BY KELLEY HUSKEY
The transition to financial independence for young adults with little or no experience managing money and often no supervision can have dire consequences. With an increased level of responsibility, first time college students are susceptible to overspending.
To keep finances in order, creating and balancing a budget can prevent students from developing poor financial habits according to experts.
One way for college students to create good money habits is to maintain a log of income and expenditures. Set a dollar amount for how much you are able to spend on various items including groceries, laundry, clothing, toiletries, food, transportation, housing, utilities and entertainment. Impose strict limits on discretionary income items – the funds you have left over after paying your bills. Avoid using credit cards or limit yourself to one or two low-interest cards. Maintain a low balance and pay them off at the end of each month.
According to Renee Hanson, a private wealth advisor, students should consider the math. “For example, $5 a day at Starbucks is $1,825 per year. Dinner out at a restaurant at $30 a week is $1,560 per year. That is a total of $3,385, which could be enough for the average cost of one year of community college.” Hanson recommends setting aside $10 to $20 a week for splurges.
Other ways to maintain a budget are to cook rather than eat out. Use student discounts and take advantage of campus resources. Before committing to activities, find out about fees. Students can also shop at thrift stores and avoid paying full price for textbooks by looking for other online options or rentals.
Once students have everything organized, they can determine what items they can cut from their list to balance their budget further. What expenses can they live without?
Tracking and managing expenses while in college is simple with budgeting tool apps such as Level Money, Left to Spend and YNAB (“you need a budget”). Microsoft Excel provides budgeting templates, including one specifically for college students. Financial experts say budgeting has never been easier and can be done with the convenience of a smart phone.