6.6 Financial Management and Budgeting

A five, a ten, and a twenty dollar Canadian banknote.

Source: “Stock Photography – Canadian Money” by Katherine Ridgley is licensed under CC BY 2.0

“Do not save what is left after spending; instead spend what is left after saving.”
– Warren Buffett

Questions to consider:

  • What simple steps do I take to create a financial plan?
  • How do I use financial management and budgeting in everyday life?
  • How is the financial planning process implemented for college expenses?

Learning Objectives

  • Identify sources of major and minor expenses in your life
  • Identify sources of income in your life
  • Set financial goals and priorities for yourself
  • Define budget strategies
  • Create a personal budget

If you’re a new college student you may not yet have money problems or issues—but most college students soon do. It doesn’t matter whether you’re a college student enrolled in college just after high school or a mature student returning to school.

You will have many new expenses including tuition and fees, housing and food bills, books and supplies, and so on. Students who have worked or started a family before attending college may have already learned to manage their money well but usually still confront some financial issues:

  • Because you need more time for studying and college, you likely have less time to work and make money.
  • You will have many new expenses including tuition and fees, books and supplies, and so on.
  • You are more likely to have to juggle a budget that may include a family, mortgage, and other established expenses.

Almost everyone eventually has money issues at college, and they can impact your academic success. Money problems are stressful and can keep you from concentrating on your studies. Spending too much may lead you to work more hours than you might otherwise, giving you less time to study. Or you might take fewer classes and thus spend more years in college than needed. Worse yet, money problems cause many students to drop out of college entirely. But it doesn’t have to be this hard. Like other skills, financial skills can be learned, and they have lifelong value.

This section will help you:

  • set financial goals
  • consider jobs and making money
  • learn how to spend less and manage a budget
  • avoid credit card debt
  • determine how best to finance your college expenses

Setting your Financial goals

It’s expensive to go to college. College tuition has risen for decades at virtually all schools, and very few students are fortunate enough to not have to be concerned with this reality. Still, there are things you can do to help control costs and manage your finances while in college. Begin by thinking about your financial goals.

What Are Your Financial Goals?

Whatever it is you plan to do in your future, whether work or other activities, your financial goals in the present should be realistic to enable you to fulfill your plan.

Taking control of your personal finances begins with thinking about your goals and deciding what really matters to you. Here are some things to think about:

  • Is it important for you to graduate from college with minimal debt?
  • What are your priorities for summers and other “free time”? Working to earn money? Taking nonpaying internships or volunteering to gain experience in your field? Enjoying social activities and time with friends?
  • How important is it to you to live in a nice place, or drive a nice car, or wear nice clothes, or eat in nice restaurants? How important in comparison to your educational goals?

There are no easy answers to such questions. Most people would like enough money to have and do what they want, low enough expenses that they don’t have to work too much to stay on budget, and enough financial freedom to choose activities without being swayed by financial concerns. Few college students live in that world, however. Since you will have to make choices, it’s important first to think about what really matters to you—and what you’re willing to sacrifice for a while in order to reach your goals.

Setting financial goals for yourself is one of the best ways to track and manage your expenses. The following strategies can help:

  • Create SMART goalsSMART stands for specific, measurable, attainable, realistic, and timely. These kinds of goals are more manageable and can help you reach your final target more easily. For example, instead of setting a broad, vague goal of “paying for college,” you might set a goal of paying off your two college loans five years after you graduate. This more specific, measurable goal can help you keep track of your progress and whether you need to make changes to reach it.
  • Monitor your spending: Try keeping track of what you spend money on during a one-month period. This can help you see where your money goes and where you may be able to save.
  • Create a budget: Based on what you discovered after monitoring your spending, create a monthly budget you can stick to. While some expenses, such as food and transportation, are necessary, you may find that you can save money on both by riding a bike (instead of driving) to school and eating out in restaurants less. We will discuss this further in the next section.
  • Consider working: Some students have full-time jobs while attending college, whereas others may not have a lot of time to work if they’re taking a full academic load. Depending on your circumstances, it’s worth looking into employment opportunities both on and off campus. Even if you feel like only a couple hours of work per week are possible, it could help you pay for something like books so you have one less thing to worry about when you graduate.
  • Choose loans wisely: Many college students need some sort of financial support through loans. While loans are a good way to pay for tuition up front if you don’t have the money, remember that they accrue interest until you pay them off. That means that you will end up paying back more—in some cases, thousands of dollars more—than you initially borrowed. Make sure you investigate and apply for as many scholarships and grants as you can (since they won’t need to be repaid), and shop around for the loans with the lowest interest rates and best repayment plans. Check with the financial aid office on our campus—they can provide additional help.

These are only some steps you can take for creating college financial goals, but it’s important to find the right ones for you.

The College Budget

“A budget is telling your money where to go instead of wondering where it went”.
—Dave Ramsey, financial author

The term budget is unpleasant to some people because it just looks like work. But who will care more about your money than you? We all want to know if we have enough money to pay our bills, travel, get an education, buy a car, etc.

