Budgeting for College Students: 5 Popular Strategies


For many of us, college is the first time in our lives that we are in control of our own money. And that’s exciting: You finally have complete freedom to do what you want with your cash!

But having complete freedom over your money also makes it a lot easier to make mistakes like overspending, relying too much on credit cards and other debt, and missing payments—all of which can come with pretty serious consequences.

That’s what makes budgeting so important.

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Here, we explore everything that college students need to know about budgeting to set themselves up for success—both in college and after graduation.

What is Budgeting?

At its heart, a budget is simply a plan that you use to spend your money, and budgeting is the process of creating that plan by balancing your income (money in) against your expenses (money out).

By creating a budget that accurately reflects your expected income and expenses, you’re able to know ahead of time how you are going to spend your money.

If when you finish creating your budget you don’t have enough money to cover all of your expenses, you have two options: Either you can boost your income (for example, by picking up an extra shift) or you can cut your expenses (for example, by skipping your Thursday night bar crawl).

Creating a Budget

If you’ve never created a budget in the past, it’s easy to understand why you might be a little confused or overwhelmed. But it’s not as scary a process as it sounds. Accurate budgeting simply requires that you understand how much money you have coming in and how much money you have going out. Following the steps below can help.

1. Pick a budgeting time frame.

The first step to building an accurate budget is to understand the period of time that you’re budgeting for.

Most people choose to create weekly or monthly budgets, because it’s easier to know what’s coming a week from now or a month from now than it is to know what’s coming a year from now. But that doesn’t mean that you can’t budget for a different time frame if doing so is better for you.

For example, some students spend the entire summer working a job to save up money that they’ll need to use during the school year. These students might choose to create a budget that spans an entire semester or school year, since that’s how long they need to make sure that their money lasts.

2. List out your income and expenses.

Once you know the time period you’re budgeting for, you should create a simple list of all of your income and expenses.

By income we of course mean any money that you make from a part-time job or federal work-study. But income can also include other sources, such as:

  • An allowance from your parents
  • Cash gifts (for example, from your birthday or holiday)
  • Any money you may have put aside from a summer job
  • Financial aid
  • Scholarships

By expenses we mean anything that you spend your money on. This may include:

  • Tuition
  • Textbooks
  • Room and board or rent
  • Food and groceries
  • Car insurance and other transportation-related expenses
  • In-school student loan payments
  • Entertainment

Pro-tip: Not sure how much money you’re actually spending each week or each month? Tracking your spending using a worksheet or app can really help. I personally use Personal Capital for this, but many banking apps also come with budgeting capabilities that you can use to better understand how you’re spending your money.

3. Subtract your expenses from your income.

After you’ve got your income and expenses all listed out, the rest is pretty basic math. Simply subtract your expenses from your income to see whether or not you’ve got enough money in your budget to cover all of your expenses.

If at this point you find that you have some money left over, consider using it to boost your savings by starting an emergency fund to cover unexpected expenses in the future or pay down debt.

If, on the other hand, you find that you don’t have enough money to cover all of your expenses, you’ll need to either boost your income or find areas to cut back.

4. Make adjustments as necessary.

There’s an old saying that goes “Mankind makes plans, and God laughs at them,” which is a poetic way of saying that it’s difficult to know how the future will unfold.

The same rule applies to budgets. Though you may have a plan for your money, it’s really important that you’re regularly adjusting that plan as necessary to account for reality.

Maybe you spent more than you thought you’d have to on groceries. Maybe you got a flat and needed to buy new tires. Maybe you got sick and missed a couple of shifts at work. Whatever the case, your budget is just a starting point.

Budgeting Strategies to Consider

Once you understand the basics of budgeting outlined above, you may decide that you want to try something a little more sophisticated.

There are many different budgeting strategies that you might be able to leverage to meet your goals. Below, are some of the most popular.

Note: Beware of anyone who tells you that there’s a single “right” way to budget. The right budgeting method is the one that works for you, whether that’s one of the methods listed below or something else entirely.

