Saving Money

One of the areas where college students tend to face major challenges is that of personal financial management. On account of being unable to manage their finances well, many college students keep on finding themselves in serious hardship from time to time. Sometimes it goes to the extent of having difficulty affording books — and even food! In the worst case scenarios, we actually see students dropping out of college altogether, on account of being unable to manage their finances well…

Thankfully, there are certain tools that college students can use to get a better grip on their finances. The most effective of those tools is (arguably) the good old budget. Here are some tips to help you in the budgeting process if you are a college student:

1. Be realistic in your allocations

First of all, you have to figure out how much money you actually have and how much money you are expecting to get from various sources. Whether it is the funds you will be getting from your student loan, any scholarships that you are benefiting from, any funds that you are getting from home, any earnings from part-time jobs… just have a very clear picture of your income. Try to work with real figures as opposed to approximations. Then you need to figure out what your expenses are, and ensure that you have a comprehensive picture of the same. Carefully allocate the money you are getting to the respective expense categories, prioritizing essential expenses over non-essentials. Just be sure that the amounts you allocate are realistic. Otherwise you will find yourself having to raid money allocated for certain things to cater for other things, and your budget will ultimately flop.

2. Create the budget in good time

This is a question of seeing to it that you create the budget as soon as you get the money. That is as opposed to what many college students do – where they first go on spending sprees, and only create a budget after having spending a considerable portion.

3. Commit to actually stick to the budgets

It is important for you, right at the outset, to make a mental commitment to stick to the budgets you make. Even if it means subjecting yourself to certain inconveniences. There is no point in creating a budget, if you have no commitment to stick to it. The challenge that many college students face is not in terms of being unable to create budgets. Rather, it is in terms of being able to stick to budgets. So they create excellent, detailed budgets — then they fail to stick to them! Or they stick to the budgets for a few days, before losing focus… You can avoid this pitfall by making a mental commitment (right from the outset) to stick to the budget you create, no matter what. Sticking to a budget is not always easy. Temptations to make impulse purchases abound. But if you make a strong mental commitment to stick to the budgets you create, the whole thing tends to be much easier.

4. Track your expenses

After creating a budget, the next important thing is to ensure that you carefully track each and every expense you incur, in order to ensure that you are actually adhering to the budget. So before incurring any expense, you try to figure out what budget category it belongs to. And after incurring the expense, you figure out how much money is remaining in that expense category. Then you try to ensure that you don’t go beyond the amounts you had set up for the various categories. That is the ABC of budget implementation.

5.Make some savings for emergencies

The fact that you are a student doesn’t make you exempt from financial emergencies. It is therefore important for you to ensure that you allocate some money to emergency savings in every budget you come up with. You then need to ensure that you don’t raid those emergency savings to cover gaps that arise in other areas of your budget. If the period you had budgeted for ends without an emergency arising, you can roll over the emergency savings to the next budget period. This would mean that during the next budget period, you don’t have to budget for emergency savings. The money that would have gone into emergency savings can then be spent on other things. Alternatively, in the next budget period, you can still make an allocation for emergency savings: meaning that your emergency savings fund would have grown in size.

6. Make some savings for financial goals

The fact that you are a student doesn’t mean that you shouldn’t have financial goals. On the contrary, you need to identify some worthwhile, realistic financial goals to work towards. Then make a point of allocating money towards those goals in every budget you create. Having some financial goals that you are working towards gives you a reason to stick to your budget. It is a strong motivator. In the absence of some financial goals that you are working towards, you are likely to find yourself often wondering what the point of creating and stick to the budgets is. So what sorts of financial goals can a student set? Well, you may, for instance, set a target of having X amount of money saved up by the time you graduate from college (to help you get started in life out there). Or you can set a goal to buy yourself a car or to start some sort of business… So you just set up the goal. Then you ensure that, in every budget you create, you allocate some money towards the said goal.

7. Consider using a budgeting app

If the process of manually creating and tracking a budget feels like too much work, you can consider using a budgeting app. A budgeting app makes the budget-creation process easier — by giving you expense and income categories which you then only need to feed figures into, in order to come up with budgets. And if you link it to your bank accounts and credit cards, it can help you in real-time expense tracking. There are certain budgeting apps that are created specifically with students in mind, and you can consider using one of those.

