As many students struggle with their finances, especially in this period of economic challenges, PRINCESS ETUK suggests ways through which students can use budgeting to overcome their financial challenges
The simplest way to budget as a student in a higher learning institution is to understand the true value of your income and how to prioritise your expenses. In addition to tuition fees, you must also account for other essential costs like accommodation and food.
Before diving into how to budget as a university student, it is important to understand the significance of budgeting. Budgeting is not just about covering your expenses; it is about setting financial goals, gaining control over your money, and ultimately achieving financial freedom.
With tuition fees, living costs, and the occasional splurge on necessities, it’s easy to lose track of your spending.
Creating a budget helps you understand your spending patterns, pinpoint areas where you can cut back, and make informed financial choices. Learning to budget can ease financial worries, allowing you to concentrate more on your studies.
To begin your budgeting journey, it is crucial to identify your motivation. Budgeting without a clear purpose can be discouraging, but having a specific reason can inspire you to stay committed, especially during tough times. The following may be helpful:
What are your financial goals? Your motivation might be as straightforward as “getting through to the end of the semester,” or it could involve paying off student loans, or building an emergency fund. Whatever your goal, having a clear sense of purpose will help you adhere to your budget.
What does a typical student budget look like? There isn’t a one-size-fits-all answer, as your budget will vary based on your financial situation. Factors such as financial aid, family support, and part-time work will influence your budget.
As a student, you need a budget plan to enable you to take control of your finances by outlining how much you need to spend based on your monthly income and determining what to do with the remainder. Having a monthly plan increases your financial awareness and helps you make informed decisions about spending and saving.
Budgeting begins with understanding your income and expenses, giving you a clear picture of your financial situation. For a university student, income might come from parents, student loans, scholarships, part-time jobs, or family support.
Income can be categorised into active and passive. Active income involves direct involvement, like a salary or freelance work, where you earn money in exchange for your time and effort.
On the other hand, passive income is generated with minimal ongoing effort, though it often requires initial work or investment. An example includes earnings from a side hustle. Understanding expenses is crucial for managing your finances as a student. You’ll encounter a variety of costs that will affect your bank account.
Variable expenses, such as groceries, textbooks, assignments, and clothing, can fluctuate from month to month. Fixed expenses like rent and utilities, remain consistent over time. Discretionary expenses include non-essential purchases that can enhance your life but aren’t necessary for survival, such as dining out, travelling, and engaging in hobbies.
Here are ways to save money as a Nigerian student:
Write your monthly income: Begin by noting how much money you have available each month. Simply write this on a piece of paper. This will help your planning.
Understand what you spend your money on: This step is crucial for learning how to budget effectively. Before you can start making cuts or budget-friendly choices, you need to understand your spending habits. Start by listing all your potential expenses, such as tuition; accommodation; utilities like electricity and water bills; transport fares; feeding, textbooks; personal items such as toiletries, clothes, and shoes; entertainment expenses for movies, social outings, and other fun activities; money for emergencies and unexpected events
Divide your list into essentials (tuition, accommodation, food, utilities, books) and non-essential (entertainment).
Do the maths: Subtract your expenses from your income until you reach a near-zero balance, ensuring every penny has a purpose. This doesn’t mean you have to spend everything each month.
The 50/30/20 method divides your income into three main categories: 50 per cent goes to needs such as rent, food, books and utilities; 30 per cent is allocated for wants, which includes non-essential items and activities; and 20 per cent is dedicated to goals like savings and debt repayment.
Alternatively, you could use the 80/20 rule, where you allocate 20 per cent of your income to savings and the remaining 80 per cent to expenses.
Another approach is the 70/20/10 rule, which suggests using 70 per cent of your income for living expenses, 20 per cent for debt repayment, and 10 per cent for savings.
Also, the Pay Yourself First method is a straightforward but effective approach that prioritises saving by automatically allocating a portion of your income to savings before addressing other expenses. Here’s how it works:
First, automate your savings by setting up automatic transfers from your checking account to your savings account as soon as you receive your income. This ensures that you save consistently without relying on willpower, which can make saving more challenging.
