College budgeting: How to budget as a student

College is an exciting time: You’re surrounded by new people, new opportunities, and a chance to dive into the next chapter of your academic career. But this transition also comes with different financial realities—and the need to develop new skills around spending and saving money.

Along with navigating your new campus and sharpening your study skills, there’s another key lesson to learn: how to create a college student budget. When done right, a budget can help you limit debt, build some savings, and accomplish your goals. Need to make sure you have enough for textbooks, rent, food—and some left over for a little fun? Want to spend a semester abroad? Creating a college student budget can help with these goals and more.

Whatever financial issue is giving you trouble, Katie Waters, CFP®, founder of a financial planning firm, has tips for how to set yourself up for success. Here’s how to get started.

Assess your income and expenses

As you begin building your college student budget, you first need to figure out how much money you have coming in and how much you have going out. You can use anything from a simple spreadsheet to a budgeting app to track your income and expenses.

How should students pay for monthly expenses? Start by writing down all the sources of after-tax money you get each month, Waters says. That includes money from a part-time job, financial aid, stipends, grants, loans, or a monthly allowance from your parents.

Next, figure out how much you’re spending each month. Waters recommends looking back at three months’ worth of your expenses. To do that, refer to your debit and/or credit card statements, plus any record of money sent through payment apps.

You should account for every dollar you’ve spent, Waters says, separating expenses into common categories such as:

• Cell phone
• Food
• Entertainment (movies, fun with friends, streaming services)
• Clothing
• Internet
• Transportation (airfare, bus tickets, car insurance, gas)
• Tuition
• Room and board or rent
• Textbooks and school supplies

The point is to add up everything, Waters says. “We want a line item for it all.”

If you’ve gotten this far and you already realize that your expenses weigh in heavier than your income, consider ways you could start giving your income a leg up. Check out these tips to help you make money as a college student.

Create your college student budget

Making and following a college student budget is the best way to ensure you have enough money to pay for the things you need while still having some money left over for the things you want. Here’s how to budget as a college student:

1. Create your spending categories.

Your budget should contain categories for all your major spending groups. (Refer to the list of expenses you created when assessing your expenses.) Then decide how much you must spend for each and assign a dollar amount or percentage to that category.

2. Choose a type of budget.

There are different budgeting styles, and Waters notes that one might fit your specific situation better than another. You could try the 50/30/20 rule, which allocates 50% of your money toward needs (food, textbooks, tuition); 30% toward wants (entertainment, clothing); and 20% toward savings.

You can also go with the envelope system, which involves setting aside a limited amount of money for each spending category. Once you hit the limit in a given category by running through money in its envelope—whether literal or digital—you can’t spend any more in that category until the next budget period begins.

3. Optimize your budget regularly.

Once you’ve set a budget, keep track of it. If you’re consistently under or over, see if there are areas where you can save more or spend less. As your needs change, so should your budget.

Prioritize essential expenses

Whichever kind of college student budget you choose, make sure necessities such as your tuition payment (if you’re paying for school yourself) or things like bus fare to get to your part-time job are covered. To make that easier, Waters says you can find ways to reduce your expenses, such as:

• Renting, borrowing, or buying used textbooks
• Buying snacks in bulk or cooking meals that are large enough that you’ll have leftovers
• Asking for student discounts when shopping in person or looking for online discounts
• Opening a cash back checking account or using a cash back rewards credit card to earn rewards¹ for purchases you already make.

Focusing on what you must pay for first can help to lessen the debt you acquire, Waters says. Bonus: If you can do that, you’ll also reduce the amount of interest you’ll have to pay while in school or after you graduate.

Manage your fixed and variable expenses

Certain expenses, such as your cell phone or car insurance bill, typically stay the same every month. Those are fixed expenses. Variable expenses include costs that can change from month to month, like food, gas, or entertainment, depending on your behavior. Variable expenses can be tougher to budget for, but they can also provide more flexibility to your budget.

The envelope budget method can help you learn to budget more accurately for variable expenses when making a college student budget. For example, let’s say you spent $140 dining out in month one, $175 in month two, and $120 in month three. Take the average of the three—$145—and set that as your “dining out” monthly line item that you shouldn’t exceed.

“The biggest ‘don’t’ for college students is saying yes to everything,” according to Waters. Instead, it’s important to set limits. “Get to know your town and find ways to hang out that are free or low cost.”

Save for emergencies

College might not seem like a natural time to save money, especially if you’re not making much to begin with—but it can be done. And saving money will be a critical skill you can continue to use throughout your life.

Often, the easiest way to save is to make it automatic, Waters says. You can automate your savings by opening a savings account and setting up regular transfers from your checking to your savings account. You can choose how much is socked away based on a percentage of your income, as with the 50/30/20 rule, or you can set aside a chunk of your remaining balance at the end of each month.

It’s also important to try and build an emergency fund, even if it’s small, Waters says. An emergency fund is money you use for unexpected expenses—think paying to fix a flat tire, covering medical bills, or repairing a malfunctioning laptop. A good goal for the amount to save in an emergency fund is three to six months of your expenses. That might sound like a lot, but you can build your savings slowly over time.

Waters notes that a savings account or emergency fund is also a great place to stash cash you weren’t expecting to receive—like birthday money from Grandma. Think of it this way: If you save $25 a week, in just six months, you’ll have saved $600. This is also a great chance to learn how to invest as a college student. By keeping your savings or emergency fund money in a high-yield savings account, you can watch how your savings grows over time with interest.

Start building your financial foundation today

Once you’ve set a budget that you feel comfortable with, make sure to regularly check in with yourself about your spending. One trick that’s great for budgeting for college students is a financial checklist, which helps you look closely at your spending habits and whether your needs have changed. Earning more or less money, a change in your rent, or a tuition hike can make it necessary to reassess your budget and tweak as needed, Waters says.

College can be the perfect time to start your financial future off on the right foot. Things like building credit, saving for retirement, and creating a thriving savings account all come from making the right choices early—and regularly. Getting a handle on your finances in college with a college student budget is one of the best first steps you can take.

Creating a budget and learning to manage your finances as a college student can put you in a stronger financial position when you graduate. Here are some of the first steps you can take to ensure your long-term financial wellness.

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