College is a time for you to learn money management skills because it is the first time you will be handling money without parental supervision. Whether your parents will be supporting you financially or you opt to get a part time job, it is crucial for you to learn how to budget now so you will have proper money management skills in the future. So before you go off to college, sit down now and use these tips to help you plan out a budget.
Determine Fixed and Variable Costs
The first step in developing a college budget is knowing what costs you will incur. These costs can be broken down into two categories: fixed and variable. Fixed costs can include tuition, rent/room and board, car payments, car insurance, and parking fees. These costs are set figures. Variable costs can include entertainment, gasoline, food, utilities, hygiene necessities, clothes, car maintenance, books, phone bills, and/or club dues. These costs can vary from month to month.
Identify Sources of Income
Once you know what your fixed and variable costs are, you will need to determine if your sources of income will cover the costs. Income can include pay from a part time job, allowance from home, grants, scholarships, or loans. If your estimated expenses exceed estimated income, then you will need to identify ways to reduce expenses or increase income. For example, to help reduce expenses, you may be able to carpool with friends or limit entertainment to once a week. To help increase income, you may be able to get a part time job if you don’t already have one. Just remember that your schoolwork comes first. If you decide to take out a student loan or need more student loans, make sure you know the terms and conditions of the loan(s).
Decide on Bank Accounts
You also need to determine what kind of banking accounts will be appropriate. It is probably best to get a checking account and a savings account so you can save extra money. Look for banks that offer checking accounts with no minimum balances and no monthly fees and a savings account that can be used as overdraft protection for the checking. If you are going to college close to home, you can go ahead and set up these accounts. If you are going to a college that is far away, you can wait until you move there before you set up accounts.
Once you get to college and start spending money, you may realize that the original budget needs to be revamped. You may find out that you need more money or that you have way too much money to waste. Either way, you will need to make appropriate adjustments to the budget.
Category: Money Matters