Budgeting involves analyzing your income and expenses so you can see where your money is going and making adjustments when needed to avoid debt. At first budgeting can seem complex or time consuming, but once you’ve gone through the basics, you’ll find it easy and a very valuable tool for controlling your personal finances. Why create and manage a budget? Going to college changes your financial situation. There are many new expenses, and you likely don’t know yet how your spending needs and habits will work out over the long term. Without a budget, it’s just human nature to spend more than you have coming in, as evidenced by the fact that most North Americans today are in debt. Debt is a major reason many students drop out of college. So it’s worth it to go to the trouble to create and manage a budget.

Managing a Budget

A budget is a plan for how you want to spend money. It details how much money comes in each month and how much you’ve allocated for spending on each thing. The virtue of a budget is that it puts you in control of financial decisions—so you can avoid surprises at the ATM or at the end of the month. Let’s look at some strategies for creating a budget:

  • Be realistic: People are often intimidated by budgets because they’re afraid the plans will be too strict or force them to cut back too much. Though a budget may reveal that you indeed spend a lot of money on clothes, that’s okay—it may just also need to show that you spend very little on restaurants and eating out to make up for it. Again, it’s about making choices and being realistic.
  • Choose a time line: Creating a budget for a fixed period of time will help you monitor whether you’re meeting your financial goals. The time line you choose is up to you and your goals. For example, you might create a monthly budget to monitor how you spend your paycheck every month.
  • Add financial padding: Even if you feel like your list of financial obligations is already long, try to set aside a certain amount each month for a “rainy day” fund—to pay for unforeseen expenses and emergencies, like car repair, lost textbooks, etc.
  • Make adjustments as needed: While sticking to your budget is important, there’s nothing wrong with revisiting and adjusting your original targets. For example, if you find that you are actually spending $50 more per month on groceries than you intended (even after shopping for sale items), you may decide to save that money elsewhere in your budget next month—on entertainment, for example.

Managing a budget involves three steps:

  1. Listing all your sources of income on a monthly basis.
  2. Calculating all your expenditures on a monthly basis.
  3. Making adjustments in your budget (and lifestyle if needed) to ensure the money isn’t going out faster than it’s coming in.

Now comes the moment of truth: compare your total monthly incoming with your total monthly outgoing.

How balanced is your budget at this point? Remember that you estimated some of your expenditures. You can’t know for sure until you actually track your expenses for at least a month and have real numbers to work with. What if your spending total is higher than your income total? The first step is to make your budget work on paper. Go back through your expenditure list and see where you can cut. Remember, college students shouldn’t try to live like working professionals. Maybe you are used to a nice haircut every month or two—but maybe you can go to a cheaper place or cut it yourself. There are dozens of ways to spend less, as suggested earlier.

The essential first step is to make your budget balance on paper. Then your job is to live within the budget. It’s normal to have to make adjustments at first. Just be sure to keep the overall budget balanced as you make adjustments. For example, if you find you must spend more for textbooks, you may decide you can spend less on eating out—and subtract the amount from that category that you add to the textbook category. Get in the habit of thinking this way instead of reaching for a credit card when you don’t have enough in your budget for something you want or need. Don’t be surprised if it takes several months to make the budget process work. Be flexible, but stay committed to the process and don’t give up because it feels like to too much work to keep track of your money. Without a budget, you may have difficulty reaching your larger goal: taking control of your life while in college.

Source: https://youtu.be/5MV4469D0gc



  • Identify two larger college expenses and two smaller college expenses that you are responsible for. For example, tuition might be a large college expense while notebooks and folders might be smaller ones.
  • Describe any sources of income you currently have to cover these expenses.
  • Explain three financial goals you have for covering your college expenses. For example, you might want to consider work study or taking out another loan.

Key Takeaways

  • Most college students encounter money issues in their academic life. Regardless if they are just out of school, or a “nontraditional” mature student.
  • Balancing a budget is a key asset to develop in life. Understand the costs that are involved with college, and have a plan to deal with it.
  • You are valued more by others for who you are as a person; not for your bank balance. Acknowledge that sacrifice and compromises might be needed and people will respect you no less for the choice.

Attributions and References

This chapter is an adaption from the following OER:

Stewart, I & Maisonville, A. (2019). A guide for student success. Windsor, ON: St. Clair College.
Book URL: https://ecampusontario.pressbooks.pub/studyprocaff/
Section URL: https://ecampusontario.pressbooks.pub/studyprocaff/chapter/successful-students-understand-their-finances/
License: CC BY NC SA: Attribution

College Success (2022). OpenStax.
Book URL: https://openstax.org/details/books/college-success
Section URL: https://openstax.org/books/college-success/pages/10-1-personal-financial-planning
License: CC BY: Attribution

College Success. OER Commons. Lumen Learning
Book and Section URL: https://www.oercommons.org/courses/college-success-2/view
License: CC BY: Attribution


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Fundamentals for Success in College Copyright © 2022 by Priti Parikh, Centennial College is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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