially with respect to creating and following a budget.


First-time college students are highly susceptible to overspending. With parents out of the picture, at least for a semester, students are suddenly given free reign to manage their time and finances as they see fit. Budgeting is a challenge for even the most seasoned adults and college has never been more costly. Last year, U.S. graduates left school owing an average of $35,200 in combined private and state loans and credit card debt. A full 39% of these grads now admit that given another chance, they would’ve done things differently, saved more, borrowed less or attended a more affordable school.

If you fall into the camp of students new to financial independence, establishing an essentials-only budget is key. Before you overdraft your checking account, dip into savings or open a credit card, you need to ask yourself: what expenses are absolutely essential in college, and what can I do without?

This guide will help you understand the value of a budget and walk you through the process of tracking your income and expenses. With these principles established, we show you how to create a successful budget, using tools and tips to identify the areas where you can effectively save money.

Though they’re living away from home, some college students continue to rely on financial assistance from their parents or families. Parents might pay cell phone or credit card bills for their students, while others deposit money into their kids’ accounts on a regular basis. However, not every family can afford to do this; most students have to rely on aid in the form of loans, scholarships, grants or what they make at a part-time job.

Student Loans

A student loan is a loan given to students or parents that is then used to pay for the cost of education after high school. Students and their families are required to repay the loaned money. Generally, there are two types of loans available to you:

  • Federal student loans: Federal loans are offered through the Department of Education to qualifying undergraduate and graduate students. As with any loan, federal loans need to be repaid, but they come with comparably low interest rates, deferred payment schedules and loan forgiveness alternatives. Eligibility varies upon demonstrated financial need and degree level. Undergraduates at accredited schools can borrow up to $16,500 per year through Perkins Loans and Direct Subsidized and Unsubsidized Loans. Graduate students may borrow up to $28,500 in federal loans each year, but the majority of funds are considered unsubsidized, meaning that a student must be interest on the loans even while in school.
  • Private student loans: These nonfederal loans are made by commercial and private lenders, such as a bank, credit union, school or state agency. They must be repaid, and, in most cases, they begin accruing interest charges upon the date of borrowing, rather than after graduation (which is when federal loans’ interest begins). Also unlike federal loans, private loans are not based upon student-need. Due to their high rates and inflexible repayment structures, students should minimize the amount of money they borrow privately. Take full advantage of federal loan and scholarship options before brokering a commercial student loan.


Often referred to as “gift aid,” this sort of income does not have to be repaid. Scholarships are often merit-based awards, offered by a wide variety of organizations. They are awarded for a number of reasons, such as strong academics, excellence in sports, or volunteer work within a certain community or as a member of an organization. Consult with your financial aid office or career center for search tools and tips, and visit the U.S. Department of Labor’s free scholarship search tool to get a better sense of major scholarships and their application deadlines.


Grants refer to need-based funds that are often awarded to college students with distinct financial need. A good first step to determine if you qualify for grants is to submit your Free Application for Federal Student Aid (FAFSA) to the US Department of Education. Grants can be awarded from the federal or state government, private or nonprofit organizations and schools. There are a number of application resources and tips on the FAFSA website.

Part-Time Jobs and Work-Study

Many students hold part-time jobs to supplement their income and help pay for their education. Some seek part-time work off-campus, but it can prove difficult to find a job flexible enough to work around class schedules. On-campus positions offer more accommodating schedules and may also qualify for Federal Work-Study, a government program that guarantees part-time campus work to qualifying full-time students. Students must file their FAFSA forms in order to be considered.

There are an estimated 3,400 postsecondary institutions in the U.S. that offer federal work-study opportunities to students. Federal work-study jobs could include tutoring elementary school students, working in a college mentor program or even joining an emergency response crew. Generally speaking, the program strives to place students in work related to their field of study, whenever possible. Some schools allow their students to count any job they find on campus as their work-study.

Your income for the semester depends on three major factors:

  1. How much loan money you qualified for and accepted
  2. How many scholarships and grants you’re applying towards your tuition and fees
  3. How many hours you’re allowed or able to work based on work-study or class schedules and restrictions

If you accepted more loans, grants or scholarships than you needed to cover tuition, room and board and facilities’ fees, the financial aid office of your school will issue a refund check. This money can be put into your bank account and applied towards books for the term and other expenses. Before spending any refund money, however, be sure to check your student bill to make sure everything has been paid for.

