University is a time for you to learn money management skills, because it may be the first time you will be handling money without your parent’s supervision. Whether your parents will be supporting you financially or you choose to get a part time job, it is crucial for you to learn how to budget now, so that you will have proper money management skills in the future.
Determine your fixed and variable costs.
The first step in creating a university budget is knowing what costs you will incur. These costs can be broken down into two categories: fixed and variable.
Fixed costs are set figures and can include tuition, room, board, car payments, insurance, monthly medications, etc.
Variable costs can vary from month to month and can include entertainment, gas, food, utilities, clothes, car maintenance, hygiene items, books, phone bills and miscellaneous things.
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 or work study job, allowance from home, loans, grants, and scholarships. If your estimated expenses exceed your potential income, then you need to identify ways to increase your income or reduce your expenses. For example, if you don’t have a part time or work study job, you may want to consider getting one. You may to be realistic about your variable expenses - do you need to go out to eat several times a week? You don’t want to have to constantly worry about money, so make sure you feel comfortable with your finances before you start the semester.
Create a budget and stick with it.
Now that you know what your expenses and income sources will be, you need to make an actual monthly budget. Check here for a sample budget worksheet http://www.bankrate.com/calculators/smart-spending/college-student-budget-calculator.aspx Getting into the habit of maintaining a monthly budget will benefit you for a lifetime.You will also need to create a weekly budget. Give yourself a spending limit for each week, and stick to it.
Go easy on the credit cards.
Credit card companies LOVE college and university students. You will be bombarded with credit card applications - shred them all. Once you start using plastic to pay for things, it is very difficult to stop. Think about it - do you really want to pay interest on a bag of chips and a Coke! Use cash whenever possible - it will keep you accountable. If you have to get a credit card, think about these things:
- Shop around for the best card with the best rates.
- Get a card with a low credit limit- $1000 or less.
- Pay it off in full each month. If you can’t, pay at least $25-$50 over the minimum payment.
- Pay on time each month. This will help your credit rating.
- Avoid cash advances.
- Avoid impulse purchases. Will you be able to pay off those shoes at the end of the month?
Know your limits. You can’t do or buy everything you want. You need to make conscious decisions. Do you need to go out for dinner 4 times a week? Do you really need that new pair of jeans? Remember that some of your new university friends may have more money than you. It will be tough to say no when you are with them, but for your own financial sanity, you may have to.
That being said, have a good time.
Make sure to include some “fun money” into your budget. You need to give yourself a reward every once in while.
Talk to your parents.
Sit down with your parents and talk about finances. You will all feel better if you go through the budget and can agree. If you don’t feel comfortable with your checkbook balancing skills, ask them. Play out the scenarios - what if you do get into financial trouble? What will they be willing to do to help? Communicating before you come to university will help in the long run.