Next, establish your savings goals by deciding how much you want to save each month. If necessary, adjust this amount based on your financial needs and goals.
Finally, budget with the remaining funds after your savings have been set aside. Use the leftover money for essential expenses and discretionary spending. By paying yourself first, you avoid the stress of saving at the end of the month when funds might be limited, keeping your savings out of sight and out of mind.
Track Your Spending: With your budget in place, start tracking your expenditures. Note everything you spend throughout the month and compare it to your plan. If you buy a coffee, deduct that from your wants allowance. This helps you observe spending habits and see if you’re exceeding your budget in any area.
Before the start of a new month, adjust your budget plan based on your observations and any changes from the previous month.
After establishing a basic budget, there are some effective strategies to help students save money. Implementing these tips together can lead to significant financial improvement.
Shopping is inevitable, but you can do it wisely to save money. Utilise student discounts at places like public transport, cinemas, and restaurants. Buying second-hand items such as books, clothes, and furniture can also help you save money and benefit the environment. Additionally, you can save money by purchasing items like canned food or toilet paper in bulk.
Cooking at home is a cheaper and healthier alternative to eating out frequently. Numerous easy recipes are available online. If you have roommates, consider cooking larger meals and sharing the costs, which can further reduce expenses and make cooking more enjoyable. Identify and cut back on luxuries you can live without, at least temporarily.
Cancel unnecessary subscriptions: For instance, switch from a premium music streaming service to its free version. Borrow books from the library instead of purchasing them. It will save you money. You may also need to reduce the amount spent on the internet.
Enjoy free activities as a student by attending campus events, which universities often host and where you can meet other students.
Relax in nature with activities like walking in the park, hiking, or spending a day at the beach, all of which are free and beneficial for your well-being.
Consider cost-effective and eco-friendly alternatives to owning a car. Public transport is better, especially in areas where the government provides mass transit buses. Biking is more affordable than a car and provides daily exercise. Walking is also a free option if your accommodation is close to campus.
Taking up part-time employment can be a beneficial option. There are many student-friendly jobs available, ranging from waitressing to remote work like translating or managing social media accounts. This not only helps financially but also offers valuable work experience and networking opportunities.
Beyond the tips mentioned, consider opening a student bank account, as many banks offer accounts specifically designed for students with minimal or no fees.
Research to find the best option for you. Be prepared for unexpected costs, such as urgent trips home or medical emergencies, by having student insurance and checking what it covers.
A Professor of Business and Applied Economics, Adegbemi Onakoya, emphasised the crucial importance of budgeting for students to ensure financial stability.
Onakoya provided practical advice and insights into managing personal finances effectively.
“You need to budget your money, if not, you will run out of funds,” Onakoya stated.
He highlighted the common issue of students facing financial shortfalls despite receiving funds from their parents.
“Usually, whatever your parents give to you cannot be enough. There are expenses that are unplanned; there are course notes that you didn’t plan for. And you need to manage your budget within those constraints.”
He stressed the reality of limited resources against unpredictable expenses.
“Your resources are limited. Your expenses are not determinable, which you cannot foresee,” he said.
To navigate this, he advised students to systematically track their spending and prioritise their needs, saying, “You need to list all the things that you do based on the pattern of expenditure and then prioritise which one is most important to handle and which one can I forgo for now, which one can I ignore forever.”
He acknowledged that some students might resort to less favourable options to supplement their income.
“Some students go as low as doing menial jobs to augment whatever money is coming from their parents,” he noted, underscoring the lengths to which students might go to balance their finances.
Managing your finances as a student can be challenging, but it’s achievable with the right strategies. By keeping track of your income and expenses, using discounts, cooking at home, enjoying affordable entertainment, and opting for budget-friendly transportation, you can save money and stick to your budget. Working part-time can also provide extra income and valuable experience. With careful planning and smart choices, you can enjoy your studentship without financial stress.
