Financial literacy is an important skill for any young adult, especially college students, to learn and master. Unfortunately it’s often an overwhelming process that even the most well-prepared student can feel daunted by. After all, having had a part-time job in high school for extra spending money isn’t exactly preparation for overseeing all of your income and spending on your own. By mastering a few of the basics of budgeting that we have outlined here, you’ll be on the right track to keeping the books like a personal finance pro!
Step 1: Calculate your projected income for the month.
Tracking income is usually pretty easy. After all, a trip to Drexel Central can tell you how much money you’re receiving in grants, loan disbursements, scholarships, and work-study. If you work, chances are you receive a paycheck on a set schedule (weekly or bi-weekly) depending on how many hours you work. From this information you can calculate how much money you earn per week, month, and term!
Step 2: Track every dollar you spend for a week.
Tracking spending on the other had, is not quite as simple because we like to underestimate how much money we actually spend. Ask for receipts, cross-reference with your online banking statements, and leave no cent unaccounted for! You’ll be surprised by how much you actually spend and how frequently you reach for that magic card of plastic. By doing nothing more than tracking your spending for this week (not changing your spending habits, yet), you’ll get a fairly accurate glimpse into your spending habits on a larger scale: per paycheck, per month, and even per term!
Step 3: Categorize each expense.
At the end of each day during the week you’re tracking your expenses, sit down and sort your transactions into categories. See the ones we’ve included below from our budget template if you don’t know where to start. You’ll quickly identify your spending trends. For example, getting Starbucks or Halal on your way to class “just a few times” per week can easily add up to $20 per week before you know it! Multiplying that by the four weeks that are in a month means you could be spending almost $100 per month on your coffee or fast-food kick (wow!).
Step 3: Use our budget template to decide where you can (and should) cut back.
Should you really be spending that much on coffee per month? Hint: probably not. Use the projections you’ve made from your week of tracking and categorizing your spending, as well as your income figures to calculate if you’re spending more than you earn (yikes!) or are pleasantly maintaining extra income. From there, you can set a budget for yourself by defining how much you expect to make and spend during the month. Ain’t nobody got time to organize and format all of this in Excel, though! We did the hard work for you and created a customizable budget template that you can download here, then save to your Google Drive to edit for your personal, private use. Anyone with a Google account (or Gmail address) can save and edit her own personal copy of the template. Even if you don’t have an account, you can still view it here.
Step 4: Track all of your expenses for a month, and compare to your expected figures.
How did you measure up? Did you way overspend or were you cash savvy in every category? We know it’s probably not going to be the latter, but that doesn’t necessarily mean you destroyed your budget! There’s probably a few key spending categories that you need to exercise more control over, and that’s okay! Everyone has her luxury vices and you should be proud that you can identify yours and take the next step in managing your money responsibly, which leads us to…
Step 5: Prioritize your investments in those ‘luxury’ categories.
Maybe you absolutely cannot go without your weekly latte fix. Or maybe getting a manicure after each paycheck is your own personal R&R time to wind down from your hectic co-op or class schedule. If there are luxury expenses that you absolutely do not want to sacrifice, look for other areas where you can save money. Minimize impulse buys, like cheap makeup or spur-of-the moment purchases so that you can still save money but afford to treat yourself to the things you really want!
By following theses five steps, you’ll be on the fast track to responsible financial management. Imagine the bragging rights to your parents in the aftermath of the holiday spending season! Happy saving (and spending), collegiettes!