The high school years are typically our first experience of managing money, whether from an allowance or a part-time job—and while that responsibility can be empowering, it calls for some planning to make the most of it. In a recent Student Health 101 survey, 97 percent of student respondents thought keeping a budget would help them better manage their money. These eight steps will get you to a spending plan that will shape your spending habits now and for years to come.
“The most important step is to understand where your money really is going. If you can’t get a handle on your spending, it will be difficult to take control and make changes.”
—Larry Pike, financial planner and advisor at Client Priority Financial Advisors LLC in Needham, Massachusetts
1. Work through what you’ve spent your money on for at least two recent, typical months.
You will probably want to include these categories and maybe others:
- School supplies
- Dining out/food
- Cell phone
2. Add your costs in each category.
- Try Mint.com or a similar program.
- Consider rounding up the numbers—it’s safer to overestimate than underestimate your spending.
- Divide your total costs by the number of months you’ve analyzed to get your regular average monthly spending.
3. Identify your irregular or nonrecurring expenses, like trips with friends or buying holiday gifts for family.
Add up these annual costs and divide by 12 to get your occasional average monthly spending.
4. Regular average monthly spending + occasional average monthly spending = average monthly spending.
“The biggest challenge to budgeting is the idea that because students have limited resources, they don’t need to take steps to take control of their finances. They do.”
—Bryan Ashton, assistant director at the Student Wellness Center at The Ohio State University, Columbus
Identify your goals. Maybe you’re saving up for your post–high school education, looking to move out in a couple years, or planning a vacation with friends after graduation. How much should you allocate monthly to meet these goals? Even if you can only put a small amount aside each month—say $20—every little bit helps.
“If we lived in a society in which there was no such thing as credit, you wouldn’t be able to claim you can’t live within your income. You just would.”
— Larry Pike
Speaking of credit, here are a few things you should know to before you get your first credit card.
What are your reliable sources of income? When do they come in? Include:
- Earnings from part-time or summer jobs (if these are unpredictable, go with a cautious estimation)
- Any other sources
Add up your income. Round down the numbers if you want to—it’s safer to underestimate than overestimate your income. Divide your total income by 12 to get your average monthly income.
Compare your average monthly spending (step 1) and average monthly income.
“The key is to be realistic about what you need versus what you want. The greatest value in making a budget is seeing where your actual dollars have gone. Then we realize how much of our spending is discretionary.”
Identify your monthly needs. Your true needs are likely still covered by your parents or guardians (e.g., tuition, housing, groceries, and health care), but you may be paying for some things (e.g., a bus pass, car payments, or your cell phone) that you can classify as needs.
Then identify your monthly wants: those nonessential costs. Be realistic. Account for pizza nights, movies, and that sixth pair of sneakers.
Add up the average of both your monthly wants and needs to establish your ideal monthly wants spending limit.
“Convenience has a cost. Eating out is more expensive than making your own meals, and buying coffee is more expensive than brewing your own. This is where you have the ability to really affect your budget.”
Divide your new spending limit by 4.5. This number is your weekly allowance.
Consider withdrawing your weekly allowance amount from your bank at the beginning of the week. Once it’s gone…it’s gone. Going cash-only makes it easier to track and adjust your spending.
As a student, you’re not expected to save money for retirement. But you should try to save up for upcoming post–high school expenses, if possible. Here’s how (and why) to start investing—on any budget.
When you receive a relatively large chunk of money, like a gift from a relative or a paycheck from a part-time job, deposit it into your savings account.
Refer back to your occasional average monthly spending—your anticipated irregular expenses (step 1). Also, consider any goals (step 2) that require you to save. You can make transfers to your checking account to cover your budgeted monthly expenses, but the rest will stay in savings.
It’s simple: Keep only enough money in your checking account to cover your expenses, based on your budget and monthly wants spending limit.
Refer back to your regular average monthly spending (step 1), adjusted to take account of your new monthly wants spending limit (step 4).
Each month, automatically transfer the appropriate amount to your checking account. This way, your lump sums function like a regular paycheck, so you won’t spend money that you’ll need for future expenses. Adjust this regularly as your income or expenses change.
“Keep a set amount of money in an envelope and use only that amount when going out.”
—Tiffani, senior, Atlanta, Georgia
“Put your money into a savings account, and try not to keep excess cash lying around. You’ll be less likely to spend without thought if you have to withdraw money first.”
—Marynn, sophomore, Colorado
“Wait 24 hours before making an expensive purchase to see if you still really want it the next day.”
—Sam, freshman, Lexington, Massachusetts
“I keep a Bullet Journal® that has a graph I made to keep track of how much money I have and how much I’m spending. I would suggest making a graph and plastering it on your door or someplace you see often to make sure you fill it out and remind yourself of your spending habits.”
—Rebecca, sophomore, Texas
“[I recommend] Honey and Rakuten. Honey finds coupon codes to save money while online shopping, and with Rakuten, you get money back.”
—Enoayoh, senior, Columbus, Ohio
Bryan Ashton, BSBA, assistant director, Student Wellness Center, The Ohio State University, Columbus.
Larry Pike, CFA, financial planner and advisor at Client Priority Financial Advisors LLC, Needham, Massachusetts.
Student Health 101 survey, August 2019.