Basic Budgeting 101

5 Jan

Raysha Duncan, Financial Aid Administrator & Purdue Alumna

Budgeting: something that’s really good to do, but terrifying to get started. It’s a big deal in the “grown-up” world (as a certified “grown-up” I can assure you of that), but it’s good to get in the habit of making a budget when you’re in college so you can track your expenses better after you graduate and enter the “grown-up” realm.

Why is a budget important?

Well, you’re in college and you don’t have a lot (if any) income yet and you may be using student loans to subsidize your living expenses. A budget can help you analyze and manage your spending to keep your student loan debt down and help you enjoy your college experience at the same time. (It’s also a good intervention strategy for a Starbucks addiction).

How do you start a budget?

First, you would track your spending to see where your money is going every month. From there, you would figure out what you can afford to cut back on and where you need to be re-allocating your money. Then you could break it down into where you need to be spending your money, and then to where you want to be spending your money (see this article on Wants vs. Needs).

What do you need to budget for?

…pretty much everything. If it’s something you spend money on, you should plan for it. This does NOT mean you need to be too extreme and plan every cent ($4.01 on laundry detergent, $0.70 Den Pop…). Break it down into larger categories: food, travel, bills/utilities, etc. If you’re living on-campus, then you’ve already paid (or have a payment plan) for your housing and meal plan, so you don’t need to include these in your budget. You can still have a food category in your budget, but it should be much smaller than someone who’s living off-campus and having to buy all their own groceries each month.

brown bag with text overlay: Basic Budgeting 101

This is a very brief explanation of a budget and how to start one. I didn’t include any percentages of how/where you should be allocating your money because each student’s situation is unique. You may be completely supporting yourself or receiving some help from your parents or your parents may pay for most everything or you live at home. There are a lot of factors that affect how you budget your money. Some helpful tips when considering your budget include: avoid overspending, don’t get into any more debt than you HAVE to in order to pay for your education, and track where you’re spending your money so you can make adjustments in order to meet short-term and long-term goals. This will also help in the future when your budget changes as you change and grow.

Let’s do an example budget to bring everything together. Amy is a sophomore in college. She’s an in-state resident and her tuition is completely paid for by a scholarship. Her room & board are paid for by a combination of Stafford loans and her parents. She wants to make sure that she’s not taking out any more loans than she needs, so she utilizes Purdue’s Estimated Cost of Attendance to figure out how much she should plan to spend on things:

Chart: Books & Supplies $1210; Transportation $210; Miscellaneous $1550; Tuition & Fees $10002; Room & Board $10030

Her Tuition & Fees and Room & Board (her primary needs) are already covered with her financial aid, so once those have been covered, this is what her personal budget for the academic year (according to Purdue numbers) now looks like:

Chart: Books & Supplies $1210; Transportation $210; Miscellaneous $1550

This is for the whole Academic Year. The Books & Supplies category is something she needs to budget for so she can buy books this semester, Transportation assumes that she will go home at least twice during the academic year (a need in this case since she’s in a dorm and they close over winter break), and the Miscellaneous category is anything and everything she can expect to spend money on while she’s at school: a few “needs” like her phone bill & laundry but also some “wants” like extra food & entertainment. Assuming all of this, let’s break Amy’s budget down by semester and make some categories out of the ‘Miscellaneous’ section:

Chart: Books & Supplies $1210; Transportation $210; Phone $100; Food $182.50; Laundry $25; Entertainment $467

Now, this chart shows what Amy expects to spend in each category over the course of one semester, but if she wanted she could break it down month-by-month. This is just an estimate of what she can expect to spend. If Amy started to worry about where she was spending her money, she could take a look and see how her current spending was fitting into this estimated breakdown. She has a pretty large estimated entertainment budget compared to the other miscellaneous categories, so she could also choose to forego seeing a movie in theaters (and wait for it to go to Redbox) if she needed money for laundry one week.

Seeing everything broken down like this makes a lot of sense, but how do you figure out where exactly you’re spending your money? One of the best ways I’ve found to track my money is This website/app can link into all of your accounts (checking, saving, credit cards, student loans) and help you keep track of how much money you have and where exactly you’re spending it. It breaks everything out into pie charts upon pie charts for you to analyze (and we all love pie). And, you can even establish goals that you’re working towards and track your progress (maybe saving up for a Study Abroad trip or a new laptop). There are a lot of other budget apps out there too, so you should look and find which one is the best for you.

Budgeting can be really stressful when you start, as I know from personal experience, but once you’ve established where your money should be going, it can be really helpful in meeting your own spending/saving goals.


Are you a budgeter? Do you have any tips or tricks to share? Let us know in the comments below!

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