Chapter 4. How to budget for college and stick to it?

You should have a good understanding of the different elements included in the cost of education. This chapter is to help you put together a sustainable budget.  A sustainable budget simply means that you have a comfortable level of certainty that you could fund your education through graduation. The worst scenario is to attend one or two semesters to find out funds have run out, you have borrowed a sizeable amount of student loans, and only completed a few classes.  In order to ensure financial success in your college experience, to set up an actual budget for the first year and forecast an estimate budget for the remaining years.  Keep in mind to cushion your budget by adding between 10% - 20% to allow for increases in cost and for unexpected events and emergencies. 

 

How to

In financial literacy, the correct strategy to set up a budget is to start with listing sources and amounts of income; then, designate an amount for each expense needed to live comfortably and avoid debt. A budget is a tool to tell your money what to do and where to go instead of wondering where your money went after the fact! In addition, a sustainable budget is a guide for you to save a portion of your money (at least 10%) and divide the remaining among living expenses. This is the correct strategy for you to use as you budget for your college education cost. 

Think of buying a car or a house. The correct budgeting strategy is to decide how much payment you can afford prior to deciding which car or house to buy. So, why do some students and parents approach funding education in a reverse fashion? Many students/parents decide on a college choice prior to exploring payment options. 

Here is a listing of items you will need as you set an actual budget for the first year of college and forecast a future budget for the completion of your degree. Normally, but not always, colleges consider 12 credit hours as a full load for one semester, and most undergraduate degrees require somewhere between 120 - 130 credit hours of applicable course work for graduation. 

 

 

Remember to remain realistic in your estimation of income and cost of education to get a clear picture of each college you are exploring. Keep in mind, you still need to consider other factors that are as important as finances in making your decision to choose a college. This financial exercise is only one factor to help you make a sound decision. You should adopt a holistic approach to this valuable experience by exploring alternatives to reach your goals and slightly compromising instead of abandoning your wishes in life. Learning to make a sound financial decision will help you create a positive behavior pattern to last you a lifetime of financial well being, security and freedom.

 

Practice

Now that you know how to accurately budget for your college experience, think of paying it forward and discuss your findings with a friend or a family member.

 

Congratulations! You can move on to Chapter 5. Tips and ways to transition successfully from high school to college.

To review the full module on financial literacy for high school students, click here.