1. Pay Yourself First Budgeting

Those who follow the “pay yourself first” budgeting philosophy prioritize savings goals, like saving for retirement, emergencies, and eventual home-ownership, ahead of any other expenses.

To follow this method, you would first determine what your savings targets are. You’d then “pay yourself first” by allocating that money to your savings. Then, whatever money you have left over would be used to cover your other expenses.

This is a popular budgeting strategy of millionaires (and aspiring millionaires), but it can be difficult for people with extremely tight budgets—like most college students. That might make this particular strategy a better fit for the post-college life, when you’re more likely to have a higher income.

2. Priority-based Budgeting

In priority-based budgeting, each and every expense in your budget is graded on a scale from most important to least important. Because everyone’s priorities are, of course, different, no two lists are sure to look exactly alike.

That being said, those listed listed as “most important” tend to be those related to survival—food, shelter, utilities, medications, etc. Those on the other end of the spectrum tend to be less essential—entertainment, eating out, subscriptions, etc. Debt, savings goals, and other expenses tend to fall somewhere in the middle.

Once you’ve graded all of your expenses, you’ll first use your income to pay for those listed as “most important” and work down the list toward the “least important.” The thinking is that, if you run out of money during the week or month, you have at least covered the most important expenses first.

3. Envelope Budgeting

The envelope system (or envelope method) of budgeting is very popular, especially for people who may have difficulty sticking to other budgeting strategies. It involves working with cash, and storing that cash in different envelopes depending on what it is meant to be used for.

For example, each month you might allot $200 for rent, $50 for car insurance, $50 for groceries, $25 for your phone bill, and $50 for entertainment. Your fixed expenses (rent, insurance, phone bill, etc.) are already spoken for. But your grocery bill and entertainment spending are more flexible. You can spend that money however you want. But once it’s gone, it’s gone—you can’t tap into any of the other envelopes, or you’ll ruin your budget.

4. 50/30/20 Budgeting

If you follow the 50/30/20 budgeting rule, you’ll allocate 50 percent of your budget to your needs (food, shelter, utilities, and other fixed bills), 30 percent of your budget to wants (like entertainment, eating out, wardrobe, etc.), and 20 percent of your budget to savings (including saving for emergency, retirements, and any other goals you may have).

This offers your budget enough structure to ensure that you’re hitting all of the important buckets, while also giving you enough flexibility to actually enjoy life.

5. Zero-Based Budgeting

In zero-based budgeting, every single dollar of income is given a job to do. That job might be to cover an expense, or it might be to work towards a savings goal—but in the end, you know where every dollar is going.

The goal is to prevent yourself from having any money that isn’t assigned to a specific task. By removing these unspecified “slush funds” from your budget, proponents say that it’s easier to know exactly how you are spending your money, which can help prevent you from mindless spending and make it easier to stay on track as you work towards your goals.

If you’re having trouble sticking to your budget…

There are some steps that you can take to make things a little easier.

If you can’t keep track of what payments are due when, consider signing up for automatic payments on your recurring bills. Doing so will ensure that you never miss payments moving forward, and might even save you some money in the form of reduced interest payments.

If you have too many payments due at once, try changing your payment due dates so that payments are spread out more evenly throughout the month. Most lenders will be willing to accommodate this if it will help them get their money.

Budgeting after graduation

The same basic principles of budgeting will apply to your life after graduation as when you are a student. Developing healthy budget habits now will only make it that much easier to budget and plan in the future, when you will most likely have even more complicated finances and goals.

About Tim Stobierski

Tim Stobierski is the founding editor of Student Debt Warriors. A freelance writer and editor with a passion for teaching people about all things personal finance, his goal is to help parents and students tackle their student loan problems so that they can live happier, healthier lives. Tim's writing has appeared in a number of publications, including The Huffington Post, The Hartford Courant, Grow Magazine, and others. His first book of poetry, "Chronicles of a Bee Whisperer," was published in 2012 by River Otter Press.

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