by Mara Strom
Let me start by apologizing for not getting this post up on Monday. I just moved this weekend and despite Major-Internet-Provider’s most fervent promises that I’d be on-line Monday, that obviously did not come to pass.
Anyway, the move has given me a great opportunity to reflect on all the millions and millions of little expenses that seem to crop up when you move to a new place. From light bulbs to toilet bowl brushes, Target has done a brisk business from me the past few days.
Come the start of school, you, too, will likely encounter the bottomless money pit that is Target (or pick your mega-store of choice). Granted, on-campus living affords you certain basics: a desk, a chair, a bed, a closet, and maybe even a lamp. But there are still plenty of start-up costs, whether this is your freshmen year or your senior one.
If you’re renting an off-campus apartment, then the potential expenses are limitless. While outfitting your new pad can be a wonderful opportunity to assert your independence, it can be a black hole of credit card debt out of which you’ll be crawling for years. And it isn’t just the coffee makers and futons that you have to watch out for. Going away to college is for many students the first chance they’ve had to manage their own money. According to the College Board, the average cost of tuition, room and board at public colleges is just over $12,000.
But another $3,000 (national average) is spent on textbooks, transportation, supplies, and ahem, entertainment. Of course, if you’re not careful that $3,000 can double faster than you can cure yourself of a Sunday morning hangover.
So, how do you keep yourself from spending wisely (and possibly even frugally) while at college? The key is making a budget — a written game plan for how you will spend your money. If you’re the typical college freshmen, then you’ve probably never made a budget — let alone had to really and truly live on one.
Don’t panic! You won’t need a crash course in macroeconomics to make a budget. Just follow these 4 basic steps:
Step 1: Track Your Spending
During the first 4 weeks of school, write down everything you spend money on. Buy a little notebook and carry it around with you. You’ll have a lot of one-time expenses, but you’ll also get to see how easy it is to blow $100 on coffees and beers. Once you know how much you’re spending — and what you’re spending it on, you’ll be better equipped to realistically allocate money toward your needs… and wants.
If you’re chomping at the budget bit and want to get a plan in place before the wild spending spree commences, check with your school’s financial aid office for an estimated cost of living. If you’ve received an offer of financial aid, you should already have this in your packet of information. This tells you what the average student spend on books, room, board, transportation and incidentals.
Step 2: Calculate All Sources of Income
A budget isn’t just a projected idea of how much you want to spend on things. It’s a way to make sure that you’re spending is in sync with your income. Many of you will have a part-time or even a full-time job while you’re in school. Others will be able to live off their scholarship money, student loans, federal or state grants — or even help from mom and dad.
Whatever they are, be sure to make a list of all your sources of income. Divide the total by however many months you’ll be at school. Now you know how much you can afford to spend each month without running into the red.
Step 3: Plot Out Your Expenses
Start by referring back to Step 1. How much was your one-month total? Let’s say it was $600. And how much is your total income? Let’s say you have $2,000 in scholarships left-over after your tuition, room and board is paid for, $1,000 in parental support and another $2,400 from your work-study job. Assuming you’ll spend 9 months out of the year at college, you should be golden. Just write it all down and keep on eye on your expenses to confirm that you’re sticking to your allotted budget.
If, however, you spent $1,000 in the first month — and that didn’t even include your new IPod docking station, laptop computer and portable printer — then you have a serious budget crisis. Assuming the same 9-month school year, you’re spending $4,600 more than you take in. That means that each month, you’ll need to shave more than $500 off your current rate of spending.
To do this, you’ll want to carefully budget each of your spending categories. These will likely include:
• supplies (printer cartridges, spiral notebooks, etc.)
• utilities (electricity, water, gas, Internet, cable and phone)
• transportation (including gas, parking and insurance if you have a car)
• food & drink
Step 4: Differentiate Between Needs & Wants If you find that your spending projections exceed your income then you need to prioritize your list. What are the absolute must-haves? What are your fixed expenses? These should be paid first out of your available income. You can get the “wants” only if you have enough money left over after the must-haves are paid for.
Take transportation, for example. If you have a car, you *must* pay for insurance. Assuming you’ve got the best rate available, there isn’t any wiggle room here. What you can moderate, however, is the expense of gas. If you’re short $50, then drive less and avail yourself of public transportation, carpooling or walking.
So that’s about it: Making and living by a budget in four easy steps. It won’t always be pretty or fun, but sticking to a written plan for your spending is the surest way to graduate without a mountain of debt.
Edited to Add: Stay tuned next week for our final installation in this series on living on a budget at college. We’ll be taking a look at student credit cards and offer some tips on avoiding credit card debt at college.