Does your spending need a reality check?: How to budget better
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The college or university years are typically our first experience of managing (or blowing) adult finances. The responsibility can be empowering, but greater control over our finances calls for conscious planning. In a recent CampusWell survey, 91 percent of student respondents thought keeping a budget would help them better manage their personal finances. But wouldnât most of us rather drink the latte and eat the pizza than track their prices?
Our spending habits have consequences that go beyond our immediate financial dilemmas (can I afford to go out tonight?) and reverberate through our futures. âYou either have enough to pay the rent or you donât. The payment either arrives on time or it doesnât,â says Gail Cunningham, chief spokesperson for the National Foundation for Credit Counseling, based in Washington DC.
We asked three undergraduates to estimate their weekly expenditures during the semester. Then we crunched the numbers to see what theyâd actually spent and how that matched up with their own estimates.
Financial expert:
Leslie H. Tayne, Esq., attorney specializing in debt-related services, New York City
Which would you cut? utlities v. celebrations
Category | Estimate | Reality | Difference |
Academics | $180 | $190 | $10 |
Utilities | $30 | $60 | $30 |
Personal | $10 | $24 | $14 |
Transportation | $40 | $40 | $0 |
Health & fitness | $5 | $5 | $0 |
Rent | $100 | $100 | $0 |
Food, socializing, & entertainment | $70 | $60 | $10 |
Total | $435 | $479 | $44 |
Korena H. is a fourth-year student at California State University, Sacramento.
If this were a typical week, Korenaâs extra spending per calendar year would be around $2,300.
Korenaâs reaction
âI was really surprised with my personal expenses. I did not take into account all the birthdays I buy for. I donât generally handle the utilities bill so Iâm not super-familiar with it.â
Expertâs reaction
The key issue Tracking costs
âThis student is living close to the edge and over budget on some things. Try and break it down to see where youâre spending the most money. With your utilities, if itâs your electric, see if you can conserve power by unplugging things you arenât using and turning off lights and electronics. If itâs other areas, consider calling the companies and asking for a student discount. You may be surprised at their response.â
More budget strategiesStrategies that force daily savings and build that habit for life
- Do a version of this exercise, estimating your expenses per month on food, transport, health and fitness, academics, socializing and entertainment, rent, utilities, and personal expenses. Then review your bank records.
- Create a monthly budget for yourself using student budget calculators.
- To keep track of cash expenses, hold onto your receipts or write down every time you spend money.
- Carry your student ID and routinely ask for discounts.
- Use public transit and student gyms for little or no cost.
- Leave your ATM card at home. âIf you go to Target with $50 in your hand, you wonât spend $51,â says Andrew Krouk, a financial planner in Philadelphia.
- If youâre not eating in a cafeteria, make a weekly meal plan and follow it. Planning ahead (and teaming up with roommates) helps you save money. Buy in bulk, avoid rumbly-tummy grocery store splurges, and prevent food going to waste.
- Get creative with socializing and entertaining. Instead of going out and spending $50 each, invite friends over for a potluck.
- Practice âStarbucks Theoryâ: Instead of going out for coffee each day, make coffee at home to bring with you. âPlanning ahead with coffee, snacks, water, etc., will drastically cut down your expenses,â says Andrew Krouk.
- Save. âYou pay your groceries and your rent, but instead of paying everyone else first, pay yourself first. Youâre working hard: Pay yourself for it!â says Andrew Krouk. Then live off whatâs left. If you put away $2 each day, thatâs $60 a month for your savings or leisure activities. âThereâs no cost in saving money. You can always use it at a later time. People think of saving as an expense, but itâs a reward.â
- Give yourself a margin for error. âSet aside 10 percent of your income for contingencies/emergencies. This will help you recover if you go over budget one week,â says Kuljeet Notay, a financial aid counselor at the University of Guelph in Ontario.
Can you afford school supplies and eating out?
Category | Estimate | Reality | Difference |
Food | $30 | $48 | $18 |
Academics | $0 | $26 | $26 |
Utilities | $8.75 | $8.75 | $0 |
Rent | $81.25 | $81.25 | $0 |
Personal | $5 | $25 | $20 |
Total | $125 | $189 | $64 |
Alice R. is a fourth-year student at the University of Utah, Salt Lake City.
If this were a typical week, Aliceâs extra spending per calendar year would be around $3,330.
Aliceâs reaction
âI was surprised by the amount I spent on food. I didnât take into account that I went out of town, forcing me to purchase more meals at restaurants. It is shocking to see how eating out can add up.
âThis is a reality check about where my money is being spent. The amount that one overspends in a year could be enough to pay the bills for several months.â
Expertâs reaction
The key issue Budgeting for variable expenses
âThis student has a great sense of fixed expenses but is not budgeting for the variable expenses, such as academics, personal items, and food. This can result in her having less money to pay fixed obligations such as rent. Itâs also important to keep some money aside for the unexpected.
âI suggest budgeting each week and trying to break down the categories and see where you are overspending. Maybe you can switch to generic for certain items or cook more at home.â
How many students keep a budget?The case study no one expected
Category | Estimate | Reality | Difference |
Transportation | $50 | $50 | $0 |
Utilities | $20 | $20 | $0 |
Rent | $98 | $98 | $0 |
Food | $80 | $65 | $15 |
Socializing & entertainment | $30 | $22 | $8 |
Personal | $30 | $20 | $10 |
Total | $308 | $275 | $33 |
Charlie R. is a fourth-year student at St. John Fisher College, Rochester, New York.
If this were a typical week, Charlieâs savings per calendar year would be around $1,700.
Charlieâs reaction
âI think I spend more than I actually do, which is surprising. On average my costs are low, but when Iâm busy, I tend to get fast food or buy food more often, increasing my spending. Overspending, especially on a limited income, makes everything more stressful and definitely makes purchasing even food tough. Saving helps relieve that stress but can also open up temptation to spend on things that arenât required but just wanted.â
Expertâs reaction
The key issue Making the most of savings
âThis is great! This student is really cutting costs and able to save money. My suggestion would be to put all this money aside in case you go over on expenses one month or something unexpected comes up. Any money left over can be put towards loans or saving for the upcoming semesters.â
10 tips for having a blast on a budget
- Carry cash
- Necessity or luxury?
- Carpool, bike, bus
- Separate checks
- Student ID
- Group discounts
- Clubs
- Community events
- School events
- Plan ahead
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