Budgeting

A budget is an essential guide to reach specific goals. It is helpful to prioritize scarce resources. Every student should work with a budget. I recall my mom and I developed one before I went to college in London, England. What a revelation when I realized how limited my choices would be with available income! I am grateful to my mom for this lesson. For four years, I lived within my budget because Mom taught me to detest debt. My budget was a great freeing tool that guided me to graduate debt-free.

According to Statistics Canada, between 40 and 50 per cent of students graduate from post-secondary institutions without debt. The Canadian government provides the means for parents to save for their children's post-secondary education. If a parent saved $37 weekly in a Registered Education Savings Plan (RESP), with government contributions and interest at 6%, at age 18 the student would have around $80,000 available for her education.

Irrespective of income sources, students need to prepare and live within realistic budgets. Parents should teach their children at an early age, and practice with them, sound budgeting. Here, I will address budgeting by post-secondary students only.

With effective budgeting, students will experience at least these three significant benefits that will lead to predicted financial positions to start their careers.

1. Goal focus
2. Targeted funds allocation
3. Funds tracking

Goal focus

For each semester, students should decide available income. Sources might include savings, RESP, grants, bursaries, gifts, work, loans; support from family, friends or others.

Available incomes should set limits for goals in the budget period--the semester. At the budget stage, students will know if their incomes will cover projected expenses. If it won't, they must make tough choices such as taking loans for shortfalls that might lead to graduating with debt which could stay unpaid for years. Alternatively, they must defer their education until the combination of work, grants, and scholarships provide enough income. Students should choose consciously, not by default.

Once they select their paths, students should set relevant and realistic goals; the single most important should be debt status at graduation--either debt free, or debt limits at graduation. Armed with their goals, to make sure decisions will not increase debts, students should check regular decisions through relevant tools such as the Affordability Index.

Targeted funds allocation

Before setting their budgets, students should pinpoint spending categories that will consume their incomes. Routine categories will include all or some of these items: accommodation, tuition fees, books, groceries, entertainment, internet, cable, cell phones, eating out. Accommodation can be costly; if feasible, students should consider living at home, although it might detract from their independence.

Students should note two crucial issues. First, they control their budgets by their decisions; therefore, they must know spending drivers behind each budget item. The budget for books should flow from decisions to buy new or used books, or to rent or share books. Likewise, the budget for cell phones must capture expected behaviors: texting, data downloads, internet activity, and so on. Students' behaviors drive expenses and need controlling; they control their behaviors, they don't control money.

Second, to stay within budget, students must watch performance against budgets routinely, and adjust behaviors as needed.

Funds tracking

Developing and tracking a budget needs tools. Many mobile phones' Apps exist to do this. As well, students must decide to use either banks or credit unions.

The key benefit from tracking spending is the knowledge gained about students' spending habits. My experience is that when we know how much we are spending we change behaviors and focus more on our needs than wants.

Gaining knowledge about spending practices probably is the most significant part of this process.

Budgeting Tips

These tips will help students handle lifestyle choices and graduate in line with their budget goals:

1. A key constant reminder on this journey is that students must choose to sacrifice consumption and some 'entertainment' today for a debt-free start tomorrow.
2. An accountability partner of the same gender will encourage each student, and remind each other of his or her graduation goals.
3. Watching spending closely will identify potential leakages. With accountability partners' encouragement, students might plug leaks sooner than later.
4. Students would benefit by travelling with small expandable folders for receipts. When they spend, they should enter amounts in their phones and place receipts in relevant folders' section.
5. Peer pressure is costly; students must learn to say no and not now. Many students can't afford iPhones, iPads, and similar grown-up toys. In these lonely peer pressure moments, students should recall their goals.
6. There are many funding sources available to students. In Canada, several tax deductions and tax credits exists for eligible students, including moving expenses, child care expenses, public transit.

Students can choose to let events pull them along, or by God's grace, they can control them. Before rushing to college or university, students should ask God to guide them. Under his direction, they should do a budget for each semester and look at likely financial positions at graduation.

Students; are you ready to spend ten or more years after graduation repaying student loans? You must choose.

Copyright © 2013, Michel A. Bell