7 Useful Budgeting Tips for First-Year College Students
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- Start with the basics by tracking any income you receive and how that income is spent.
- Short-term spending can have long-term impacts, so consider your goals when budgeting.
- Find a source of income, whether that's a part-time job, side hustle, or scholarship.
- Spending below your means and building up savings are vital to a strong budget plan.
For many first-year college students, it's the first time you're making decisions with financial independence. Balancing the burden of tuition, cost of living, and recreational spending with a limited income can be complicated. We recommend leaning into the Type-A parts of your personality and developing a detailed budget.
"Students should view a budget not as a restrictive measure, but as a spending plan designed to help achieve what one wants to do and have in life," said Tanya Peterson, vice president of brand for Freedom Financial Network. "Being in control of finances allows individuals to avoid debt, prioritize, achieve goals, and lessen stress."
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Everyone's budget will look a little different, but some general advice will apply to most first-year students. Here are seven college budgeting tips with insight from financial experts.
1. Track Your Spending
When building a college student budget, you'll want to start by getting a sense of the current state of your finances. Track your incoming funds and how you spend that money to better understand your habits and where your money goes.
"Your fixed expenses may be your rent, internet, gym membership. Your variable expenses may be dining out, entertainment, tuition, and school supplies," said Sandy Yong, financial speaker and author. "Understanding what you spend [your money] on is very important to determine how to tweak your budget."
Take advantage of the digital tools available to make tracking your finances easy. Your bank or credit card likely has an app with a budget feature. Alternatively, you can use an app like Mint, which integrates all your accounts to help you track your spending and create a budget.
2. Set Long-Term Financial Goals
Many wealth-building strategies and long-term financial health moves have the same credo: the earlier you start, the better. As you take steps toward financial independence, it's a good idea to plan long-term goals into your college budget.
R.J. Weiss, CERTIFIED FINANCIAL PLANNER™ and founder of The Ways to Wealth, says even short-term goals can impact your long-term finances. "Your long-term goals are what should impact your short-term financial decisions," he explained. "Without goals, it's impossible to know whether you're making the right choices day to day."
You can change these goals and evolve your budget as you go, but setting aside a portion of your money toward long-term financial goals can set you up for success.
3. Build Credit Into Your Budget
College is a great time to begin building credit with a credit card. Your budget should include any credit card payments you need to make. In general, you should strive to keep your credit balance low and plan to pay back any spending in your monthly budget. Explore whether you want to set up automatic payments so that you never miss a payment, which can negatively impact your credit score.
You should also choose a credit card wisely, as many companies prey on students and new borrowers. Pay close attention to fees, interest rates, and incentives.
"A common mistake would be to sign up for the on-campus credit card offers. They may not be the best deal," explained Yong. "Given that there are many offers to choose from, such as cashback to travel rewards, be sure to shop around to find the card that is most suitable to your needs."
Building credit has a long-term budget payoff as well. "College students should understand that credit scores also can affect the ability to rent an apartment, lease a car, get the best auto insurance rates, and even get a job," said Peterson.
4. Create an Income Source
Income is an important part of a healthy budget, but it's not always straightforward for students. Your source of income may be the cost-of-living portion of your student loans or scholarship funds. Or, if your course load can handle it, pick up a part-time job, a campus gig, or an internship. You can also create passive income sources or start a side hustle for more flexible income.
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5. Spend Below Your Means
One of the most foundational pieces of financial advice is to spend less than you earn. "Ensure you are spending below your means and have money left over at the end of each month," advised Yong. "If you are spending more than you earn, then you will need to find ways to get out of debt."
When creating your budget, make sure your total spending is less than your income. If you don't currently have an income, divide your total available funds by the length of time you expect to live off that money. For each month's allotment, do your best to spend less than you have. Overspending can fast-track you to debt, especially if that spending is mostly on credit cards.
6. Keep Searching for Scholarships
One way to add some wiggle room to your budget is to relieve the burden of tuition. Many students stop seeking scholarships once they begin college, but you can qualify for funding throughout your whole time as a student.
According to Yong, scholarship money often goes unawarded because no one applied. "Some [scholarships] are focused on BIPOC, athletics, outstanding grades, community service, participation in student organizations — just to name a few," said Yong. "An application may take a few hours of your time, but you could reap the rewards of thousands of dollars that can help you pay off your tuition and student loans."
7. Set Aside Savings
Always prioritize setting aside a portion of your budget for savings. Having an emergency fund for the unexpected can save you from financial hardship — whether it's medical bills, car problems, or a pandemic-related unemployment crisis. A significant amount in savings will also set you up for achieving longer-term goals and making large purchases.
Even a couple hundred dollars can go along way with a surprise purchase. "With every check or payment they receive, no matter the amount, and whether it comes from a job or from parents, it's essential to get in the habit of depositing (ideally) 10% into a savings account of some type," advised Peterson.
With Advice From:
Tanya Peterson is vice president of brand for Freedom Financial Network. Before joining the company in 2018, she was an executive at Ancestry.com in San Francisco, where she held positions of senior director of brand strategy and management, director of consumer insights and brand strategy, principal consumer insights manager, and principal conversion manager.
Previously, Peterson served as director of brand marketing at BabyCenter and director of marketing at Linden Lab and WorldPantry.com, all in San Francisco. She has held product management and account executive positions with Jump! Music, Ninth House Network, Intuit, and Foote, Cone & Belding.
Peterson holds a BA from Yale University.
R.J. Weiss is a CERTIFIED FINANCIAL PLANNER™ with over a decade of experience in the financial services industry. Before founding The Ways To Wealth, R.J. spent 10 years working in the financial services industry, including a stint operating his own registered investment advisory firm where he specialized in helping young families grow and protect their net worth. Prior to that, he worked for his family's 100-year-old independent insurance agency, specializing in home, auto, and life insurance.
Sandy Yong earned a business degree at Ryerson University in Toronto. After graduation, she started her career and began saving her hard-earned money. She naively invested in high-fee, high-risk mutual funds and soon lost thousands in the stock market. Feeling frustrated and upset, she decided to become a self-directed investor and successfully generated a six-figure investment portfolio by the age of 27. She is also a real estate investor owning several rental properties with her husband. As a keynote speaker, she teaches female millennials how to invest in the stock market and in real estate. With her decade of experience, Sandy has published her award-winning book, "The Money Master." She has been featured in countless media outlets including Toronto Star, NBC News, and Yahoo! Finance. Sandy proudly partners with CAMH: The Centre For Addiction and Mental Health. For every book purchase, she personally donates $2 to this charity.
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