Budgeting is a hot topic for college students, and not just because post-secondary is a time of major expenses. Your university or college days are probably going to be the time in your life when money is the tightest — you’ll have a lot going out in tuition and related expenses each semester, and not much coming in.
However, most budgeting advice blogs forget one simple fact: Managing money doesn’t just mean saving it. It means using money in the best way for you. Budgeting isn’t one-size-fits-all. So when you’re trying to figure out how to budget as a college student, remember to use your critical thinking skills you’re learning in your post-secondary courses and look for the advice that best fits you and your unique financial situation.
Also, think of this time as preparation for your future. University and other post-secondary study remains a good investment: In 2018, workers in their 40s earned 53% more per hour with a university degree, or 18% more with a college or other post-secondary certification. Investing in your education now will ensure a better standard of living for the rest of your life.
Budgeting in college is the first step to establishing financial literacy, and good habits that will last you for the rest of your life. In this article, we’ll cover how to track and categorise your spending, break down your budget by categories, and manage irregular income. We’ll also talk money-saving tips, and how to avoid the financial traps that others fall into.
Money-Saving Tips for College Students
Before you begin your studies and a new chapter of your life, it’s worth it to examine your current spending habits. Do you spend a lot on clothes, or eat a lot of fast food? Do you have a weekly manicure appointment? What about Netflix and other subscription services? You might feel like these things are essentials — and if your budget can stretch to cover them, then go right on enjoying them. However, if you need to trim down, these expenses are a good place to start.
Another place to cut costs is in your workouts: forget the gym membership. Unless it’s included with your tuition and fees, you’re studying kinesiology, or playing a sport for the university and consider it important for your training, the gym is a notorious budget-killer that most people don’t use to its full value.
Another way to save is to talk about money with your friends. Don’t be shy, or let old ideas about it being bad manners stop you from sharing tips, or even financial woes. If you’re all on the same page about money, you can look for ways to save together. Plan low-cost activities rather than nights out at the campus bar, for example, or look for clubs and activities on campus that are low-cost or free. Most universities are bursting with student-run organisations, from drama clubs to charity groups. You can use your downtime to pursue new hobbies, save money, and make lots of new friends along the way.
Managing "Lumpy" Income
Most budget articles are geared towards people working a full time job, who can expect to get a steady paycheque every two weeks. However, student budgeting doesn’t look like that. Lump sums from loans, bursaries, or savings at the beginning of the year have to last for months – and income from part-time jobs or internships tends to be irregular, too. The best way to manage your money in university is to track your spending. Divide the money you have at the beginning of the term into monthly chunks (after you pay tuition and fees), and compare the monthly totals to your expenses. Then use any extra you make during the term to supplement the outgoing costs.
Offset: Download Our Budget Template for Students
Avoiding Common Financial Pitfalls
For many students, beginning adulthood means starting off with debt. 1.9 million Canadians are student loan holders, and many working adults struggle to pay off their loans. If you must borrow to go to school, remember that learning good financial habits early will help you to manage your money later.
It’s important to avoid falling further into debt during your university years. For this reason, we don’t recommend opening a credit card account until you begin full time work. If you’re online shopping, most debit cards have a credit function, or you can open a PayPal account and link it to your bank account.
The reason to avoid credit cards is simple: Most people are either savers or spenders. You probably know by now if you like the feeling of setting money aside for a rainy day, saving up for a big purchase, or if money burns a hole in your pocket. When it comes to credit cards, if you’re a saver, you may not really use the credit card enough to build a useful credit history, which is the point of getting a card while you’re young. If you’re a spender on the other hand, the credit card can be too tempting for impulse purchases and cause you to fall into debt, struggling to pay the bill each month. There will be plenty of time to build your credit score after university, so avoid the card for now and focus on learning to manage the money you have.
Understanding Your Expenses
To get a handle on budgeting, the first step is to write down all your expenses. Seeing them on paper (or in a spreadsheet) will help you to understand when the expenses will occur, track them, and categorise your spending.
Here’s a list of common expenses to get you started. Keep in mind, you may have others you should be tracking, so be as thorough as possible!
- Tuition and fees (including books, software, etc): Your main expense during your studying years, tuition will likely be paid once, twice, or three times during the year. Even though this is a lump sum expense, many budgeting sites will break down this cost into a monthly one. But that’s impractical — The best budgets track expenses when they happen, not averaged out over a set time period. You’ll have a better grasp on your money if you track it in real-time.
- Rent: This is likely to be as big an expense as your tuition if you’re living in a large city. According to the old budgeting rulebooks, housing should cost 30% of your monthly income. In today’s reality, that’s impossible for many people living in major Canadian cities. Just remember to try to keep the percentage of your funds spent on rent as low as you can. It’s worth it to allocate plenty of time to searching for a place to rent with roommates. Get a handle on what average rents are in different areas of the city, and be careful as you browse the listings — if something seems too good to be true, it probably is.
- Setting up house (furniture and household items): This line item is often overlooked in many college budgeting articles, but dishes, bedsheets and sofas don’t just appear in your apartment — you have to buy them like everything else. If you’re lucky, your parents might supply many of these items from home, or take you shopping before you head off to campus. However, there are still likely to be some items you’ll discover you need as the months go by. Talk to your roommates and pool your resources, then be sure to spend time doing your research. You can find bargains on secondhand furniture, and even have fun hunting down deals in antique shops on retro housewares that cost the same as a trip to IKEA, but look a lot more stylish.
