How Not to Move Back in With Your Parents
Financial Literacy 101 Podcast Episodes
A Second Look at Budgeting
Listen to the Podcast
Pete and Alex are joined once again by Phil Schuman to talk about whether or not you need a credit card in college, and how to responsibly use one. They also discuss "old man ice cream."
Read the Show Notes
Budget. Spending plan. The thing that shows where my money is supposed to go. Whatever you call it and however you might feel about it, a budget is an incredibly powerful tool that is designed to provide you reassurance and comfort when it comes to you operating your financial life. Operating without a budget is like playing a game where you don’t know the rules.
One of the most beneficial things you can do while in college is create a budget for yourself so that you know how much money you’re going to spend—and hopefully save—each month. Even though you might not have a lot of income or expenses to work with while you’re in college, starting to budget now is really a job readiness skill because budgets are plans…and plans have goals…which leads to results.
Employers want to know if you can achieve organizational goals. It is a powerful message to be able to declare in an interview that you have managed to minimize borrowing and make sacrifices for four years.
Things to Remember About Budgeting
Before talking about specifics when it comes to budgeting, it’s important to remember a few things:
- Everybody’s income is different. Everybody’s expenses are different. Everybody’s priorities are different. Make sure you tailor your budget to your lifestyle/goals.
- Budget all of your fixed/necessary expenses first. This means any housing, transportation, tuition, groceries, etc. Whatever is left can be used for saving, entertainment, clothes, etc. The key is that you make sure that all of your necessary expenses are accounted for before you start spending your money on other things.
- Even though saving doesn’t technically qualify as a necessary expense, it’s important that you do allocate some of your income towards savings, if possible. While 65, 55, 45, 35, or even 25 might feel like a long time from now, starting to save now will help you afford a house, a car, a trip, a marriage, a life…
So now that those little tips out of the way, you’re probably wanting for me to tell you how much you should allocate for each budget. Well…I’m not going to do that—at least completely. As Tip #1 above says, “Everybody is different.” Where one person may only allocate X towards their groceries each month because they only need pasta to survive, another person may need to budget Y because they want fresh meats, fruits, vegetables, etc…
Instead, I can give you guidelines for you to follow and from there you can determine what’s most appropriate from you, and if you still need help or have questions, you can contact us at firstname.lastname@example.org or set up an appointment with a Peer Educator.
We should probably list the things that are generally in a budget. Even if they’re $0 on your budget, just remember that you could have them someday and better to start thinking about them now.
The percentages next to each category are the recommended allocation amounts, according to Pete the Planner.
- Rent/Mortgage – 25%
- Utilities & Phone – 10%
- Transportation – 15%
- Groceries/Dining Out – 12%
- Savings – 10%
- Entertainment – 5%
- Medical – 5%
- Gifts – 5%
- Donations – 5%
- Misc. 3%
- Clothing – 5%
Again, remember that these are guidelines and that your situation will differ. Still, try not to go well above these numbers.
When calculating these numbers, you might be thinking that the numbers you’re coming up with are too small (e.g., $1000/month income, only means $250 for rent or $350 for rent/utilities combined), but truthfully, that is about where the numbers should be.
If you need a more expensive place, then you’ll have to make a trade-off. If it’s food that you limit, maybe it just means less meals eating out, or less expensive grocery foods. If it’s entertainment, maybe you have to start staying in and watching movies instead of going out.
Try to make choices that promote a financial advantage and result in savings. The consequences of your student decisions can have an impact after graduation. Not everyone gets a job three months after leaving school. Establishing “cash reserves” for the future is commendable if you can do it.
Regardless of what you choose to do in your budget, you should prepare to budget before you even step on campus. Take a look at the “budgeting” spreadsheet that we’ve created for you to see how things stand for you. And if you need some help figuring out what your budget should be, schedule an appointment with a Peer Educator, they’d be more than happy to assist.