Student Budget – How to Set It Correctly?
Inflation continues to burden students this year as well. The annual inflation rate in Slovakia fell to 6.9% in November 2023, still being one of the highest rates of inflation among EU countries. Prices of food, petrol, utilities, and accommodation have risen. Students can be particularly vulnerable to such price increases, as many of them already have a limited budget for regular expenses.
Time spent at a university is one of the best life periods. During these years, many students learn to handle money, as they begin to manage it on their own. Reality is unforgiving, and sometimes, at the month’s end, we find ourselves out of all of our savings and budget designated for that month.
I experienced similar situations at the beginning of my studies, so I decided to bring other fellow students tips on how to manage a personal budget while studying. The period of high inflation only reinforces our need to be in control of our personal finance. With the correct financial setup, even high inflation can be survived.
Creating a budget in times of rising prices is the best step to understanding what items you spend on each month. This will allow you to adjust your spending to reflect current prices.
Once you have a clearer picture of your spending and saving habits, you can work toward bigger goals like traveling and saving money for future plans, such as moving to a new city after college.
The budget you create today can help you throughout your 20s and beyond. Plus, once you have a budget, you only need to make minor adjustments as your income and spending habits change.
How to Create a Budget?
1. Keep track of your net income
Regular income from a part-time job or paid internship, an allowance from your parents, scholarship from the university – all these belong to your net income. The amount of money that lands in your bank account each month is a crucial part of your budget, forming the basis for how much you can afford to spend.
If you have irregular working time and your salary is unstable, varying between months, weeks, and periods, try to calculate an average amount that you can generally count on each month. It's better to choose a smaller number to avoid the risk of overspending.
2. List your monthly expenses
Make a list of your monthly expenses. You don't have to hunt in your memory, trying to remember each item you bought this month. Most students routinely pay by a card or mobile phone. Few of us carry cash these days.
Most banks offer an in-app spending summary. If you can’t find it there, or you use multiple banks, try our Finbot app. Link it to your bank account and Finbot will categorize your spending. This way, you’ll obtain a comparison of how much you spend each month on food, transport, groceries, etc.
In Slovakia, the most significant expense for students is food. Since we don’t pay tuition fees, we can save a lot of money compared to our foreign peers.
Books, textbooks, and other study materials vary depending on universities and programs, but they need to be bought once a semester. Accommodation is still affordable as long as you live in the dorms, and even if you don't, you can always find a student room in an apartment building for a fair price.
However, food prices have soared, hence you need to consider whether you'd rather eat at restaurants and student dining halls (both of which have raised prices for daily menus) or cook your food. The latter allows you to buy groceries precisely for what you need, not to mention that you can cook for several days in advance.
Source: Statistical Office of the Slovak Republic
3. Split your expenses into fixed and variable
Include all the bills you pay every month – accommodation, phone, transport, food, internet, etc. – in your fixed expenses. These are the expenses that you just can't avoid.
Those you can do without should be categorized as variable expenses. Gym memberships, Friday night parties with friends and the expenses associated with them, hairdresser, manicurist, coffee dates. These are the things that serve us for fun, or for what we want but don't need.
These expenses can vary from month to month, so it's a good idea to take an average of everything you spend money on in a given month. In the event of an income reduction, you can cut some of these activities, making it without them for a while.
4. Determine the average monthly cost of each expense
As I mentioned earlier, variable expenses can vary from month to month. Maybe you visited your manicurist only for gel replenishment this month, spent less time at the gym due to exams, or saved on transportation by not commuting to school as much. Fixed expenses will be about the same on average, the cost of accommodation or the phone bill won't change much from month to month.
For example, if you live in a rented place, expenses for electricity, water, utilities (which you can also save money on – see the tips in this blog) and so on may vary. The same goes for those who drive.
For these expenses, we will need to do an average to determine a budget for the month. Just add up the expenses for, say, three months and divide by three. If you have a monthly grocery expenditure of 143 euros, you can round it up to 150 euros. This will make it easier to work with your budget and gives you room for minor variations.
5. Make adjustments if necessary
The final step is to compare your monthly income and expenses. If you earn more than you spend and have money left over at the end of the month, your budget is perfect. The money you didn't spend on necessities or variable expenses, fun with friends, or new clothes can be set aside for the future.
Whether you're saving for a vacation, a car, or a new cell phone, it's good to know you have extra money. What's more, you can invest this money and ensure you'll have an equally stable financial situation in the future.
However, if you can't afford your lifestyle, spending more than you earn, it's time to reassess your priorities. You can increase your income by finding another part-time job, trying to negotiate a raise at your current work, or search for extra scholarship options, but you should also think about ways to cut costs.
I Have a Budget. Now What?
If you've taken the trouble to go through all your expenses and set up a budget, congratulations. You're one step closer to better management of your funds. An important step after setting up a budget is to stick to it.
Sticking to a budget and working properly with your money while still studying will help you start life with a solid financial foundation after finishing your studies, and teach you good habits that you‘ll appreciate in the future.
Student life is one of the most carefree times. During these years, we don't have to worry about mortgages, children, buying the first home, and similar issues that add wrinkles to our lives.
It's okay to enjoy student life, and not be afraid to spend money on what we want as well. However, it is important to check whether your spending reflects your priorities (whether you spend most of your money on things that are the most valuable for you) and whether your income can support your lifestyle over a longer period.
After all, wouldn't it be much better if you finished your studies without having to start building your wealth from scratch? You won't lose years after graduation when you're still young and can travel, explore, and look for things that fulfill you in life. Even though money, as they say, doesn't bring happiness, I think the fact that you don't have to worry about it will be quite positive.