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How to Start Budgeting for the Upcoming School Year

It’s no secret that college is expensive. According to U.S. News & World Report, roughly two-thirds of college graduates take out public or private loans to cover their tuition and fees. By the time they leave college, the average student’s debt totals about $30,000.

Outside of the obvious costs of tuition and course materials, you may also have to pay for room and board (or rent, if you live off-campus), food, extracurricular fees and social activities. At the same time, you want to start building a solid financial footing so that you’re ready for life after graduation. To do that, you’ll want to take time to prepare your finances before the school year begins. Creating a thoughtful budget and basic financial plan is a great place to start.

Identify Your Income

Setting a realistic budget typically begins with gaining an accurate understanding of your cash flow. That’s the amount of money that flows in and out over the course of the year. It’s a good idea to start by identifying all of your income sources. They might include student loan or scholarship disbursements, income from an on- or off-campus job, and monetary gifts or financial support from parents and family members.

Reviewing your income is a good opportunity to ensure you’ve taken full advantage of any free or low-cost financial assistance options available to you. These might include federal and state financial aid; scholarships, grants and endowments; and college savings plans. You may also want to revisit the Free Application for Federal Student Aid (FAFSA) you likely submitted along with your college applications. If your family finances have changed, you may be able to appeal to your school for a better financial offer.

Determine Your Expenses

Next, you’ll need to identify all of your monthly expenses. This includes how much you spend on housing, transportation, necessities such as food and medicine, and entertainment. If you rent, make sure you include any utilities or other fees that aren’t a part of your base monthly rent. Phone, internet and subscriptions are common expenses. If you don’t already know what you’re spending on these things, try using an app or program — such as Mint or You Need a Budget — to help you track your expenses for a month. Completing this exercise may also help you identify a few areas where you can cut back on spending. Even if you don’t find areas to cut back, you will at least know how much of your income should be set aside for expenses.

Know If (and What) You Owe

Depending on your unique situation, debt payments may need to be part of your expense calculation. Do you have monthly car payments? Do you carry a balance on your credit cards? If the answer is yes, it’s important to make scheduled payments on time to avoid late fees, interest rate charges, and negative impacts to your credit score.

Graduate students should also review the repayment terms of any student loans they took out to support their undergraduate education. Payments on most of these loans can be deferred while you’re still in school, as long as you’re attending school halftime or meet other criteria. Monthly payments for any loans that can’t be deferred must be factored into your expense calculations.

Find Some Savings

Ideally, you’ll also find room in your school year budget to save for the future. Many financial advisors recommend a savings goal of 20% of your income, but don’t get discouraged if you can’t put that much aside. Just saving a few dollars a month is a good place to start, especially if you deposit them in a bank account that offers compounding interest. Set up automatic savings whenever possible to ensure that you stick with your savings plan. If you’re paid via direct deposit, for example, you may be able to divide your paycheck so some of the money goes directly to your savings account. If you get a raise or an unexpected increase in income, you can also stash some or all of that money in your savings account. Or you might consider using a portion of it to pay down your highest interest rate debt.

Remember that successful budgets are not static. Once you’ve got a budget in place, do a monthly check-in to see if it needs adjusting. Did your income change? Are you spending more than you expected? Were you able to save any money?

Getting your finances ready ahead of the school year is just as important as making sure you have all the right books and supplies. A CERTIFIED FINANCIAL PLANNER™ professional can help you create and monitor your budget, setting you up for spending and saving success through graduation and beyond. Visit to find a CFP® professional in your area.

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Budgeting Starting Out