The cost of a college education has risen faster than inflation and remains a significant financial concern for families.
Creating a college budget can help ensure that you don’t overspend and that you have enough student loans, grants or job earnings to get you through the end of the semester.
Here’s how to budget in college.
How to Build a College Budget
Tuition costs. Your college spending plan has to start with an understanding of tuition, room and board costs at your college. Published prices can vary anywhere from more than $20,000 annually at a public in-state four-year college to nearly $50,000 annually at a private college, according to an analysis of 2018-2019 average estimated undergraduate budgets from the College Board. But your financial aid package may lower your actual costs.
Books and supplies. Next, add the cost of textbooks and school supplies. Be sure to plan on a laptop and printer as needed by the school. On average, books and supplies cost more than $1,200 at a four-year university, according to the College Board report.
Transportation. Whether you plan to walk, bike or take the bus, add the cost of transportation. If you are planning on owning a car, be sure to factor in the total costs, including payments, fuel, repairs and insurance.
Discretionary spending. For many, the college experience is broader than just the classroom, so include the cost of clubs, sports and Greek life or even a semester abroad if that is in the plan. Summer plans may mean additional expenses for travel to visit family or vacation with friends. Travel is rarely cheap, so it is important to factor summer plans in your college student budget. Finally, everyone needs to live, so add entertainment, clothing costs and something extra for discretionary spending.
All of the expenses should be organized into a list on a spreadsheet to make it easy to reorder, edit and tally up individual expense items.
Optimize and Save
Once you have a sense of your expenses, analyze where you have flexibility to lower your costs. If you haven’t committed to a college yet, note the relative prices and potential net costs of the universities on your radar. And it is sometimes less costly if you live at home and commute instead of living on campus. Also, forgoing a car is another way to save significant expense.
It is not just the big-ticket items that can be analyzed and optimized, but the small expenses that can be reduced. For example, purchasing used instead of new textbooks and buying a coffee maker instead of visiting Starbucks daily can save you money. A student can often get free meals by working at a restaurant and save on health insurance by staying on a parent’s health plan until age 26, as allowed by the Affordable Care Act.
These are just some examples of how significant savings can be found by being thorough and relentless in analyzing regular expenses. It is worthwhile to redo this exercise annually as the nature of expenditures change.
Graduate On Time
Only about 40% of first-time, full-time bachelor’s degree students who started a four-year college degree in 2011 finished within four years, according to the National Center for Education Statistics.
Do your best to have your major and choice of college figured out to minimize the chance of switching majors or colleges and costing additional money and time. If you are unsure of the major or choice of college, at least make sure your credits will transfer to likely alternatives. Also, if your grades are borderline, be proactive in seeking a tutor or other academic help to avoid repeating a class.
Remember, each additional year in college adds significantly to the cost of a four-year undergraduate degree, so it is very important to keep on track and graduate on time in four years.
Once you have a college student budget, the next part is tracking expenses to make sure you truly understand how much you’re spending. When devising a system for tracking expenses, remember that any such system is not foolproof but should generally capture most of the financial costs. Leave yourself some financial wiggle room to adjust your budget in case expenses turn out higher than planned.
When it comes to tracking expenses, electronic payment methods make expense tracking more thorough and simple. This is especially true when combined with budgeting tools such as Mint or Clarity Money. A note on managing money as a college student: Credit cards come with a warning. A high-limit credit card makes it too easy for a college student, without a lifetime of financial discipline, to overspend and end up indebted.
One way to mitigate that risk is to use a lower limit credit card that is monitored by the parent and paid off monthly. A credit card is best used as an expense management tool instead of a way to borrow money. If you do need to borrow, consider other sources such as federal student loans.
Think of College as an Investment
Given the enormous cost of college, it is sometimes easy to focus on the costs and forget the opportunity college provides in life. It is important to choose your college and major wisely since they will help determine the return on investment from college.
Remember, regardless of whether you want to be a pediatrician, paralegal or puppeteer, it is important to be motivated not just in studying the field, but in making a living in that field. Even if the chosen career does not promise riches, it should provide a good living commensurate with the college costs and your goals in life.
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