Why is a Budget Important as a College Student?

Creating a budget in college is an essential step in understanding your financial situation. College students face many financial obligations, such as student loans, rent and other bills.

Karissa Ellard, a financial aid specialist at Southern New Hampshire University (SNHU), said budgeting helps you avoid overspending and accumulating too much debt. Without a budget, you might end up spending more on things you don't need, which could leave you short on money for important expenses.

By budgeting, Ellard said, you can "identify spending patterns, take corrective action and plan for the future." This habit not only helps during college but also prepares you for managing your finances after graduation, she said.

How to Budget as a College Student

One of the first steps in budgeting is understanding how you currently spend your money. Ellard said one way to do this is by looking at your bank statements from the last few months and asking yourself if your money is going toward necessities.

According to Ellard, you can start by asking yourself, "Are there areas where I can cut spending?" Once you've identified those areas, she said, you can set financial goals, such as saving a set amount by a certain date.

5 Advantages to Budgeting in College

Creating a budget while you’re in college can help you in more ways than you might think. Here are five benefits that budgeting can offer, according to Ellard: 

Prevent Overspending and Avoid Debt

Creating a budget can keep you mindful of your finances, helping you avoid spending too much or falling into debt. By understanding your financial capacity, you can make better choices with your money.

Balance Essential Expenses

Budgeting ensures that you can cover important expenses like rent, utilities and groceries while still having money left for other necessities.

Identify and Correct Spending Patterns

When you budget, you can look at your spending habits and make necessary changes. This allows you to plan for the future and work toward your financial goals.

Build Emergency Savings

Budgeting makes it easier to save money for emergencies. Setting aside funds can protect you from unexpected expenses, such as car repairs or medical bills.

Prepare for Financial Success After Graduation

By learning to budget now, you can build strong financial habits that will help you manage student loan repayments and other post-college expenses.

What Tools Can You Use to Create a College Student Budget?

There are several useful tools to help you create a budget while in college. Scott Fournier, associate director of student financials at SNHU, said his favorite is the budgeting tool on iGrad, which is available at no cost to SNHU students and alumni.

Fournier said iGrad "not only helps students budget effectively but also equips them with the knowledge and resources to make informed financial decisions."

If you're looking for other options, he said, "You can create your own spreadsheet or explore budgeting apps like You Need a Budget (YNAB)." These tools can make budgeting easier by tracking your income and expenses, helping you stay on top of your financial goals. However, apps like YNAB usually come with a monthly subscription.

According to the Federal Student Aid, an office of the U.S. Department of Education, choosing the right tool to manage your budget is important. Whether it's a spreadsheet, pen and paper or a budgeting app, having an organized way to track income and expenses will help you stay on top of your finances.

Here are some other money-saving apps students can use:

• EveryDollar: A tool that lets you assign every dollar to a specific category for easy spending tracking.
• Goodbudget: A budgeting app that helps you divide money into categories to stay within spending limits.
• Mint: An app that tracks spending, sets budget goals and alerts you to bills or unusual transactions.
• PocketGuard: This app shows your available disposable income after covering bills and essential expenses.

How Can You Plan Your Next Steps and Save Money?

After creating your budget, it's important to think about how this habit can impact your financial future.

Kerry Koziell, a training team lead for the financial literacy department at SNHU, said that budgeting in college helps you get ready for student loan repayment after graduation. By including expected student loan payments in your budget, you can better understand what kind of income you’ll need to maintain a healthy financial life.

A common mistake students make is thinking they don’t have enough income to start budgeting. "Budgeting, even with limited income and expenses, helps to avoid financial pitfalls like overdrafting a bank account or missing an important payment," Koziell said.

By practicing budgeting now, she said, you'll be prepared to avoid costly fees and learn more about your spending habits. Once you see patterns in your spending, you can tackle issues like emotional spending or living beyond your means.

If you're able to set aside part of your income in a separate savings account, Koziell said "An emergency savings account can be a lifesaver if there is, for example, an unexpected job loss or an unexpected car expense."

To find more savings opportunities, she said to categorize your spending into "wants" and "needs." By cutting back on some of your wants, you may be able to save more.

Budgeting in college can help you manage your finances and prepare for the future. By tracking your spending, saving for emergencies and planning for student loan repayments, you can develop habits that support your financial goals after graduation.

Ollie Burkett is a writer at Southern New Hampshire University, where he is pursuing his Master of Arts in English and Creative Writing. You can connect with him on LinkedIn.