- Utilities, including internet and phone: Depending on where in Canada you’re going to school, your utility bills will vary by month and by season. If you’re attending the University of Winnipeg, you’ll probably spend a lot on heating during the winter term. If you’re doing a summer term at the University of Windsor, however, you can expect a big electricity bill for your air conditioning. Make sure that as you’re apartment hunting, you factor in the cost of any utilities, and even consider them as part of the monthly rent. Ask the landlord plenty of questions about the monthly costs for utilities, and how they vary over the year. The classic budget guides list utilities as 5-10% of your spending. For expenses such as phone and internet, look for bundles, student plans, and/or family plans. Some family plans only require a shared address, so look into combining the costs with your roommates. Just be sure you can trust them before you put your name on an account, so that you don’t get stuck with the bill.
- Food: This is a major part of any household budget, and getting more major by the minute. Food prices rose by 5-7% in 2023, and many Canadians are feeling the pinch in their wallets. If you’re living away from home for the first time, your first grocery store trip might come as quite a shock. However, you’ll still want to avoid the old stereotype of the college student who lives on ramen noodle packets. You have to fuel your brain properly to learn in class and study at home. If you’re living in residence, most of your food budget might go towards your meal plan, but don’t forget that you’ll still want to eat at restaurants, buy midnight snacks, and socialise over food with your friends. The classic budgets put food costs at 10-20% of your spending. However, you might wonder: Does going out to eat at a restaurant count as a food or entertainment expense? Remember this: It doesn’t matter how you categorise your spending. It matters that you track and categorise it. Untracked expenses can easily put a dent in your college budget.
- Transportation: This advice might shock some, but we stand by it: Don’t have a car if you can possibly help it. Gas, parking, insurance, maintenance, and car payments will take an enormous bite out of your monthly budget. Insurance is more expensive while you’re young, and this annual expense has ruined many a well-planned budget. If you’re living at home in the suburbs and require a car to commute to school, this can be a justifiable expense. However, if you’re living in the city, get used to taking the bus — the unexpected expenses that arise when owning a car, like repairs and parking tickets, can be too much for the average college budget.
- Entertainment, clothing and miscellaneous: The old school budgeting guides will put this category at anything from 5-15%, and we’ll all for keeping it as close to 15% as you can get it. Your college years are a time for fun and making new friends. You can’t stay home and study all the time, so make sure you set aside some money each month for pursuing your hobbies and spending time with your crew. Just remember that as you’re learning how to budget as a college student, the all-night parties at the bars and clubs can really add up — look for other ways to have fun with your friends so that you’re not blowing a week’s expenses in a single night.
- Incidental expenses: Finally, make some room in your budget for those costs that only pop up from time to time. These include medicines, health services like massages, physiotherapy, and trips to the dentist, and even professional services like tutoring. Try to add a small amount each month to your savings account to help you offset the cost when these expenses arise. However, if any of these expenses become regular, like an ongoing prescription for medication, or an ongoing appointment with your tutor, be sure to promote them to line items in your budget.
Setting Up Your Budget
Now that you’ve listed your expenses, it’s time to make sure they balance with your income. Many people use the 50/30/20 rule. This means that 50% of your monthly budget should go towards needs — rent, food, utilities, etc. 30% goes toward your wants, like entertainment, and 20% to savings and other financial goals.
As a student, you might already be laughing (or crying!) at this breakdown. This budget advice might work for a middle-income-earner, but it won’t work for you. The best way to learn how to budget as a college student is just to get practical about your limited resources, and keep all expenses as low as possible. Set up a tracking sheet for incoming and outgoing money, and try to keep yourself in the black each month. If you have expenses that vary, like utilities and transportation, put them in the budget sheet on the higher end of the average cost, rather than the lower end. You won’t mind having extra money at the end of the month for doing a fun activity, or putting in your savings account.
As you list out your expenses, and as you use your budget from month to month, look for anything that stands out. Are you spending a lot on entertainment? Look for ways to shave that down. If you are blowing your food budget each month on takeout and restaurants, make a plan to cook at home more often.
Remember that part of the process of budgeting is just tracking how you spend money and live your life. Most budget guides won’t tell you that the budget you create initially may not actually reflect how you’ll live — it can be nearly impossible to live within the parameters of the numbers on a spreadsheet. Instead of feeling guilty, be realistic about your expenses and living situation, and adjust your budget as you collect more data about how you really spend money. The point of a budget is not to follow the rules perfectly, and the best budgets aren’t those that are the most ruthlessly practical — they’re the ones you can actually follow, give you the best bang for your buck, and help you to stay out of debt.
As you follow your budget, do yourself another favour: Remember that you’re learning to be an adult during this time. You don’t have to be perfectly balanced at the end of each month, and you don’t have to get straight As each term. You just have to do your best.
Conclusion
Whether you’re a first-year student or pursuing graduate work, a budget is incredibly helpful. It’s not just about saving — it’s about helping you see around the corners. There will always be unexpected expenses that crop up as you move through adulthood. A budget helps you to deal with them, instead of letting them become major stressful events. Post-secondary is stressful enough without money worries. Spending some time each week to track your expenses will save headaches down the road. To track your spending easily, download our budget template, which will give you a head start on your financial planning. You can also sign up for a financial literacy tutoring session with a Tutorlyft tutor to answer all your budget questions, and help you transition your budgeting skills from college to the working world.
