Budgeting 101: Budgeting for college students

Every spring, millions of college students prepare for graduation and the next phase of their lives

But new graduates who enter the working world may not be ready for the challenge of calculating and managing a budget which can include rent, utilities, food, transportation as well as student loan payments.

Let’s look at some budgeting tips that can help college grads get off to a solid start with their finances:

Create your first budget

There are many tools and tips available for new graduates to get started with budgeting and saving:

• Budget templates are easy to find online
• The Federal Trade Commission’s consumer.gov  site has a simple, two-page budget template as well as a guide for getting started. 
• You can create your own budget with a spreadsheet.

Several organizations offer free tips for saving money and budgeting on a lower income, which is typical for entry-level jobs. You start by listing your expenses, which might include:

• Housing
• Utilities 
• Transportation
• Food
• Loans
• Health insurance

When you add the expenses together and subtract the total from your income, there should be something left over. That amount could go towards savings, entertainment and other non-essential items. When drawing up a budget, the math can be simple. Sticking to it could prove to be much more difficult.

Prep for the new expenses

Recent graduates must also prepare for under-the-radar expenses, such as auto insurance premiums, health insurance contributions, and banking costs.

Graduates are also likely to have different banking needs. Many banks offer an online tool that enables users to compare checking account options. A new grad might also need to set up direct deposit through their workplace and connect a savings or money market account to their checking account.

One of the benefits of that arrangement is the ability to automatically transfer a manageable amount from each paycheck into savings

Build a habit of saving

It might seem like there is plenty of time before you need to worry about building up a nest egg, but after graduation is a great time to start.
Even if you have college debt to pay off, it might still be worthwhile to put a little money into savings each month. Your bank might make this very easy by allowing you to set up a direct deposit into your savings account

Track your financial activity

There's an app for everything, including budgeting and tracking expenses. Many banks provide budgeting and tracking tools through their mobile apps and online portals.

It’s an important service, because tracking your spending is essential and can help you:

• Stick to your budget
• Notice patterns in your spending/li>
• Find ways to increase savings and reduce debt
• Build good financial habits

Don't forget to have fun

Joining the professional workforce is an exciting and challenging time for young adults, and all the new expenses can seem overwhelming at first. Take it one step at a time and don't forget to budget for entertainment—just because you're out of school, it doesn't mean you can't have any fun

Revisit and adjust your budget

A budget is not a set-it-and-forget-it kind of effort. It’s a living document that changes as your circumstances change. And when you're young, your circumstances can change quite often.

If you're new to budgeting, you might have to adjust it a few times until you get it right. Also, unless you review your budget regularly, you can’t be sure that you're on the right track. Here are some guidelines to consider:

• Budget check-up. New expenses might crop up. Your salary could increase. As your life changes, it’s important to adjust the structure of your budget
• Monthly budget review. Part of budgeting is guessing what you’ll spend in certain categories. During your monthly review, see if you were off in any category and adjust accordingly. You might also see if you are on track to meet your goals
• Budgeting strategies. Err on the side of overestimating expenses and underestimating income. Then, you might be less likely to run out of money before the month is over. Look for spending on little items that can take a big bite out of your budget plan.

Start an emergency fund

Even if you think you can put off saving for the future, you probably need to start an emergency savingsaccount

This financial safety net might come in handy when unexpected expenses occur. It could be a car repair bill, a medical procedure, or anything else that’s beyond what you can afford in a normal month. Your bank might make it quite easy to use automated transfers or direct deposits to put money into your rainy day fund every month

Take advantage of employer benefits

Even though retirement is very far off, it could be a wise decision to take advantage of employer benefits like retirement funds and health savings accounts.

The sooner you start saving in a 401(k)-retirement plan, the more time you have to get the tax benefits and watch your money grow through investments and compound interest. In addition, if your employer offers a 401(k) match, the plan is even more attractive. The match means the employer adds money to your retirement fund, typically equal to a percentage of what you are contributing.

Another employer benefit that could help with a recent college graduate is a Health Savings Account (HSA). An HSA is a personal savings account you can use to pay certain health care costs. You aren’t taxed on money you put into it or on the interest you earn. The money carries over from year to year, and you can keep your HSA if you change jobs