If you’re attending college (or will be soon), it’s in your best interest to create a budget. Indeed, learning to budget as a college student is an invaluable skill that can serve you well beyond your university years.
Setting a budget is a fundamental step toward financial independence and responsibility. It involves understanding your income sources, such as part-time jobs, scholarships and family support, and balancing them against your expenses.
Determine a Time Span
As a student, consider creating a budget to cover an academic term, such as the length of your school’s semester. Bear in mind that your income and expenses will vary month by month. You’ll need to account for bigger expenses (such as purchasing books at the beginning of the year) and seasonal expenses (such as a holiday trip home).
List Income Sources
Your first step in establishing a budget is to list all monthly income and expenses to get a clear picture of your financial situation. Begin by assessing your income. Sources may include your pay from a part-time job, financial contributions from your family members, financial aid, scholarships, grants, work-study and loans.
If you’re employed during the semester, determine how much your take-home pay is each month. Or, if you typically earn most of your income during the summer months, estimate your yearly income and then divide it by 12. Also, include any financial aid credit balance refunds. This includes money that’s left over after your financial aid has been applied toward your tuition and fees.
Map Out and Track Expenses
One way to identify your overall expenses is to make separate lists of your fixed and variable expenses. Fixed expenses are regular and consistent. They may include tuition and fees, rent, utilities (water, internet, and electricity), and insurance.
As the name implies, your variable expenses can change month to month. These expenses may include groceries, eating out, entertainment, transportation and laundry.
Another important aspect is tracking your spending. Various smart phone apps and online tools available can help you monitor where your money goes each month.
Regularly checking your spending habits can help you stay within your budget and identify areas where you can cut back. Additionally, setting aside a portion of your income for savings can provide a financial cushion for unexpected expenses or emergencies.
Make Informed Financial Decisions
Remember, the goal of a budget isn’t to restrict your spending but to empower you to make informed financial decisions. It’s about finding a balance that allows you to cover your essential needs, enjoy college life and save for the future. Regularly reviewing and adjusting your budget as your financial situation changes is key to maintaining this balance.
Finished With Your Budget? Begin Work on a Basic Estate Plan
As a college-aged student, the last thing on your mind is the need for an estate plan. (Isn’t that just for older people?) However, even though college students generally don’t have many assets, consider having these four documents in place if an unforeseen incident occurs while you’re away at school:
1. Will. A will specifies the disposition of your assets and can tie up other loose ends of the estate.
2. Health care power of attorney. With a health care power of attorney, you appoint someone to act as your proxy or surrogate for health care decisions. Typically, your mother or father is designated as the attorney-in-fact for this purpose.
3. HIPAA authorization. To accompany a health care power of attorney, Health Insurance Portability and Accountability Act (HIPAA) authorization allows health care providers to share information about your medical conditions with your parents. The absence of a HIPAA authorization can make health care decisions significantly more difficult.
4. Financial power of attorney. This legal document enables your mother or father to conduct financial activities on your behalf. A “durable” power of attorney, which is the most common form, continues in the event that you become incapacitated.
Talk with your parents. An estate planning attorney can draft a plan.
For educational purposes only. Nothing in this article is intended as individualized investment advice. PKS Investment Advisors, LLC (“PKS”) is a registered investment advisor with the Securities and Exchange Commission. Reference to registration does not imply any particular level of qualification or skill. PKS does not provide tax or legal advice; you should consult with your trusted tax or legal professionals before acting on any suggestions in this article. Examples and illustrations are purely hypothetical in nature, and do not represent actual PKS clients.
