For college students, for whom fun opportunities seem endless, budgeting may not be a priority.
Unfortunately, lots of these fun opportunities cost money.
It can be very tempting to sign up for all the clubs, attend all the sporting events, and take part in every school trip. After all, you’re finally on your own, and you have no one telling you what time you have to get home, how long you have to spend studying, and which concerts you should definitely not attend.
So maybe you splurge.
But when you finally check your bank account, you might find yourself stressed and ready to panic.
Budgeting can help you avoid this moment.
Although this can seem overwhelming (especially if money management is new to you), we’re here to help you avoid several common pitfalls when it comes to budgeting.
1. Not tracking your spending
Tracking your spending is a key aspect of creating a budget. By doing this, you can determine how much you spend on average on a daily/monthly/annual basis. Then, from there, you’ll be able to determine where you’re making unnecessary expenses.
If you simply try to make a budget off an estimate, you may create a budget that’s either too high or low.
After you’ve made your budget, it’s important to continue tracking your spending. If you don’t, you won’t know for sure when you’ve reached your spending limit.
2. Setting an unrealistic budget
On one hand, it can be easy to fall under the trap of trying to create a budget that will leave you with a ton of savings. On the other hand, it can be tempting to create a very low budget in an effort to make the most of your life during college, a time where you may have plenty of fun opportunities involving expenses.
However, this often leads to an unrealistic budget. If you have an unrealistically high budget, you may get discouraged and end up shelving the whole thing. If your budget is way too low, you might find yourself in financial trouble later on.
3. Not accounting for emergency expenses
It’s pretty easy to tell yourself that you’ll be responsible—and that you won’t ever run into a situation where you need to use emergency funds.
But that’s simply not the case!
As a college student, you’ll want to be as prepared as possible, especially if you won’t be able to seek financial support from your guardians in an emergency situation.
Bottom line: make sure to account for emergencies when crafting.
4. Estimating/guessing costs
It makes sense that you’d opt to estimate your monthly expenses rather than going through and actually figuring it out—it’s the easier option. However, this can result in a poorly-made budget.
And if you end up realizing that you’ve done this, you’ll probably have to go through and figure out your true expenses anyway.
So take the time to go through your bank statements (over the last few months), and tally up your expenses in various categories (i.e. groceries, school supplies, clothes, etc.)
5. Not leaving wiggle room in your budget
Here’s the thing—you can’t plan for everything. It’s unrealistic to expect to follow your exact budget every month, because you’re human; and life happens.
For instance, maybe your energy bills increase, or perhaps you decide to start volunteering and need to pay for transportation.
Ensure that you’re allowing yourself some wiggle room in your budget—when the time comes, you’ll thank yourself.
6. Not asking for help with budgeting
If budgeting is new to you, you probably have some questions. And managing finances can become overwhelming very quickly if you don’t get them answered.
Although asking for help is difficult for some people, in this case, avoiding getting support is doing way more harm than good.
Likely, there are some people in your life who do have some knowledge in the area of finances. Whether it’s your friends, classmates, academic mentor, or teachers, seeking answers is well worth the effort.
7. Neglecting to use online resources
And if you find yourself struggling to find someone who can help you, we live in the 21st century, so you still don’t have an excuse. The internet is filled with helpful resources where you can almost definitely find the answers to your questions.
When it comes to financial questions, some helpful resources include:
- The IRS’ Interactive Tax Assistant program
- The SEC
- The Financial Literacy & Education Commission’s MyMoney.gov
- The Consumer Finance Protection Bureau
- The American Institute of CPAs
8. Prioritizing wants over needs
This one’s tricky. With all the fun opportunities you may have in college, the logical decision may, at the time, be to prioritize them. After all, how can you pass up on the chance to visit the local state fair and try just about every tasty treat that’s been fried and placed on a stick?
However, (you see where this is going), if you’re always prioritizing the fun stuff instead of the necessary stuff, you may find yourself in a pickle. When it comes down to it, you’re going to want to have funds for all your true necessities—food, housing, medications, etc.
Of course, this isn’t to say that you should cut out fun from your life—you definitely shouldn’t! But it’s a balancing game. You’ve got to ensure that you’re leaving room in the budget for your needs.
If you’re ever struggling to determine whether something is a “want” or “need”, ask yourself if there is a less costly alternative. If there is, it’s probably a “want”.
9. Not revising your budget monthly
You can never expect your life to be fixed. On a month-to-month basis, you may run into various things that impact how much you spend.
For instance, if you take on a part-time job at your campus coffee shop, you’ll be earning more. Or, on the flip-side, if you join a club that involves travel, you’ll need to account for new expenses.
So ensure that you’re putting aside time each month to determine whether or not you need to adjust your budget.
10. Budgeting based on your gross income
Unfortunately, making a budget isn’t as straightforward as looking at your income and determining how much you can spend. Using your gross pay (what you earn before taxes) to make a budget can lead you to create a budget that’s too high.
You have to account for taxes, health insurance, and other payroll deductions. So when creating your budget, you’ll want to use your net pay (or take-home pay) to determine what you’ll be looking at.