Lage: Choices define your financial future: Budgeting

Tyler Lage

Unlike the federal government, we as college students must actually face the reality that we have limited financial resources, and that debt must eventually be repaid. In my previous articles, I have addressed specific issues that commonly trip up college students. Today, I am going to take a look at the greater picture of budgeting while in college.

Budgeting, which has become some form of profanity in many circles, is simply the idea of identifying, categorizing and providing funding for the money you spend during a given period of time. For college students, the period of time is most often monthly or per semester.

The benefits of budgeting are numerous. First, budgeting allows you to spend time figuring out how to spend your money in the most efficient manner possible. Second, budgeting gives you peace of mind while spending your money; it provides reassurance that your needs are covered. Finally, budgeting is a responsible and simple practice to start now so that you can build on the basic plan when your life becomes much more financially complex.

The simplest form of budgeting is zero-sum budgeting, an idea that has been around as long as the topic of personal finance has been considered. In zero-based budgeting, each dollar that you take in over a period of time — be it payment for a job, student loans or parents’ generosity — is spent on paper before you even receive it.

In order to spend your money effectively on paper, you first list your expenses in order of priority. As college students, your first few items would be: food, clothing, shelter, tuition, transportation, insurance and so on. You continue this list until you progress out of “needs” and end up with “wants,” such as Rebecca Black concert tickets or a four-story beer bong.

After you have prioritized your expenses, you apply your money to each item in its order of importance until you run out of funds. In the above example, if you run out of money before the beer bong, you have to wait until next month or use the money your grandma sends you for your birthday for that extra special purchase. (Note to my grandmother: I have never used your generous gifts for anything of the sort).

The next step of the effective zero-sum budget is to share your plan with a trusted financial mentor. This can be a parent, adult friend or anyone else who is not going to encourage you to sell your organs for a new iPad. This process is intended to help keep you accountable to your own goals.

Finally, the last step is to spend the money in your budget with a new peace of mind owed to the fact that you have a plan. I have found in my relatively short time practicing the zero-based budget that it allows me to be much more confident in spending money because I know I have all of my responsibilities covered.

Whatever your financial situation in college — be it massive debt, parent sponsorship or working your own way — budgeting allows you to sit down and figure out the most efficient way to use your money. It offers peace of mind and lifelong financial prosperity to the consistent practitioner.