Budgets are one of the easiest financial concepts to grasp, partly explaining why the country’s budget deficit has been such a large talking point during the run-up to the 2012 presidential election.
Everyone can appreciate that if more money goes out than comes in, it’s ultimately unsustainable.
The gap between knowing what to do and doing it, now, there’s the challenge. So much is written on budgets, as it is on weight loss. There are parallels: you can’t abstain from money any more than food, so the goal is lifestyle change if your life has gone out of balance.
Sometimes people hear “budget” as they hear “diet” but what feels like deprivation will backfire. That’s why financial advisor Galia Gichon advocates that your saving include a “splurge fund” as part of an approach she calls “Weight Watchers for your money.” (You can view her budgeting video here.)
Budgeting Is Basic:
- Money in must exceed money out*
- Track spending
- Distinguish fixed from variable expenses
- Distinguish needs from wants
- Trim spending to stay within your means and allow you to save
* Day-to-day spending. The minus side of the equation may temporarily be bigger than the plus side because of prudent debt that can be considered an investment in your future, such as student or mortgage loans.
What Are Typical College Costs?
Anticipating your expenses can seem daunting with few costs known for sure, such as tuition and room and board.
Various entities offer guidance. They don’t agree on likely costs, but do agree on the top categories of expense.
Top Categories of College Expenses:
2. Room and board
3. Books/supplies and/or health insurance*
5. Personal expenses/other
*Unlike others categorizing college costs cited here, WCSU includes sickness insurance at $1,087 for both in- and out-of-state students, who aren’t covered under someone else’s policy. (Remember, under President Obama’s health insurance reforms you can now stay on your parents’ policy until age 26—often the best deal.)
Estimates of Variable Expenses:
For attendees of four-year public colleges*
1. Books/supplies $750-$1,300
2. Transportation* $900-$1,082
3. Personal/other** $1,496-2,066
Sources (from low-end to high-end estimates):
1. WCSU, for 2011-2012—estimates only the cost of books/supplies from the above
2. Peterson’s “How to Get Money for College,” for 2012-13
3. The College Board Survey of Costs, for 2011-2012
4. About.com, specifically for WCSU, for 2011-12.
*Out-of-state students pay more in fixed-cost categories, like tuition, but transportation costs are estimated notably higher for in-state students–about $500 more by The College Board. Peterson says to budget for $2,500 instead of room and board if commuting from home.
** We left out About.com’s high $2,325 “other” costs estimate, since it seems to include transportation.
Budgeting Tools and Worksheets
There are umpteen budgeting aids online including:
- A budgeting calculator from Mint.com, which lets you see all financial accounts on one site and which offers online reminders of bills due or spending limits breached.
- Check out WCSU’s spending plan
- See a video: 10 tips for setting a budget at PFHub.com
How to Save Money? Let me Count the Ways…
Thrift is very fashionable since the financial crisis so a search of “thrift,” “frugal,” etc. will yield more ideas than you can implement. Whet your appetite at wethesavers.com, studentbank.com, feedthepig.com, stretcher.com, and elsewhere.
Books A Biggie
Strange But True:
- Gen Y teens spend five times more than their parents did, even adjusting for inflation. —Jones Lange LaSalle study
- Teen debt is a top cause of college dropouts.—INGDirect.com
Read: How One Graduate Got in a Hole—and Got Out. Firsthand account.