Financial Authority of Maine's 5 on the 5th

November 2013 ~ Five Steps to College Budgeting        

Money, specifically not having enough of it, is a challenge for most college students. Borrowing money is not always the best solution. Developing a budget will help you make the best of the money you have and help you avoid borrowing more than you need. It's a simple process that has a big impact.

Here are 5 easy steps to get you started and keep you on track:

1.  Calculate Your Income 

Include money that you earn, financial aid, and money that you receive from other people (such as your parents). 

  

2.  Calculate Your Expenses
Include college expenses, such as tuition and fees, books and supplies, room and board (if you're living on campus) as well as other expenses, such as rent (if living off campus), utilities, groceries, car payment, insurance, phone bill, entertainment, car repair, etc. If you're not sure exactly what you are spending (and most people are not), it's a good idea to track your expenses for a month or two by keeping a record of every dollar that you spend. Have a smart phone? Use the FIXX app by SALT™ to track expenses.

3.  Categorize Your Expenses 
Deciding which expenses are fixed, variable, and optional will help you determine which expenses you can adjust within your budget.    

• Fixed expenses are those that must be paid and the payment amount cannot easily or quickly be adjusted. Examples would include rent and loan payments.    
• Variable expenses are those that must be paid, however, unlike fixed expenses, you have some ability to reduce the amount that you spend. Examples would include utilities and groceries.
• Optional expenses are those that you may want but you do not need. Examples include movies, concerts, and eating out. Many purchases fall into this category.   

4.   Make a Spending Plan 

Use your income and expense information to prepare a college budget. There are many online budget calculators that can help you. Don't forget to budget for savings. It is recommended that you "pay yourself first" and save 10% of your income for emergency expenses you didn't plan for, like a flat tire or a crashed computer.     

5.   Evaluate and Adjust

Evaluate your plan every month and make adjustments as needed. This is where categorizing your expenses into fixed, variable, and optional will really help you. Your categories will allow you to quickly see where you may be able to reduce your expenses. 
Remember, practicing good financial habits such as budgeting and reducing expenses can have a huge impact on your finances while you're in college and for the rest of your life! Visit FAME's financial education page for steps to financial success and other money management resources.