Creating, balancing and maintaining a budget seems like an arduous task, but knowing how much money you earn and spend in a month will help you stay on top of your bills and savings. It will also let you determine what expenses are necessities versus wants, and you’ll be able to alter your budget to save for the things you want to buy but don’t need to survive.

Before we dive into creating a budget, there are a few key terms to keep in mind.

  • Total Income: This includes the money you arrived at school with, any refunds you receive from your financial aid and the funds from a steady paycheck.
  • Monthly Income: Recurring funds that you receive each month from your job. Amounts will vary based on the hours you work.
  • Discretionary Income: This is your spending money. It’s the funds you have left over after paying your bills and moving money into a savings account.
  • Necessities: Goods or services you need to live or succeed in school.
  • Wants: In terms of budgeting, these are goods and services that you can live without.
  • Fixed Expenses: These are the necessities you are required to pay the same amount for every month.
  • Variable Expenses: These are necessities or wants with prices that vary month to month.
  • Money to Savings: This is the amount of money you decide to transfer from your checking account to your savings account.

How to Budget

The first step to creating a budget is determining what expenses you have. Using your bank statements, make a list of everything you spend money on in one month, and categorize each transaction as “fixed or variable” and “necessity or want”. Some expenses may fall under more than one category. The table below illustrates the most common expenses that college students have.

Utilities (gas,power, internet, etc.)
Insurance (car, health)
Phone Bill
Car Payments
Groceries (food, personal care)
Personal Savings
Credit Card Bills
School Books and Supplies
Apparel (clothes, shoes)
Electronics (computer, phone)
Dining Out
Entertainment (movies, concerts, etc.)

To calculate your budget, subtract the cost of your necessary expenses each month from your total monthly income. Essentially, the formula is:

Discretionary income = total income – necessary expenses

The remaining total is your discretionary income, or spending money. This is what you have to “play” with for the month. For students living on campus, room and board expenses are usually paid for at the beginning of the term when you pay your tuition, and you usually aren’t required to pay more for utilities, so your discretionary funds may be bigger than for students who are responsible for all living expenses. Keep in mind that while this income is available to spend on extracurricular activities, it is also money that could provide a much needed cushion on expenses that follow graduation. Spend it wisely.

The following is a sample budget created for a student moving off campus for the first time. For our purposes, we budgeted against monthly income. Most students may continue to receive refund checks from their schools for unused financial aid money. We suggest using this money for emergencies and to cushion your savings account if you can.


  • Only necessary expenses were included in this budget; it is up to each person how leftover money is spent.
  • Monthly income is based on $8 per hour (75 cents more than the federal minimum wage) for a part-time job off campus, working 30 hours per week.
  • Costs for rent and utilities reflect average expenses when living with two roommates.
    • Average rent for a 3-bedroom is $1,529 nationally
    • Utilities are variable, so the price reflects what you should set aside until they are paid.

This budget assumes a great deal, and it will not reflect everyone’s situation. We’re working under the assumption that many undergraduates are on their parents’ insurance, aren’t responsible for their car payments and don’t yet have credit cards, so the bills were left off this example. If you do have a credit card, be sure to include the payment into your budget, and only use it for emergencies.

Monthly Income: $960
Rent: -$510
Utilities: -$50
Internet: -$50
Groceries: -$100
Laundry: -$20
Savings: -$50
Discretionary Funds: $180

If you find that you’re struggling to make ends meet or barely living paycheck to paycheck, consider revising your budget. Look at what you’re buying at the grocery store or how often you buy new clothes. Watching where your money goes makes it easier to change spending habits. Utilizing electronic budgeting tools makes it easy to keep your finances in order.

Budgeting Tools

Tracking and managing your expenses via apps, computer programs and bank services can simplify the process and allow less room for discrepancies. Below, we detail some of the programs designed to make budgeting simple.

