A Complete Guide: How to Budget as a Broke College Student
If you’re wondering how to budget as a broke college student, you are not alone. Thousands of broke college students are thinking the same thing. If only you could save a little money, feel a little less stressed, and set yourself up financially. That’s what this article is all about. We will discuss the ins and outs of how to budget as a broke college student, anything from what budgeting is, right down into exactly how to budget.
I was a broke college student not so long ago, but these are the principles that taught me how to budget as a broke college student. These principles will cover topics like mindset, rules of thumb, and goal setting to make sure you never feel broke again.
What is a Budget?
In the simplest of terms, a budget is a financial plan where you track earnings and expenses. Usually, you will use software or an app to help with this process, but a budget can be mental too (though I wouldn’t recommend it).
A budget helps you save money by managing and tracking your expenses so that you can keep them below your earnings. Many people do not budget and are left either in credit card debt (spending more than they earn) or breaking even (every dollar they earn, they spend).
That is exactly what we want to avoid. Spending too much money doesn’t make us happier and owning more things doesn’t feel good when you are stressed about paying your bills.
Why Budgeting is Important
Budgeting is the foundation of any good financial plan, and if you think that budgeting is only important if you are broke, then you’d be wrong. Even the wealthiest of the wealthiest people follow budgets, whether that’s in their businesses or their personal lives.
A budget is like your air pressure sensors in your tires, but instead of monitoring if your tires are filled too much or too little, it measures whether you are spending too much or too little. A budget doesn’t mean that you don’t spend anything. A budget means that you have a healthy balance in your spending.
Now that we have established what a budget is and why it is important. We can move to how to budget as a broke college student or really as anyone that wants to budget.
How to Budget as a Broke College Student
You googled “how to budget as a broke college student” so I am going to assume you are pretty broke. Maybe you are having difficulty paying your tuition, your rent, or for food. All of the things that you need to survive.
Every college student has looked at their bank account and had their heart sink, but how do we stop that from happening again?
The average college student’s net worth is negative $20,000. Read my whole article about the average college students net worth and how to improve it here.
That’s not a fun feeling, but budgeting is the answer. There are three main categories to discuss when it comes to putting together a solid financial budget. They are…
- Your Money Mindset
- Your Budgeting Goals
- Your Budgeting Strategy
These three categories will help to guide your money saving journey by first understanding your beliefs on money, setting a realistic budgeting goal, and choosing the right strategy to achieve your goals.
The 3 Musts of How to Budget as a Broke College Student
Your Money Mindset
The first and often most important step in creating a budget is understanding what flawed thoughts you have about money. Some of the most common misconceptions that students have about money is that they are just doomed to be poor. Maybe you grew up in a low-income household or you’ve never really seen anyone be successful. Whatever thoughts you have about money, set them aside for a second.
I want you to focus on two things right now. That money isn’t as scarce as you think, and that saving/investing is more important than you think. Most people, especially young students, believe that in college they can’t make a lot of money. They also believe that saving and investing is for after school.
I can tell you now that both of those things aren’t true.
First, there are college students that make good money at their internships, or they work long hours after classes. There are also students that start their own business or side hustle to help earn more money. I was in both of those boats at one point. I know it’s possible.
Second, saving isn’t something you do just when you want to make a big purchase. Saving is something you do to build financial security and to invest money. As the saying goes, a dollar saved is a dollar earned, and a dollar invested is even better.
Additionally, the most powerful factor in investing is time. The more time you have money invested, the more money it will make you. Four years of investing in college can add a lot of money to your accounts down the road.
Your Budgeting Goals
If you want to learn how to budget as a broke college student, you first must have a goal. Your budgeting goal tells you whether you were successful in budgeting or not. You can’t make a shot if there isn’t even a basket for the ball.
Creating your budgeting goal is entirely up to you. It’s important to have a goal that is realistic, manageable, and trackable. Whatever goal you decide on should be relevant to you. It doesn’t make sense to make your goal to save $1,000 a month if you’re taking out a loan to pay for school (there might be some debate on that).
Sometimes this is the hardest part for a student to figure out. If you are new to setting financial goals, then it might even seem abstract to you. Here are some examples of good financial goals to set as a college student.
- Graduate debt free
- Have enough saved for moving expenses
- Save up to buy a car
- Keep weekly food spending under $100
- Save up for a house
- Invest $10 a week or $50 a month
This list is by no means comprehensive, and your financial goals may vary significantly, but this gives you a general idea of how to create a financial goal.
