So newsflash: budgeting is hard.
It’s hard even with a full-time, steady paycheque that shows up like clockwork every few weeks in your bank account.
But add in a variable income, some monster expenses, and uncertainty about how much money you’ll make next month or next year, and it’s downright terrifying.
And no, this isn’t about freelancing.
It’s about budgeting as a student.
Budgeting as a student
Take everything that makes budgeting as a freelancer hard—the variable income, the monthly expenses that have to get covered no matter what, the uncertainty—and now hand that to an 18-year-old who’s never seen thousands in a bank account before.
And can probably now, or soon, legally drink on their own and buy whatever they want. Speaking as Literally That Person When I Started School, it’s not always a recipe for disaster, but it is hard. And stressful.
Plus, you’re probably more likely to talk about the new jeans or the necklace you got when your scholarship came through than you are about how you’re going to make it last for the whole semester. *raises hand*
So *raises hand again* I went to be awkwardly open about money (my superpower, whether I like it or not) at Carleton University to help current students figure it out last week. This is a recap of what we talked about IRL, especially since I know it’s hard to make it to events when you’re in the middle of midterms and final projects.
Step 1: Know your income
When you’re a student, “know your income” isn’t as easy as double-checking your pay stub.
You might have income coming from multiple different sources, and there’s a good chance almost none of them carry the stability of a regular paycheque.
Most of the time, income will come in one of a few buckets.
- Loans (money you have to pay back)
- Scholarships (money you don’t have to pay back)
- Work (part-time, TA-ing, etc.)
- Other (family support, etc.)
Often, the income from these sources shows up when it wants to—you might get your loan opened up to you once a year, or your scholarship might show up in three big chunks. Even a part-time job isn’t always predictable, since it depends on how many hours you get for any one pay period.
To start budgeting, you need to get an idea of how all of these sources of income add up, and when they hit your account. Write out all of the places you’re going to find money this year, how much you expect from each, and when you expect that money to show up.
Now put all that aside for a second.
Step 2: Know your expenses
Sure, you might have $10,000 show up in your bank account one month, and literally nothing for the next two, but that doesn’t mean anything to the rent that needs to get paid, or the food that needs to be purchased.
So your next step is to take a look at your expenses as if you didn’t have a weird amalgam of different income sources.
Start with fixed expenses. You know, the ones that stay the same every month, no matter what happens. This is stuff like your shared internet bill, your rent, your cell phone bill, and for the most part, your groceries. Write down how much you spend every month on each one (and track your spending if you’re not sure).
Then, add in variable expenses. Yes, you can and should budget for things like the occasional coffee or drink with your friends, because taking a hard-line stance and going cold-turkey on lattes is a plan destined to fail. (You can read my impassioned defence of the fun budget here.) Add in a reasonable amount for your variable expenses.
I made a quick worksheet to help you write down all those numbers, and I seriously suggest using it—not for my ego, but because it’s so easy to read this and do nothing. Getting out a pen and paper can make a big difference in how much you actually get from this post (and students have like, literally zero time to waste. I’ve never been as busy as I was in school.)
Now figure out the gaps
So you’ve got your “annual” income number, if you total up your income sources for the year. And you’ve got 12 months (or maybe 8 months, if summers are radically different for you) of expenses to cover.
First, subtract any big annual expenses that need to come out of that income (ahem, like tuition).
Take whatever is left over and divide it by 12 (or 8) to see how much you have to cover one month of expenses. Does it cover what you’ve budgeted for a month?
If yes, amazing. You have a totally sustainable budget. Well done you.
If not, it’s time to figure out how to cover that gap. It may mean scaling back on your budget line items (here’s a good way to start) or finding additional sources of income. As a student, your first step should always be to check in with any financial support services on campus—they might know about scholarships, bursaries, or programs that can help.
From there, consider other options, like job opportunities or loans. The only thing you shouldn’t turn to for routine cost-of-living expenses, if you can possibly avoid it?
No offence to them, and I’m a big fan in the right circumstances, but the interest rate on a credit card is going to be one of the most expensive ways you can finance your education.
If you find you’re relying on them to cover true basics like food, look at other financing options, all of which will be cheaper in the long run. (And if you’re carrying credit card debt to finance things like partying or shopping, this is when I become a huge killjoy and tell you it’s not worth it, and to scale back to a smaller, cheaper fun budget).
Sometimes, credit cards are the only option, because getting credit as a broke student, especially when no one can or will cosign for you, is tough. But that’s what they should be: a last option.
PS. I could write a whole post on how unequal access to affordable credit options, not to mention higher education as a whole, is a Big Giant Issue in and of itself, but this is not that post. The one thing I will say is that if you do find yourself in the category of “credit cards are truly the only way I can finance my basic living while a student,” don’t feel bad—that is not your fault.
Budgeting is just one of the topics that make up Financial Literacy Month, which is now (surprise!)
I’ve done a few interviews about why financial literacy matters, but at the end of the day, it’s because the financial industry is an industry.
You need to know about the products that are available to you so that you can make smart choices (like getting low interest rates) and understand which products you do and don’t need.
And getting a handle on how you’re managing your student budget is one way to limit how many financial products you need to get through school. Trust me, you have a whole lifetime of products to learn about (and that’s what I’m here to help with, to a certain extent).
So grab the worksheet, figure out your money, and have a great #FLM2017, pals!