PARK: Student budgeting will help you in long run
Column: The Queue
With the holiday season nearly upon us, I, like many others, have already spent more money than I would have liked.
Black Friday and impending holiday shopping have my bank statements looking far too steep. As I am working during this semester, I have a pretty regular flow of money that comes into my bank account every two weeks. I do try to save or invest, but I will say it is nice to have a little bit of extra cash to spend on yourself and others.
73 percent of Americans do not regularly follow a budget. Staring at all your money on paper and seeing how much of it is actually an out-flow rather than an in-flow seems daunting. As I grow older and begin to take an in-depth look at the money I am earning regularly — rather than receiving as cash gifts from family members and an occasional allowance — I now understand the importance of tracking what I actually spend.
Even if you have a large disposable income and can afford to "shop till you drop," budgeting can be extremely helpful. I am privileged and fortunate enough that my parents pay for my education, car expenses and other basic necessities. But tracking how much I charge to my parents and to my own credit cards keeps me from overspending in one area or another.
Let us paint a picture of an average college student. Say our parents pay for our fixed expenses like education, rent and utility bills. As students, we pay for things that we control, like groceries, takeout, clothes and entertainment expenses.
There are plenty of apps and Excel templates that one can use to start budgeting. But at the end of the day, being consistent in filling out your budget and tracking your spending is a habit that you have to build.
There is the infamous 50-30-20 rule which requires you to allot 50 percent of your money toward needs, 30 percent of your money toward personal wants and 20 percent of your money toward savings.
For some students, this may be a relatively reasonable breakdown, especially if that student comes from a middle to upper-class family. For many of us, our needs are partially covered by someone else, so spending a large fraction of our budget on other necessities seems practical.
As college students, I think the tricky part is deciding what is a need and a want. Do we really need another $5 coffee on our way to class? I say yes, but oftentimes my budget says no. Another sneaky expense is things like streaming services and subscriptions. Basic Netflix, HBO Max, Hulu and similar subscriptions can run you upward of $50 a month.
Something I like to keep in mind as a student tracking her expenses is that it is good to budget and save with intent. If you want to save up for a summer apartment sublease in the city or a big spring break trip, then great. You have a baseline of something you want or need and are willing to save up for.
Also, know that you will make mistakes. It is easy to find yourself saying yes to eating out, going on mall trips and spending money to do fun things with your friends. We are in college. We might as well make the most of these four years, and going a couple hundred dollars over budget will not hurt us in the grand scheme of things.
Nonetheless, starting to save early on can really help you in the long run. For example, putting aside 20 percent or even more at a younger age can help you build an emergency or retirement fund.
As we get older and leave the college lifestyle bubble, we will find that the 50-30-20 rule is unrealistic. 50 percent of our budget will most likely not be enough to cover the expenses of living in expensive cities like New York, Boston, Chicago or San Francisco. In addition to saving a chunk of our budget, we will most likely have some sort of student debt to pay off, which must be accounted for in our expenses.
It gets more complicated as we get older and make more money, but for now, it is good to begin to build a habit and start to learn about how and where we spend our money.
Annabel Park is a junior at Rutgers Business School, majoring in supply chain management and minoring in economics. Her column, "The Queue," runs on alternate Tuesdays.
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