Your Budgeting Strategy
Finally, how to budget as a broke college student by building a strategy that works for you. There are plenty of financial gurus out there that will tell you that there is the BEST way to budget, but in actuality, there isn’t.
The best budget is the one that you can stick with throughout college. Budgeting can be summarized like this. Earn more than you spend or spend less than you earn. How you decide to track that is up to you.
I will give you two easy budgeting tips (two methods) and give you an example of how I use excel to track my budget.
Forward Budgeting
Forward budgeting is an easy method of budgeting where you take your income, and you decide where you are going to spend it. For example, if I make 4k a month and 25% of that goes to housing, 40% towards tuition, 15% towards food and utilities, and 10% towards savings or investments. That is a forward budget.
That means I have $1,000 for housing, $1,600 for tuition, $600 for food and utilities, and $400 towards savings or investments. This may not be the most accurate example, but it’s simple to understand and easy to apply.
This type of budget starts with your income and works its way down as you allocate expenses. Your savings are whatever you didn’t allocate to other expenses. Budgeting this way is useful if you know how much money you will make each month. Forward budgeting is the most common type of budgeting for a reason. It’s easy, it’s simple to track, and it’s effective if done right.
Backward Budgeting
Backward budgeting or reverse budgeting is my personal favorite. Backward budgeting is the inverse as the name states. With a backward budget you start with the amount that you want to save and build the rest of your expenses around that.
Using the previous example. If you wanted to save $1,000 a month you would have $3,000 to fit the rest of your expenses in. In this example, that might mean you find a cheaper place to live for only $500 a month, you spend less on food, and your tuition stays pretty much the same.
The biggest benefit of reverse budgeting is that you know how much you will save every month regardless of any fluctuations in expenses or earnings. Maybe you earn more this month or have lower expenses than expected. Now you can choose to add more to your savings or spend that extra money because you already met your saving goal.
How to Determine Your Actual Expenses
You might be thinking, “How do I know how much I am spending already?”
That’s a really good question. The two places to check are credit card statements and bank transactions. Go over your last few months of transactions, adding up all the expenses for the month. Once you have a couple of data points, find your average spending each month.
Once you have that number you now have your baseline spending. You can cut back on specific areas if needed, such as eating out, concerts, entertainment, or pricy single purchases.
How to Budget as a Broke College Student using Excel
There are plenty of great budgeting apps out there, but I don’t personally use any. You don’t have to be a financial wizard to use excel either and your budget doesn’t have to look pretty. After all it is just a bunch of numbers and transaction descriptions.
You actually only need three key things. Your earnings either by week or month, your expenses either by week, or month, and your savings either by week or month.
Additional details that can be nice are transaction descriptions, expense categories, and savings target or spending amount.
Below are screenshots of a free Microsoft excel template that you can view and download here. There are dozens of free excel templates on Microsoft Creates website. If this template doesn’t match your needs, you should be able to find one you like on Microsoft’s website.
Income Section
Income tracks how much money you make whether from a job, a side hustle, investments, or even gifts. This is what’s called your top line.
Expense Section
Expenses track how much money is leaving your pocket every single month and where that money is going. This is where you make sure you don’t overspend so that you can save. The majority of your budget comes down to how you manage these expenses.
Total Section
Totals this is where you see if you reached your saving or spending goals. Whenever you need a quick glance of your spending/saving health, this is where you’ll go. You can see how much you spent and how much you saved (if you saved at all). This is called the bottom line.
Putting it All Together: How to Budget as a Broke College Student
You made it to the end. Now you understand how to budget as a broke college student. The easiest part is done. You’ve learned everything you need to know, from changing your mindset, to setting your budgeting goals, and creating your budgeting strategy. You have everything you need to start putting money away and living a more stress-free college life.
Your destiny as a college student is not to be broke. Your destiny is not to be stressed out. You have a choice to take action towards your saving goals, and when you do, your whole world changes around you.
I hope you found this article helpful and if you did, I would appreciate it if you shared it with someone else who might find it helpful. If you have a specific topic that you’d like to read about, please contact me below and I will do my best to answer any of your questions.
Until the next article.
**Hi, I am your author Ryan Lisota, and I am on a journey to educate students of all ages. I am young, just like you and I have a goal to be on Forbes 30 before 30. Help me make that dream come true by reading another article here or subscribing to my newsletter here.**
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