In November 2017, we recommended spending plans for all undergraduate students. This month’s holiday break is the perfect time for them to take two additional steps. First, evaluate fall spending plans. Second, make new spending plans for the next academic term.
All college students need accurate spending plans to:
- Set financial goals and stay on track to meet them;
- Choose more and less important costs and income streams; and
- Successfully predict income and expense amounts and dates.
Sizing up previous plans and making future spending plans requires four steps.
- Review last term’s plan. Use bank, credit card, and other financial records to recall each week’s income and expenses. Compare actual amounts to original estimates. Then consider whether what made the estimates high or low will be repeated during the next term. Also identify new and different income and expenses for that term.
- Set financial goals for the next term that correspond to academic and life goals. A student got all Cs in his first term. But he hopes to go to graduate school. So he wants all As and Bs next term. He sets a financial goal of lowering his costs by a certain amount during that term. This will make it possible for him cut his weekly work hours, giving him more time to study.
- Estimate weekly income and expenses for the next term. Remember to make adjustments if that term is longer or shorter than the fall term.
- Schedule dates for comparing actual and estimated income and expenses during next term. Then make changes as needed.
Student income and expenses usually fall into several general categories:
- Income — Family contributions, financial aid, reimbursements, savings withdrawals, and take-home pay; and
- Expenses — Books and class supplies, deposits to emergency savings, personal spending, room and board (or groceries, rent, and utilities if living off-campus) transportation, and tuition and fees.
Married students should count their spouses’ salaries or wages as take-home pay. Child care costs are personal spending. So are medication and treatment costs that doctors classify as medical musts. Insurance reimbursements for such costs are reimbursements.
Don’t neglect emergency savings. A “safety net” is always needed in case there are unexpected costs.
This year’s college students average about $17,000 in spending not including tuition and fees. Unfortunately, many try to “wing it” when it comes to their spending. So it’s no surprise that the top two reasons for dropping out are financial.
This makes it absolutely necessary to review the last term’s spending plan. And it’s equally important to use results from that review when making the next term’s spending plan!
We’re planning to take a break from publishing articles over the next three weeks. But we’ll begin posting them again on this website every Wednesday beginning January 2, 2019. Meanwhile, you’re welcome to use our Topical Index to find more than 100 articles on strategies for keeping postsecondary educational costs within your means.
Happy Holidays from College Affordability Solutions!