Budgeting Strategies For Students. As a college or university student, you need a budgeting strategy that meets your needs and lifestyle in school. Going for any budgeting strategy is a risk and may not work for you, especially if you want to control your impulse spending in school and focus on your pressing needs.
There are several budgeting strategies for families, businesses, or companies. But then, there are specific ones for students. A budgeting strategy that works well for a family may not be effective for a college student, as their needs, preferences, and lifestyle differs.
Would you like to adopt the Zero-balance budgeting strategy to avoid extra debt acquisition? Or go for a Pay Yourself budgeting strategy to meet your pressing targets, like repaying your heavy student loan in three months?
This article will show you how to budget as a student and the four best budgeting strategies you can adopt based on your needs and lifestyle in school.
How To Budget As A student
1. Take account of your income/allowances
Often, so many university students need to pay more attention to those weekly or monthly stipends that come as income or allowances from home, such as scholarship grants from your state, side-hustle payments, student loans, and what have you.
Although, this income or allowances may fluctuate, especially if you’re a part-time student worker or freelancing gigs based on the nature of your job. Nevertheless, you must know how much money you have to account for if you spend below or above what you earn.
Taking account of your income will help you thoroughly size your impulse for purchases for that fancy jewelry first concerning your pocket(income), deciding whether or not to give in for the purchase.
2. Monitor your expenses
Taking account of your income will naturally make you want to make your track and keep records of all your expenses in college or university. Because, keeping records of all your expenses, from minor to major spending from your income or allowances, is a saving grace for effective cash flow management.
For example, let’s say you spend close to $80 during school activities on data subscriptions for your take-home assignment, handouts bills, then an additional $20 for weekend relaxation on Starbucks.
If this is your routine spending, it is essential that you know, if not precisely, but at least an estimated amount of what you spend your money on. Monitoring what you spend your money on every day or week will assist you in knowing what to cut down during budgeting.
3. Hold on to your short and long-term targets
One of the best and most practical ways to budget is constantly keeping your eyes on your gold mine—your short and long-term goals.
Please take note there are times you may want to defer or even quit in accomplishing either your short or long-term goals during budgeting, especially when you need more than your weekly or monthly upkeep to help you arrive at your set financial goals.
What could make you quit the pursuit of your short or long-term goals during budgeting? Cost of living in school? Or the general stress you will need to go through at least every day, from waking early enough for morning classes, night reading, and many more.
But here is what you need to constantly remind yourself of when you start budgeting for your short and long-term targets:
- The fulfillment in your inner being after you accomplish your set financial goals through budgeting.
- Be realistic enough to say no to impulse spending to reach your desired targets during budgeting.
4. Have a compulsory savings account
You may need to deliberately set aside some funds in your savings to meet your set goals, for example, repaying student loans in three months.
For instance, if you want a new personal computer for your upcoming project in three months, you must be realistic enough to say no to impromptu or impulse spending unless they are emergencies.
Therefore, a way to ensure that your savings do not take the back seat when your next allowance or income arrives is to apply a budgeting strategy called the Pay yourself budgeting style, which will be discussed in the next section of this article.
5. Go for a budgeting strategy that is best for you
What budgeting strategy will work for you based on your needs and preference as a student?
Do you prefer the Pay yourself budgeting strategy? The (PYBS) allows you to give attention first to your savings account by allocating a certain amount from your after-tax income to meet your short- or long-term goals before allocating funds to other categories of your needs and wants.
How about exploring the Envelope budgeting strategy? This budgeting strategy limits your credit card impulse purchases, as you will only spend a certain amount of money found in the spending category of the envelope you wish to spend from. After exhausting the amount on that envelope category, you won’t touch on other categories to spend more until the next budgeting period for that category.
4 Best Budgeting Strategies for Students
1. Zero-Balance Budgeting Strategy
In a zero-balance budgeting strategy, the total amount of revenue or allowance you receive minus the total of your expenses leaves you with zero balance for the next budgeting period.
The Interesting thing about the zero-balance budgeting strategy is that it does not give room for extra debt acquisition and impulse purchases, as you will be constrained to spend based on your income rate at any given time without borrowing.
Let’s say your total income is $3,500. Applying zero-balance budgeting will appear this way:
Total allowance or revenue – $3,500
Spending categories:
- Rent – $2,500
- Electricity bills – $250
- Groceries – $200
- Gas bills – $100
- Hand out bills – $50
- Savings – $300
- Debt repayment – $100.
Zero-balance budgeting strategy:
Total income – $3,500 minus total spending category cost – $3,500 = 0(zero-balance)
2. Pay Yourself Budgeting Strategy
In pay yourself strategy, as soon as your income or allowances comes in, a certain amount as savings is first taken out as regards meeting a short or long-term goal.
Therefore, the Pay Yourself Budgeting Strategy can be the best budgeting strategy for students who desire to accomplish an in-demand short or long-term goal, for example, repayment for a student loan in three months.
3. Envelope Budgeting Strategy
Are you struggling with impulse purchases currently? Or do you waste money on less essential things in school, like spending $10 to $30 on Starbucks daily? Then, an envelope budgeting strategy can help you overcome all that so you can focus on allocating your money to more important things in school.
This is how the envelope budgeting strategy works manually:
You allocate portions of your income in different envelopes representing your spending categories – needs, wants, and savings.
For each envelope that represents your spending category, you have specific amounts in that envelope you can spend that will cover the cost for that category. And when you’ve fully exhausted that amount for that spending category, there won’t be money left to spend more on that category until the next allocation during the next budgeting.
Envelope budgeting strategy will help you discipline yourself toward unnecessary spending, avoid wastage, and, most importantly, adequately pre-plan for every spending category before allocating money for them.
4. Proportional Budgeting Strategy
The strategy divides your income or allowance into 50%, 20%, and 30% on your needs, savings, and wants. Have you heard of the 50/30/20 budgeting rule or strategy before now?
The proportional budgeting strategy is also known as the 50/30/20 budgeting rule, where you spread your income or allowances allocation into three categories: needs, wants, and savings.
So, if you earn, let’s say, $3,500 as allowance or income, allocating that amount to your needs, wants, and savings using the proportional budgeting strategy will be got this way:
Needs – rent, gas, electricity bills, groceries, handout bills (50% of $3,500=$1750)
Wants – new headset, shopping, Starbucks (30% of $3,500=$1050)
Savings – repayment of student loan and a new computer for an upcoming project (20% of $3,500=$700)
A proportional budgeting strategy guarantees you to choose the best flexibility that will work for you, as you can decide to split your income spending in other proportions, such as 80% to needs and wants and 20% to savings, or split it into 60/30/10 proportion.
Whichever proportion or splitting you want, the proportional strategy gives you flexibility based on your needs and lifestyle.
