Center for Personal Financial Management

How college students can budget in 5 effective steps

By Lauren Twork | February 21, 2024

Many college students get stuck when trying to budget because they don’t have a set income. It is not uncommon for college students to pick up odd jobs to make some spending money. However, it is a good idea to start yourself a “nest egg” for when you graduate and have life thrown at you. You may need to get an apartment, start paying your own bills, maybe you’re going to be moving away for a job and need money for moving expenses, but either way, your student loans will start having to be paid off whether you find a job or not. 

The first step to effective budgeting is to try to determine how much you make per month. If you can’t determine that, then set a goal for how much you want to try to make. Work towards your goal income every month if your income isn’t one stable job and try to maintain that. 

The second step is to calculate your expenses. Where is all your money going? You can easily determine this by opening your online banking app/website, categorizing your expenses, and adding up each category. Categories include: restaurants, grocery store, transportation/gas, insurance, housing costs, entertainment, giving, material items (i.e. clothes, household goods, gifts for others), and miscellaneous expenses . Once you add up each category, it may be eye-opening to see where your money is really being spent the most. This might make you realize that every dollar really does add up. 

The third step is to calculate the difference. Is it negative? Is it positive? If it is negative, hopefully you haven’t been draining your savings or running up a credit card, but now you can make a plan of action. If it is positive, then good job for saving! Are you happy with how much you’re able to save? If you want to save more, typically it is easier to spend less, than to make more money. 

The fourth step is to decide what your goals are. What do you want to use your savings for? A good rule of thumb is to have $1000 readily available for emergency expenses. Beyond that, it is also a good target to have at least three months of living expenses saved in case you get injured or ill and can’t work, or in case some other crisis happens. But, reflecting back on step two, you probably wouldn’t know how much to save, or what categories could be reduced unless you planned ahead, so good job for making it this far. You could also take the percentage route, a good percentage to put into savings/investments monthly for around 25-year-olds is 10-15% of gross income. 

The earlier you invest in your future self, the more rewarding it can be. 

This is a hypothetical example based on information found at johnhancock.com Investing involves risk, including loss of principal, and past performance does not guarantee future results. Diversified portfolios and asset allocation do not guarantee profit or protect against loss. 

Lastly, make it a habit. Or more than that, a lifestyle, because I’m sure everyone wants time to live their life and travel and get into cool hobbies and not have to worry about working at some point. The earlier you save, the earlier that dream can become a reality. Make sure to evaluate your budget at least monthly, or more often if you see it needs to be. Good luck!


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