A budgeting app can help reduce the amount of time and effort you have to put into creating a budget. Some budget apps go beyond that: they also help you in the process of implementing the budget. It is for these reasons that you may find yourself inclined to start using a budgeting app. That would then lead you into wanting to know what the use of a budget app entails. In other words, you may find yourself wanting to know what exactly you need to do, in order to tap into the benefits offered by budgeting apps. That is the question we will be attempting to tackle, as we give a step by step guide on how to use a budgeting app.

If you want to use a budgeting app, you will need to:

Download and install the budgeting app

So you first decide on which specific budgeting app you are to use. There are dozens (if not hundreds) of budgeting apps in the market, and you need to explore several, before ultimately settling on one. You could opt for one of the free budgeting apps. Or you could opt for one of those budgeting apps that have to be paid for. You could opt for a budgeting app that only has basic features. Or you could opt for one with sophisticated features. You could opt for a budgeting app that is based on the traditional (incremental) budgeting method. Or you could opt for one that operates on zero-based budgeting… Just ensure that the budgeting app you settle on is one that is ideal for your needs. And after selecting the specific budgeting app you will be using, go ahead and download it. Ensure that the source you are downloading the app from is a trustworthy one. The actual download and installation process should be straightforward. On most app stores, once you click on the ‘Install’ button for the budgeting app you settled for, it should be almost instantly downloaded and installed on your device.

Explore the expense categories in the budgeting app

A budgeting app will typically have expense categories which you (as the end user) are expected to fill figures into, in order to come up with an actual budget. Explore the respective categories, to identify the ones that are applicable to you. Some budgeting apps allow you to create your own expense categories, in case the ones that are available by default don’t sync with your circumstances.

Fill in the income details

This is where you are expected to enter the details for the income that you are budgeting for. The most important thing at this point is to ensure that all your income sources are captured. If you are on a fixed salary, this should be easy – as it is just a matter of entering the salary figure. But if you are on a variable income, it can be a little bit complicated, and you would probably have to make some approximations. Just ensure that you enter the right income details.

Fill in figures for the various expense categories

This is the most crucial point in the budgeting process. It is at this point that you make decisions on how much money you are to allocate for various items. It is also at this point that you get to differentiate your needs from your wants, then prioritize the needs over the wants. The most important thing is to ensure that your allocations are truly realistic. You also need to ensure that all your expenses are captured in the budget. You of course also need to make allocations for emergency savings as well as savings for the various goals you are working towards.

Consider linking the budgeting app to your accounts

Most budgeting apps have the capability to link with accounts and credit cards. The objective behind this is to track expenses as they are incurred (in real time). The end goal is to ensure that the budget is actually being adhered to. You may (understandably) be uneasy about the idea of granting the app full access to your account and credit card transactions. But if the people behind the app are trustworthy and the app is secure, there should be no reason for you to be too worried. But if you ultimately decide against linking the app to your accounts and credit cards, you would need to be logging the expenses in real time as they are incurred, and that is quite a bit of work.

Ensure that each expense is logged into the app

The idea here is simply to ensure that the budget you created using the app is actually being adhered to. If you opted to link the budgeting app to your bank accounts and your credit cards, some of the expenses that are incurred would be automatically logged into the app. But for stuff that you pay for in cash, you would probably need to do the expense logging manually. Just ensure that each expense is captured. This is really just a question of figuring out what expense category it belongs to, and then ensuring that the amount you spent is captured there. It would then be deducted from the amount you had allocated for that particular expense category.

Ensure that you don’t exceed the spending limits

Most budgeting apps have the capability to detect when you are nearly exceeding the spending limits you set up for various expenses. They then alert you of this fact. Of course, you can always adjust the limits upwards and the app won’t stop you from doing so. But if you keep on doing this, it will beat the purpose of setting up the budget. If you have to go beyond the limit you had set for any expense category, you need to figure out which other expense category you would draw money from to cover the gap. An important aspect here is to ensure that you don’t raid your emergency savings or the savings for your various goals to cover the gap. You should only tap into your emergency savings if whatever is causing you to go beyond the spending limits is an actual emergency. Otherwise if you tap into your emergency savings for non-emergency expenses, then an actual emergency comes up, you would find yourself in a hard spot. Similarly, if you keep on raiding the savings you had allocated for your various financial goals, it would mean that you end up not achieving those goals on time (or at all).