Creating a Budget for College and Life as a Penn State Student
A budget is an important step your student must take before leaving for college at Penn State. It is good to find a cooperative atmosphere and keep your student involved when you help them to create a budget. Sometimes it is not the easiest thing to discuss depending on the financial capability of the household. Things at college are expensive and your student may not want to come to terms with that at first, but stick with it and you will both come to a reasonable understanding based on your personal family situation.
The first step in creating a successful budget
It is good for your student to take charge in creating a financial plan but it will definitely require the guidance of an experienced veteran in the financial world. When creating a budget start by understanding your current financial situation. Ask yourself some of these questions:
- How much money do I make?
- How much money do I spend on a weekly basis? Monthly?
- How much money do I have saved?
This can be one of the most time consuming parts of setting up a personal budget, but it is essential. You can download smart phone apps to assist you with this task such as MINT personal finance which is a free Intuit product. (Desktop | Android | iPhone. Work with your student on this step and come up with a lot of questions to help make their list as complete as possible. Tell them what expenses you will be helping them with, if any, so they can cross them off the list.
Carefully track monthly spending
The next step will be tracking and recording your students current spending. Choose a typical month where spending is normal (free from large one time expenses such as car insurance) and log every transaction made. A good way to help with this is to log data from receipts and enter them into a budget spreadsheet. An even better way is using the MINT app we recommended previously. You can safely link all of your bank accounts and credit cards to the MINT app and it will log your activity automatically and provide you with exactly the data you need to create your budget. The resulting logs will be an excellent way to pinpoint and eliminate some spending from your daily activities. You will probably be surprised on how much needless spending your student have been doing.
Visualize progress with your money
The next step in creating a successful budget is to find out where you are going with your money. You already found out where you are, it is now essential to redirect your thoughts in the direction you want to go. Make some short term adjustments by eliminating wasteful spending from the list of expenses and put that money towards other things. One of the best things you can do with extra money is to pay down debt. If you are carrying a balance on a credit card or have an auto loan, pay it off before going to college.
Some easy ways to cut spending are as follows:
- Drop cable channels that you do not NEED such as movie channels or sports packages.
- Eat fast food less often and cook instead of eating at a restaurant
- Cut back on entertainment expenses such as movies and purchasing new video games
- Look for less expensive store brands at the grocery store and cut back on snacks and energy drinks
Budget Goals and Rewards
Budget Goals and RewardsThe next thing you must have to create a successful budget goals, and rewards for when you reach those goals. You need to have something to work towards and a way to reward yourself when you reach your destination. An idea we recommend is planning a reward such as with a night of something you may have previously cut out of your budget. Saved an additional $100 this month? Go see a movie and eat fast food with friends.
Examples of excellent budget goals:
- Comfortably reaching a new weekly or monthly savings level
- Paying off a credit card or auto loan
- Making a well thought out purchase you've been saving for
Work unexpected occurrences into the budget
A staple in any budget is an account for unexpected occurrences. What will you do if all of the sudden your student gets ill and can't work for a few weeks. What If they get injured on the job and disability insurance is only 40% of their normal income. You will need to instruct your student to create an account with funds to make sure they will be covered through these times. Create a goal to set aside some money every month and stay ahead of the game for unexpected occurances.
Track your progress and achievements
Do you want to have $5,000 saved by the end of this year? Do you want to pay off your credit card bill and put aside enough for a down payment on a car? Sometimes it helps to track your progress visually by writing it down or making a spreadsheet on your computer. Physically logging and viewing accomplishments releases chemicals in the brain that makes you desire more progress.
