Jessica, a student in Illinois, grew up learning how to watch her spending. “I like to spend my money on things that will keep rewarding me, like my animals,” she says. She means it: She has 25 snakes, 2 lizards, and a dog.
While she may have some unusual expenses, Jessica’s methods of budgeting to handle them all are time-tested. To keep track of where her cash goes, she uses a good old-fashioned notebook and pen, checking her bank account almost daily and writing down all expenses. After reviewing her budget, she realized that the monthly care for her dog costs more than taking care of all 27 reptiles combined. Maintaining a budget has been key to helping her meet the financial demands of caring for all of her animals.
Developing and maintaining a budget requires discipline (whether you have a personal pet store or not), but once you know where you stand, financial stresses—like running out of money or accumulating debt—can be a whole lot easier to handle.
Why build a budget?
“A lot of my friends only look at their money from a current standpoint,” says Bryant, a student in North Carolina. “They don’t realize that budgeting is an essential tool for planning for the future.”
Tracking your spending can, of course, help you avoid running out of cash. But budgeting also helps you figure out where you might be spending unnecessarily and put that money toward savings goals—like a college fund or car—instead.
Sixty-five percent of high school respondents to a recent Student Health 101 survey said they don’t keep a budget, and 28 percent of them said it’s because they’re too busy. Luckily, there are a ton of free tools to help you build a budget without staring at a spreadsheet for hours.
If tracking your money with a pen and paper feels a little archaic, there are plenty of free apps and tools to help you develop and maintain a budget.
Mint merges all your money info into one place so you can see how you’re tracking against every budget category.
By manually entering your expenses each time you spend, Fudget can help keep you accountable—and thinking about the impacts getting out your wallet will have on your budget.
Albert puts financial experts right in your pocket—almost literally. Text Albert your financial questions, and the app can help you figure out the smartest ways to spend.
PocketGuard will automatically build a budget for you based on your income and your savings goals.
With Spendee, you can share wallets with your friends to make splitting going out to eat much easier.
Simple is a helpful budgeting app, plus an actual bank account so you can keep everything in one place.
Building a budget
To get started, figure out your income. “Your cash flow may be supplemented by a part-time job, your parents’ help, etc.,” says Kurt Rosentreter, a certified financial planner in Ontario, Canada. Make sure you’re taking everything into account before you get into the budget breakdown (just don’t include uncertain sources of income, such as birthday money or a bonus from your boss).
“If you don’t have a consistent income via paycheck, set an average for money earned by looking at past months,” says Amy Conrad, program director of CashCourse, an online money resource designed specifically for students.
Step 1: Categorize your cash
Before you get into the budget breakdown, look at your bank statements to get a feel for how you’re spending. “It’s frustrating to try to stick to a budget that’s completely different from your spending patterns,” Conrad says, who recommends categorizing your spending into chunks like eating out, trips, or new clothes.
Step 2: Cut the stuff you don’t need
Most likely, you’ll realize there are some categories you can cut—or at least trim down. For example, if you’re paying for Hulu but only ever watch Netflix, you can probably ditch that subscription.
Reprioritizing can also help you save some cash. Say you’re shelling out a large amount on restaurants each month, but you really love to cook. Start inviting friends over and put some of that cash toward that blender you’ve always wanted rather than a restaurant bill.
- What recurring purchases aren’t really necessary? For example, can you make your morning coffee at home instead of going out for an expensive latte?
- Are you paying for subscriptions you don’t use? Even seemingly inexpensive subscriptions can add up (look out for online purchases that turn into monthly subscription services).
- Are you making a lot of unplanned purchases? “I tend to buy a lot of electronic items,” says Mitchell, a student in St. Cloud, Minnesota. “Some things that I’ve bought were an impulse purchase, and now I’m looking at myself saying, ‘Why did I ever buy that? I didn’t need it.’”
