Missed our Budgeting 101: Foundations for Success in Postsecondary workshop? No worries! Check out the full recorded event below, to see Anne Arbour, a financial educator with the Credit Counselling Society, join FuturFund for an interactive virtual workshop on how students can graduate in the best financial position possible, especially given the current COVID circumstances.
Benjamin Franklin once said, “an investment in knowledge pays the best interest.” Being a student, you may wonder if you should even consider keeping track of their income or expenses. You may think: Do I really earn any significant income? I only recently started part-time work, so what’s the point? In fact, budgeting is probably the most important financial skill every student needs to learn because it’s the cornerstone of financial security and, eventually, success. If you learn how to manage a tight budget while in school, you should be able to master budgeting for the rest of your life.
Set Financial Goals
Setting realistic financial goals gives you a head start to create your budget. It’s important to have something to work toward financially, whether it’s paying all of your bills on time every month or saving up for a vacation. But it’s just as important to ensure you’re working toward realistic goals you can actually meet so you don’t end up disappointed by missing goals outside your capabilities. Think about what kinds of goals you want to set, both short- and long-term. Once you’ve thought out your goals, write them down and hang them up. Having something you can see every day will make those goals a reality to you.
Smart Budgeting for School Expenses
There are three budgeting elements you need to pay attention to. Your sources of income are first. What students often forget is that your income can come from a variety of different sources. Do your parents give you a weekly or monthly allowance? Do you have some money from a recent birthday or holiday? Have you been awarded any scholarships or bursaries? If yes, then you already have a few sources to draw income from! Your basic budget is as simple as listing all the money you’ve got coming in, tracking how much you spend, and seeing how they balance out.
Next, and equally as important, is keeping track of your expenses, of which there are two broad categories. Firstly, fixed expenses are those that are the same amount from month to month and may include things like rent, gym memberships, tuition payment, car payment, and cell phone bills. Variable expenses, as the name implies, vary from month to month and include food, clothing, transportation, vacation, gifts, or any other miscellaneous purchases. As you purchase things on a day-to-day basis, it’s important to save documentation like receipts, bank or credit card statements and any other relevant bills, as they will give you insight on how much you actually spend monthly and yearly. Now knowing both your income and expenses, you can budget efficiently and ensure that your money is being well spent.
When you first start your budget, if you’re not honest about the things you’re already spending money on, it’s going to be hard to set goals and properly track your expenses. Start with your current financial situation and make adjustments after you’ve assessed where you’re at.
It’s typically easiest to create a budget on a computer, either in a spreadsheet or using budgeting software. Spreadsheets allow you to easily calculate your budget in numerous ways (e.g., monthly or yearly totals). Once you’ve decided how you want to create your budget, you can get started. For a full example on how a budget for a university student could look like, check out our ‘Budgeting Samples and Tips’ blog post to help get you started: http://www.futurfund.org/2018/03/22/budgeting-samples-and-tips/.
In general, keep it simple and not too complicated. The amount of detail put into your monthly budget is dependent on your needs. If you’re renting an apartment that includes all utilities as well as wifi, it is much simpler to group all of those expenses under “Rent”. Additionally, more one-time expenses can be put under a “Miscellaneous” section given the fact that only expenses spanning over a 30 day period are being covered. Especially during the transition from high school to university, the heightened responsibility of overseeing your financial situation can seem daunting at first. However, by sticking to a monthly budget, you become aware of your spending habits and can accordingly set some limits and goals to achieve. By making these adjustments and focusing more on needs rather than wants, you can effectively avoid the pitfalls of instant gratification and plan for the future.