For many young people, college offers an unofficial crash course in money management. It may be your first time renting your own apartment, paying bills in your name and realizing how much toilet paper actually costs. The average college student spends $36,436 a year on tuition, housing, living expenses and more. That’s a lot of money to manage, even if some of it comes from financial aid or another source. You need a system for organizing and tracking your finances, and that’s where budgeting comes in. A budget can help you figure out how much money you need each term, where the funds are coming from and how much you can spend on routine living expenses. Without a budget, you might run out of money for major necessities, start overspending, go into debt and potentially lower your credit score. While each budget is unique, there are some general steps you can take to set one up. Here’s the ultimate guide to budgeting for college students.

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Set financial goals

Your financial goals can help guide your budget, so take time to think of what you’d like to accomplish. Writing them down and including a concrete plan gives you a better chance at achieving those goals, too, according to a Harvard Business School study. For instance, these may be your short-term goals you set for your first year in college:

• Create an emergency fund with one month’s worth of living expenses. Save $50 a month until this is achieved.
• Establish a credit file by applying for a credit card.
• Avoid credit card debt by only charging purchases I can afford to pay off each month.

You can also set medium-term goals for the next one to three years. Maybe you want to save up for a new laptop computer or a summer vacation. Long-term goals might include investing for retirement or paying off your student loans within a certain time frame.

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Set up your college budget

Next, you’ll set up a budget. This involves two major pieces: calculating your income and defining your expenses. Follow this breakdown:

Step 1: Calculate your income

This step is important because you’ll need to know how much money you have coming in to determine how much you can spend. College students often get income from a combination of sources, such as:

• Family contributions
• Your own savings
• Financial aid such as scholarships, grants and student loans
• Your pay from a part-time job

Financial aid money is usually paid directly to your school. And if it’s more than enough to cover tuition, fees, and room and board, then your school's financial aid office should give you a refund for the excess amount. Keep these refunds in your bank account for now. Add up the refunds and the rest of your income sources, and keep this number handy. Let’s say this is the income you can expect to receive each semester:

‍Income source Amount per semester

‍Scholarships $5,700

Family contributions $4,850

Student loans $2,100

Part-time job $2,000

Step 2: Categorize your expenses

Now make a list of your expenses for the semester. You may have large, one-time expenses plus recurring costs that can vary each month. Check your list of goals to see if you should add categories, such as investing and saving, to your budget.Here are some examples to get you started:

‍Major expenses:

• Tuition and fees
• Rent or dorm payment
• Textbooks

Variable recurring expenses:

• Groceries
• Utilities (electricity, gas, water, cable, internet)
• Cellphone plan
• Streaming services and other subscriptions
• Car insurance
• Gasoline, parking and bus passes
• Dining out
• Entertainment
• Personal care
• Student club memberships
• Traveling home
• Savings goals, like a vacation
• Car loan payment
• Investing money

Step 3: Assign a value to each expense

Now you’ll estimate how much money to earmark for each category. For your variable living expenses, you can go through your bank and credit card statements from the past few months to get an idea of how much you typically spend.For school-related costs, you should receive a bill ahead of each semester that includes a breakdown of your tuition and fees, plus your meal plan and housing costs if you live on campus. If you’ve already registered for classes, you may be able to find out which textbooks and supplies you need from your syllabus. All of this information can help you fill out some of the expenses in your budget.    List each expense, the amount you plan to spend on each and how you’ll pay for those expenses.

Here’s an example:

‍Expense - Amount and frequency - Payment method

‍Tuition and fees - $4,850 per semester - Family contributions

Dorm room - $5,700 per semester - Scholarship

Textbooks and supplies - $600 per semester - Student loans

Meal plan - $1,500 per semester - Student loans

Transportation - $50 per month - Part-time job

Cellphone plan - $50 per month - Part-time job

Car insurance - $100 per month - Part-time job

Entertainment and dining out - $150 per month - Part-time job

Personal care - $50 per month - Part-time job

Emergency savings goal - $50 per month - Part-time job

Investing - $50 per month - Part-time job

Step 4. Crunch the numbers

This part should be quick: Add up all of your expenses for the semester and all of your income. Then subtract your total expenses from your total income to see if it evens out:  

Income: $14,650 per semester

Expenses: $14,650 per semester

$14,650 - $14,650 = $0

A $0 result means you have just enough income to cover your expenses. If you have a surplus, though, you can allocate your remaining income to an expense of your choice. And if your expenses exceed your income, then consider working more hours or cutting back your costs.

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Budgeting tools you can use

Once you’ve set up your budget, you’ll need to start tracking your expenses over time and monitoring your financial goals. There are a few ways you can go about it:

Budgeting apps

Budgeting apps can help you create your budget and track your expenses, and they all work a bit differently. For instance, some allow you to move money into a savings account where you can track your savings goals. Take a look at a few lost-cost budgeting apps:

• Goodbudget helps you manually portion your monthly income into spending categories using digital “envelopes.” There’s a free basic plan with 20 included envelopes and an upgraded paid plan ($70/year) with unlimited envelopes.
• You Need A Budget (YNAB) helps you assign all of your earnings to different expense categories. Customers pay either monthly ($14.99) or annually ($99), but college students are eligible for a free one-year subscription.
• Oportun analyzes your checking account transactions and looks for places where you can save money. Then it withdraws funds from checking and puts it into a savings account or retirement account. The service is free for 30 days and then costs $5 a month.

Pen and paper

If smartphone apps aren’t your thing, you can always go analog. Take a notebook and pen, and create a budget sheet for each month of the year. For the first month, write down your income along with a list of your monthly expenses. Every time you make a purchase or pay a bill, record it on that month’s budget sheet. Include the date, a note on what the transaction was, and the amount.Create a sheet for each goal, too, and track your progress along the way. If you want to save $50 a month for your emergency fund, then make a note every time you stash that amount away.

Spreadsheet

An Excel or Google Sheets spreadsheet can perform the same function as a budgeting app or your analog budget, but these options are free and don’t require you to carry around a pen and paper. Remember that creating a reasonable budget and sticking to it while in college will train you to manage your money responsibly as your paychecks grow post-graduation. You’ll also be in a much better position to pay back your loans as payments come due (along with interest) and build your credit score.