Step 3: Set your goals
Once you have an idea of what you’re spending and what you can cut, you can budget for the things you need and value the most. Your budget should be divided into “fixed expenses”—the things you pay for every month, like your phone bill or car payment—and “discretionary expenses”—the remaining cash you use for things like food, clothes, and hobbies.
“I take out everything I have to pay, such as the phone bill and gas, and then I put my other money towards saving for college,” says Laura, a junior in Fouke, Arkansas.
Questions to ask yourself:
- Are you earning more than you’re spending? If so, what savings goals can you set?
- If you’re spending more than you’re earning, where can you make cuts to get your budget in balance?
To make all these things no-brainers, use a budgeting wizard.
The other element of budgeting is saving, which can feel challenging when you don’t have a lot of cash to work with. “Saving even small amounts as early as possible is important,” says Conrad.
It helps to think about saving for short-, medium-, and long-term goals, says Rosentreter. For example, in the short-term, if you want to go on a spring break trip with your friends this year, figure out how much you need to save each month until then. In the long-term, you might want to buy a car when you graduate. “Working backwards makes big purchases feel bite-size,” Rosentreter says.
To make saving clearer, set up different savings accounts for different goals—you might have one as an emergency fund and another for that big vacation. “This gets you thinking in silos—different pools of money for different purposes,” says Rosentreter.
It’s OK to set your initial savings goals relatively small, says Conrad. The important thing is that you get in the habit. How you save is up to you and your goals, but the earlier and more regularly you save, the better off you’ll be when you hit a big milestone, like graduating and wanting to buy a car or move to a new city. Try one of these methods:
- Save 10 percent of every paycheck.
- Save $10 per week.
- Save half of every financial gift you receive (say, for birthdays or graduations). “It’s good to put [bonuses, raises, or monetary gifts from family] into savings or an emergency fund,” says Andrew, a student in Williamsburg, Virginia. “If you don’t plan on having them, you won’t need them.”
Just because you’re living within a budget doesn’t mean you can’t have fun.
- Look for free events, such as concerts and festivals in your town.
- Take advantage of high school student discounts and discount codes.
- Break your “fun stuff” budget into weekly increments instead of monthly. “This will help limit the tendency to spend more at the beginning of the month and then feel deprived by the time the month is over,” says Conrad.
“I make sure I don’t spend [more than] $50 per month, and if I want to buy something bigger, I save this amount for a couple months and then buy it,” says DeLynn, a junior in McKinney, Texas.
Budgeting can feel a bit overwhelming, but it helps to remember that budgets aren’t written in stone. Be realistic when evaluating your spending habits and revise your budget as needed. Keep detailed records of your earnings and expenses, and review your budget every few months to gauge whether your spending and saving goals make sense. With time, sticking with a budget will feel like a healthy habit that helps you do what you need to do while also saving for those things you want and need.
Amy Conrad, program director of CashCourse, National Endowment for Financial Education, Denver, Colorado.
Kurt Rosentreter, certified financial planner, Toronto, Ontario.
CashCourse. (n.d.). Retrieved from www.cashcourse.org/student/Financial-Tools/Budgets
Craig, G. (n.d.). Free From Broke. Retrieved from https://freefrombroke.com.
Getting Finances Done. (2010). Two common objections to using a cash budget. Retrieved from https://www.gettingfinancesdone.com
Money Under 30. (n.d.). Retrieved from https://www.moneyunder30.com Phillyburbs. (n.d.). Does that make $ense? Do budgets work? Retrieved from https://www.phillyburbs.com
Student Health 101 survey, July 2012.
Student Health 101 survey, May 2017.
Rosenberg, E., (2018, April 8). The 8 best budgeting apps to download in 2018. The Balance. Retrieved from www.thebalance.com/best-budgeting-apps-4159414
Vega, C. (2018, January 18). Saving for your dream vacation? Here are the best budget apps to help you. Digital Trends. Retrieved from www.digitaltrends.com/mobile/best-budget-apps/