While I was in school, I worked numerous jobs, managed the majority of my bills, and tried to plan for my future where I would graduate and enter into the real world. But I noticed as the years passed that there were a lot of topics (budgeting being a huge one) that I wish I had learned.
Now mind you, this is Budgeting 101. So we’re going to start small with the basics. For some more in-depth information about budgeting and ways to save, check out my other blog posts.
So today I want to share the top 5 budgeting tips I wish I had access to when I was in college:
1. LIVE BELOW YOUR MEANS THROUGH CREATING A BUDGET
For many people, college is the first time you begin paying at least some of your own bills, possibly all of them. The biggest piece of budgeting advice I can give is to do everything in your power to live below your means. (Means = the amount of money you have coming in) I know that seems like common sense, but I’m also saying to not live paycheck to paycheck.
Now, I know there absolutely are times where you can’t help your circumstances and you can only just scrape by at the end of the month. And that’s totally fine. However, what I’m trying to say is that when you look at apartments, make sure you’re consulting your budget for what you can afford. Maybe consider having a roommate or two to keep costs low.
Ideally, you want to be able to consistently put some of your money aside each pay period into savings for when something comes up — and you’ll find that something always comes up. If your expenses end up being equal to or just under what you’re making, you’ll find yourself coming up short more than just once or twice.
* A secret I learned during my own trial and error in budgeting during college: if you have been just scraping by to pay bills, when you get a raise, try to keep your budget the same. That way you can put the extra money aside until your savings are in a stronger place and you receive another raise or change jobs.
2. CREATE TWO SAVINGS ACCOUNTS
When you’re handling bills, payments for school and books, and of course pizza at midnight with your roommates, the best thing you can do budgeting-wise to keep everything organized is have three accounts — one checking account and two savings accounts.
Your checking account is where everything flows — receiving paychecks and paying bills.
The first savings account is a short-term savings account. This is where you should have an emergency fund of at least $100. If you ever need to dip into your emergency fund (like if you get a flat tire), replenishing that fund should be your first priority in this account. After that, this account could be used to save up for a trip, purchasing a new computer, or anything that isn’t factored into your usual budget each month.
The second account is for long-term savings. Anything you deposit into this account you should plan not to touch — pretend it’s not there, and as if it’s completely unaccessible to you. This money is for the future. When you’re making out your budget, see how much you can take out to put towards long-term savings, whether that’s $5, $20, any amount is better than nothing. (I also would recommend you set up any paychecks you receive to automatically move a percentage of your income so you get used to not seeing that money in your checking account)
You may see people talking about how you should have 6-8 months of bills in your savings in case of a *cough* pandemic. And they’re not wrong — if you’re able to begin contributing to your savings in that way, I applaud you. These are just building blocks. I believe in taking one step at a time before trying to run. But you do you.
3. GET A CREDIT CARD TO BUILD CREDIT — AND KEEP ONE MAJOR THING IN MIND
Credit cards can be a double edged sword if you’re not careful. This is something you should not open unless you know you can be trusted with the money you already physically have in your account.
You should treat your credit card as if it is the same as cash — if you do not have the money currently sitting in your bank account, you should not be charging anything. Personally, I’ve found that convincing yourself that it’s okay to get something because you get paid next week or in a few days makes it difficult to have restraint. (You’re also likely to buy other things) Credit cards let you have things now, but what people forget is that you’re still paying for it. So you need to have that money in your account in order to buy it.
Some other thoughts on credit cards and budgeting:
- Go for a credit card with a cash back option, like the Capital One Journey card
- Do some research on which cards have a 0 APR (annual percentage rate), and which credit cards are good for people just starting out
- When you pay your credit card, PAY. IT. IN. FULL. Never just pay the minimum balance, otherwise you’re getting charged interest (also it likely means you don’t have the funds in your account to afford what you bought)
- Start out with one credit card and consistently pay the total amount each month
- Never open another credit card to pay off your credit card — that’s how debt can start to snowball
- Don’t open a credit card with a store (Sephora, Kohl’s, Old Navy, etc.), it’s just not worth it
4. WHEN YOU START YOUR FIRST “BIG GIRL/BOY” JOB, OPEN A 401K
This is the big one I wish I had known more about when I was younger. Once you get your first career job, open up a 401K — even if your company doesn’t have a match.
What’s a 401K? Think of it as a savings account for your retirement that you’re not allowed to touch until you’re 59 1/2. It’s also taken out of your paycheck before taxes. (The difference with a 401K vs. a Roth IRA is that a 401K is taxed later)
Why should you care now? Because the money you add to a 401K will generate interest, and the earlier you start, the more money you will have when you want to retire (like A LOT more).
What is a company match? What that means is that the company you’re working for also puts in payments towards your retirement. But if you don’t have your 401K set up, you don’t get to claim that money later. So you miss out.
Pro tip: if, for example, your company is willing to pay 100% of 10% of your paycheck, you should have at least 10% of your paycheck withheld for your 401K. Why? Because that is the maximum your company is willing to pay towards your retirement. And you want to get the maximum amount possible since they’re the ones paying for it.
5. DON’T ASSUME IT WILL BE YOUR FUTURE SPOUSE’S JOB TO HANDLE BUDGETING THE FINANCES
This is mistake I made in college. I kind of assumed that my husband would be the one managing our finances, budgeting, and letting me know if I could afford to redecorate the kitchen. Don’t get me wrong, I definitely thought I’d have a role in it. I even thought that we would partner.
But then I married someone who really struggles with math concepts. Not his fault at all — he actually takes on a lot of the responsibilities I thought I would be saddled with in our marriage. However, what that meant was that I had to play catch up.
I hope that some of these tips were helpful for you! If you have other recommendations for college students and those just starting out, leave them down below in the comments.
Much Love,
Jenn
