School budget is no different from other budgets. A budget is an key guide to reach specific goals. It is helpful to prioritize scarce funds. Every student should work with a specific school budget. I recall my mom and I did a school budget before I went to college in London, England. It showed my limited choices with available income. I am grateful to my mom for this lesson. For four years, I lived in my school budget because Mom taught me to stay away from debt. My budget freed me and guided me to graduate debt-free.
School Budget Will Relieve Stress
According to Statistics Canada, between 40 and 50 per cent of students graduate from post-secondary institutions with no 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.
Whatever the size of the student’s income, he or she needs to prepare and live in a realistic budget. 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 enjoy at least these three major benefits that will lead to improved financial positions to start their careers.
- Goal focus
- Targeted funds allocation
- Funds tracking
For each term, 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 term. At the budget stage, students will know if their incomes will cover future expenses. If it won’t, they must make tough choices such as taking loans for shortfalls that might lead to graduating with debt that could stay unpaid for years. Or, they must defer their education until income from work, grants, and scholarships might cover their expenses. Students should reflect on this choice.
Once they select their paths, students should set relevant and realistic goals. The single most important should be to graduate either debt free. Armed with their goals, students should check regular decisions through relevant tools such as the Affordability Index. This decision process will help develop healthy habits.
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: Housing, tuition fees, books, groceries, entertainment, internet, cable, cell phones, eating out. Housing can be costly. If feasible, students should consider living at home. The trade-off here is the student’s independence.
Students should note two crucial issues. First, they control their budgets by their decisions. Therefore, they must learn about items they must control. It’s never money. You don’t control the budget for books by looking at the money. The budget for books flow from decisions to buy new or used books, or to rent or share books. In the same way, the budget for cell phones must capture expected behaviors: texting, data downloads, internet activity, and so on. Students’ behaviors drive expenses and need controlling. Students control their behaviors, they don’t control money.
Second, to stay within the school budget, students must watch performance against budgets routinely, and adjust behaviors as needed.
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.
These tips will help students handle lifestyle choices and graduate in line with their budget goals:
- 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.
- An accountability partner of the same gender will encourage each student, and remind each other of his or her graduation goals.
- Watching spending closely will identify potential leakages. With accountability partners’ encouragement, students might plug leaks sooner than later.
- 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.
- 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.
- 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.
Each student should do a school budget. Students, do you want to spend ten or more years after graduation repaying student loans? You must choose.
Copyright © 2013, Michel A. Bell