How to Budget While Studying So You Can Quickly Pay Back Your Student Loan
A student loan opens many doors for acquiring a college degree that dramatically increases your chances of landing a successful career - as long as you manage your repayments properly.
Repaying your student loan on time is easy if you have surplus cash each month. To make that happen, you’ll need to ensure that your income is always bigger than your expenses - and that’s where the magic of budgeting comes into play.
What is Budgeting?
Budgeting is a smart approach to managing your money. A budget is a tool you can use to calculate your income, your expenses and how much money you’re really left with at the end of each month.
Once you know these figures, you’ll be able to increase your income and - more importantly - cut down on your expenses to meet your budgeting goals.
Here’s how to create and stick to your first budget.
4 Steps to Effective Budgeting for College
1. Know Your Income and Expenses
The first and most important rule of budgeting is always spending less than you make. Before you can do that though, you’ll need to know exactly how much your income and expenses are each month.
Using a free budgeting template or application is a great way to keep your income and expenses under control.
All you need to do is input everything you spend money on each day, and after a month or so you’ll have a clearer picture of your real expenses. This takes some discipline but is definitely a worthwhile exercise over the long-term.
To calculate how much you earn, enter your income from your part-time job and any financial assistance you receive from your parents or other sources like living expenses and scholarships, and the app will total them automatically.
2. Keep Your Income Rising and Your Spending Under Control
Now that you know exactly how much you earn and spend each month the next step is to tweak those two figures to increase your monthly surplus. The surplus amount is equivalent to the cash you have leftover at the end of each month after expenses.
Earn More Each Week
When it comes to earning more, a good approach is to work the same number of hours each week (as many as you can manage) while getting paid more per hour. You can achieve this by seeking a promotion at your part-time job or finding another one that pays better.
Cut Expenses, Not Enjoyment
When it comes to expenses, there are a lot of ways to live your best life for less. You’ll need to take some time to break down your monthly expenses and see where you can save money without giving up your quality of life. Here’s how.
3. Spend Money the Smart Way
Expenses are the number one reason why many people struggle to balance their budgets. If you have no money left well before the end of the month the reason could be that:
a) You’re buying stuff that you don’t really need
b) You’re spending too much on the stuff you do need
The first budgeting challenge is to decide what you really need to buy every day, week and month - and one of the biggest ways to overspend your budget is by eating out.
Every coffee and takeout meal drains your finances, so it’s best to save those things for the weekend or a specific day of the week.
By cooking your own food at home, you’ll be able to save money and enjoy more of the foods you like - especially if you have special dietary needs and restrictions.
Socializing is important, but you may need to sacrifice a few nights out to keep your expenses under control, or you could budget for one big party or concert per month and find more affordable ways to socialize the rest of the time.
4. Use SMART Goals to Budget For Life
Once you’ve got a monthly surplus, your goal will be to keep it up for the rest of your college and working life. That way, you’ll have funds to save, invest, and use to reach your life goals.
Financial goals should be SMART in order to be successful. That means Specific, Measurable, Attainable, Relevant and Time-bound.
Let’s say your goal is to pay back your student debt within 5 years of graduating from college. You already have a specific goal that’s time-bound and totally relevant! You’ll just need to make sure you can measure it by paying enough into your loan to totally clear it in 60 months.
You can apply the SMART method to any life or financial goal, both now and in the future. With a monthly surplus and SMART goals, you’ll be able to budget to buy a car, a home, and plan for your retirement years from now.
Budget Today To Reap The Rewards Tomorrow
The idea behind budgeting is so simple that it’s worth repeating. From now on, always make sure that your income is greater than your expenses.
By using the strategies we’ve outlined, you’ll be able to boost your income, cut your expenses and live your best life while paying off your student loans. After that, the sky’s the limit.