Dave Landry Jr. is a financial consultant and economist dedicated to blogging and the creation of infographics in his down time. He has two young daughters who will be graduating from high school before he knows it, and will be sharing these budgeting tips with them as well. He hopes you find these tips useful for your own pre-college budgeting, or if you’re a parent, will give some of this advice to your children.
Congratulations, you’ve made it through high school! As you get ready for the next big step, it’s important to learn real world skills that will help you transition not only from high school to college life, but also from college life to the world beyond.
Budgeting skills are important in everyday life; learning how to manage your money before you’re on your own in college will keep you from overspending and finding yourself deep in debt. Below are some budgeting tips that will help you get started on to that path to financial security.
1. Learn to track your spending. The first step to creating a budget is to document everything you spend money on or buy. Whether you stick with an old-fashioned notebook and handwritten lists or choose to download spending tracker apps for your smartphone, track everything you spend for at least a month. It doesn’t matter if it’s as small as a pack of gum or a soda from the vending machine at school. While not strictly necessary, it would be good to include notes on your spending behavior, like how you paid for it, where you bought it, and why you bought it.
After a month’s documentation, you’ll have a better sense of where your money is going. If you use apps or a spreadsheet, you can quickly see how much you’ve spent on entertainment, car expenses, clothing, food, and school-related purchases. This will form the base categories of your budget.
2. Learn to develop a budget. Once you’ve established where you spend most of your money, start to set up a budget. The budget will consist of the major categories established during your spending, and will include a space for savings, emergencies, and income.
Ideally, you’ll create this budget on a spreadsheet, or using one of the free online budgeting tools or apps. Once you graduate from high school and enter college or the workforce, your budget categories will change and shift; using a malleable system allows you to customize and adjust as needed.
Establish spending maximums so that your spending doesn’t exceed your income.
3. Pay yourself (start saving). One of the important categories in your budget should be a savings account. Even though interest rates on savings accounts are low right now, putting money in the account is more about the practice and the act of creating an emergency fund, than it is about making your money work for you (even though it is a good idea to start thinking about investments and interest rates).
Whether you’re saving for a rainy day, or towards a particular big purchase like a post-graduation trip or a new car or college, getting into the habit of “paying yourself” and including it on your budget will serve you well in your adult life, when you won’t necessarily have alternative sources of financial assistance.
Learn to prioritize within your budget by putting money in your savings account before you spend any of your income or allowance on entertainment.
4. Figure out financial aid, student loans, and other means of paying for college. Most families will need to rely on financial aid and student loans to pay for school. As you, the student, will need to start paying back the loan as soon as you graduate (up to a six month grace period, or possible deferment if you are going to graduate school), it’s important that you learn as much about your options before taking out the loan. Don’t borrow any more than absolutely necessary for tuition, room and board, and other essentials.
5. Get a summer job. Now that you have a sense of your expenditures, and can project how much you need in order to fulfill all your bills and other costs, you need to start bringing in income. If you’re not already working a part-time job of some sort, consider getting one in the summer between high school and college. Previous work experience can help you get a coveted college job, which will help with bills that the student loan doesn’t cover.
Keeping to a budget isn’t as boring or challenging as it may seem. These are necessary skills that can translate into an opportunity to study abroad, buy that dream car, or have money on hand for an emergency, which greatly reduces stress in the long run. Learning to manage your money is a skill you’ll use for the rest of your life. You can also consider obtaining your education online through affordable programs that offer equivalents of in-classroom learning and degrees. Online degree programs also allow students to pursue their education at their own convenience, allowing them to work full-time to support themselves or a family if need be.