Every student could benefit from a budget. When in college, money is a particularly scarce resource, as is your time. Working side jobs can be difficult, and working too many hours will only compromise your grades. Whilst you need enough to survive, a better way to look at it might be how to reduce your spending rather than how to earn more money. Afterall, money-making can be done once your degree is in your hands.

Budgets are the best way to achieve this. Following a spending plan can help minimize debt and overspending on less-than-necessary things. It may even lead to mindset differences, such as becoming more minimal and more appreciative of the smaller things in life.

The problem with researching the topic of budgeting

The issue is that everyone’s circumstances are different. Finding budgets online is a nightmare. Templates are an issue because they will likely consist of a bunch of things that you don’t have, like mortgage repayments and rental income. Whilst you can adapt them, you will have to add in things specific to you as well as remove items (and perhaps whole sections). The process is kind of pointless.

What’s more important is to really understand your own situation and spending patterns, and then making a budget from scratch, bespoke to you, will not take very long. Plus, filling in manually every type of spending that you have might be a wake-up call that’s needed.

How to create your own budget

Creating a budget doesn’t have to take long. In fact, it can be done in an afternoon with just a few steps. If you have more time to spare though, you can add in some extras (step 5) that will make your life easier and enhance the effectiveness of the budget.

Step 1: Income

The first step is to determine what your income is. This is easier to calculate than your spending, so it comes first. It should be a relatively steady number: living cost loan income, income from working, parental help, and so on. Find out what your income will be for the near future, or until the end of college if possible. Of course, use your after-tax income here for simplicity, unless you have a small business in which you want to track expenses within this same budget.

Step 2: Track spending

This isn’t about guessing what things you’re likely to buy next month, this is about tracking what you actually buy. The issue with forecasting items is that you’re prone to underestimating. Things constantly pop up, whether it’s getting college books or new clothes. It’s best to just track what you actually spend for a couple of months, then you’ll know for sure what the average month looks like. 

This doesn’t have to mean delaying your budget creation either. You can literally just open up your bank statements and reconcile them. Go through and write a note next to each spending. Even if you can only identify 75% of them, this means that you will need less time tracking them physically, meaning you can get started sooner.

Step 3: Goals

The point of a budget isn’t the budget itself, it’s to better reach a goal. Think carefully about why you want a budget. Is it so you can pay off more of your college debt? Is it to save up for a 6-month traveling experience? Whatever it is, write down a handful of meaningful goals.

SMART goals are best, too. This means making them specific, measurable, achievable, relevant, and time-based. For example, a poor goal would be to “have lots of savings in the future”. A better goal would be, “build a $4,000 emergency fund by July 2021”.

The reason this is step 3 and not 2 is because “track spending” is a function of goal-setting. In other words, your goals must take into account of your spending. It’s impossible to completely turn your spending on its head and set unrealistic goals. 

Step 4: Set parameters

This is the fun/daunting part; the budget itself. Now that you have an idea of what you actually spend, and what your fixed, unavoidable costs are, you can start to set parameters on your variable costs. 

If you have optimistic goals though, don’t shy away from being ruthless on your fixed costs. For example, running a car may seem like an unavoidable fixed cost, but you should think carefully about whether it really is. 

Most college students live close to or inside the campus. Having a bicycle may be the more healthy, environmentally friendly lifestyle choice that could save thousands per year.

Step 5: The spreadsheet itself

Now that you’ve created your budget, you want to represent it on a spreadsheet effectively. Downloading templates and copying them is one way to do this, but alternatively, you can play around with it yourself and learn some valuable Excel skills.

For example, you may want to use conditional formatting to change the colors of the cells depending on their value. This is how you make your balance appear in red when it goes below zero, for example.

Likewise, you want to set borders around sections, instead of having prose of messy information. You could use different pages for different sections too, and have the main page that represents and pulls in all the data together.

If you want an easier way to input data into the sheet (i.e. input each purchase you make as you go), then you can make use of forms. Google forms (inputted into Google Sheets) are an easy way to do this — you simply make a small Q&A where you type in the data and hit enter. This will be submitted to the budget. The link to the form can even be placed on your mobile home screen.

Lastly, formulas are important to learn too. It doesn’t have to be complicated, but you want to automate the calculations as much as possible so there are few mistakes. “=SUM” will perhaps be your most used formula.