  • Microsoft Excel provides several budgeting templates in it’s latest edition, including one specifically for college students. All are free to use and can be saved on your computer; no internet access is necessary.
  • Simple.com works with Bancorp Bank, Member FDIC, to provide customers with a free, insured online checking account and budgeting tools that make it easy to spend smart.
  • Mint is designed to securely connect with your bank account and automatically organize and categorize your spending habits. It offers suggestions for ways to cut back on the areas where your spending is the highest. Mint even breaks down transactions such as ATM fees, reminding you to limit those where possible.
  • Level Money is an app that automatically updates your spendable income each day for real-time budget tracking. It allows you to view how much you have left for the day, week, and month.
  • Left to Spend is an app for users who just want to set a spending allowance and track how much of their budget is left. Users choose a target allowance and can review transaction histories from over a month.

Before transferring your funds to Simple, or downloading one of the above apps, check with your current bank. Many credit unions and banks are providing their account holders with budgeting tools that are automatically populated with your balance and spending habits.

Remember to cut back on unnecessary spending and use expense tracking apps that can help you stick to your monthly budget. Don’t make the mistake of winging your finances; staying organized and creating a balanced budget will give your financial future some serious promise.

Tips for Saving in College

It is never too early to start saving. Here are some tips to help you develop savvy saving habits today:

Establish a credit history.

Having a credit card to start developing your credit history is smart, but having too many cards can quickly lead to serious debt or even fraud. Limit yourself to one or two low interest cards, and pay them off each month, or keep a low balance of 20 to 30% of the credit limit. Overusing or maxing out credit cards will hurt you in the long run. Even if you pay the minimum on them each month, they accrue interest that will extend the time it takes to pay off the balance. If you want to move off campus, or if you need to take out a personal loan for school, having a high debt to income ratio on your credit report will make it harder to be approved. A good rule to follow: use your credit cards for big items such as plane tickets, and only use them when you know you’ll have the money in your checking account to pay it off.

Don't pay full sticker price on textbooks.

Having a credit card to start developing your credit history is smart, but having too many cards can quickly lead to serious debt or even fraud. Limit yourself to one or two low interest cards, and pay them off each month, or keep a low balance of 20 to 30% of the credit limit. Overusing or maxing out credit cards will hurt you in the long run. Even if you pay the minimum on them each month, they accrue interest that will extend the time it takes to pay off the balance. If you want to move off campus, or if you need to take out a personal loan for school, having a high debt to income ratio on your credit report will make it harder to be approved. A good rule to follow: use your credit cards for big items such as plane tickets, and only use them when you know you’ll have the money in your checking account to pay it off.

Cook for yourself.

Dining out at restaurants or having a few drinks with your friends is always fun, but the bill will add up by the end of the month. Consider learning how to cook, and host a dinner party at your apartment instead. An easy way to split costs with guests is to host a potluck and have everyone bring their favorite dish and recipes to share!

Get used to communal living.

If you’re planning on living solo, consider living with roommates instead. College is a time for socializing; having a roommate or two will expand your social circle and could cut your rent and living expenses in half each month. If you find a roommate with a similar palette, you could save on groceries too!

Frequent thrift stores.

Shopping at thrift stores, instead of buying new clothes, is a great way to save money. Thrift discounts can be as high as 90% off the retail price. A shrewd shopper can save hundreds by sticking to thrift stores. You might also consider a clothing swap. Have friends and neighbors bring a set number of items in good condition over, and then all together trade in clothing you never wear. This is an excellent excuse to clear your closet and come home with a free stack of new clothes.

Drop your cable subscription.

While everyone has shows they claim they can’t live without, paying for cable each month can prove far too expensive. TV lovers will want to consider services like Netflix, Hulu, or Amazon Prime. All of these are cheaper than cable, and each offers access to movies and full seasons of shows.

Use student discounts.

Hold on tight to your college ID; this piece of plastic is worth more than you might realize. Retailers like JCrew, Banana Republic and Amazon offer discounts for students able to present their ID or a .edu email. Before you purchase your laptop, flash your student ID at Apple or Best Buy for student discounts. Consider signing up for Best Buy student deals, which is currently offering students $100 off all Macbooks and iMacs, and 20% off all countertop microwaves. Your student ID will also likely get you discounts at local eateries and businesses near campus, so keep it in a safe place in your wallet, and don’t hesitate to ask local establishments about their discount programs.

Take advantage of free entertainment.

There are often free events happening all over campus, such as movie screenings, intramural sports, pizza nights and volunteer opportunities. Head to your student union for a calendar of events.