The Down and Dirty of Budgeting
Welcome to freedom. No more Mom and Dad watching over your shoulder and monitoring every move! Stay up as late as you want, sleep in, skip all of your classes, drink The Out Back Shack dry if you are physically able to, and be broke and out of money by the second week of classes. All of this is possible if you wish this to be your crowning achievement and glory.
Budgeting is one of those things that you hate to deal with when you first hit college: but it is one of the most important words you need to learn when you hit this campus. Each year, you should prepare a budget, which lists all reasonable expenses for attending Fanshawe College. Budgets will include direct education expenses (tuition, fees, books, and supplies) and indirect education expenses (e.g. room, board, personal, medical, and transportation).
So what exactly is budgeting? Budgeting is quite simply the art of balancing the amount of money you have coming in (your income) with the amount that you need to spend (your expenditure). By drawing up a budget plan you can come to a better understanding of your situation and thus make informed decisions about your financial needs.
Because budgets include many categories and will be affected by many different things during the year, you will probably spend more or less than you originally planned. For example, you may only spend $600 for books and supplies even though the amount budgeted are $1200 for the year. However, you may pay more for your rent and utility bills than you originally budgeted. The amount you spend, except for tuition, ancillary fees and books, is up to you and depends on the lifestyle you choose to live and the funds you have available to spend. What you budget should reflect the costs for living comfortably, but not extravagantly. If you choose to live a more affluent lifestyle, preparing an expense budget is a critical process to ensure the lifestyle is something you can afford in the first and last month of school. (And all through the year so that there are no surprises.)
A guide to assist you in developing these budgets can be obtained from the Financial Aid Office in Room E1003. Most financial aid programs such as OSAP do not keep up with the rising costs of college, so it is important for you to manage what money you have wisely -- both this year and next, whether you are a co-op student or not. You will probably live the most frugal years of your life while in college, and you may be learning for the first time how to manage your own money and stretch your dollars. Remember these lean years are preparing you for a life of making money from the profession that you are learning while at school.
But do you know the right way to budget for college? Are you going to live on Ramen Noodles, Kraft Dinner and tap water for the next two or more years? (Trust me, you will soon find that you cannot afford bottled water!) Through efficient student budgeting, you will be able to create a college student budget and enjoy the opportunities that college life holds for you. College budgeting is the process of understanding the source of your income, your expenses and the best way to budget what you have.
Student Budgeting 101
First of all, don't freak out and don't worry too, too much: millions of students do this each and every year and do it successfully. Approach it with common sense and it is do-able for each and every student.
WOW! Who knew life outside of Mom and Dad's could be so expensive? Tuition, books, school supplies accommodation, food, clothing, etc. It's crazy how much it can cost! But, if you budget carefully and sensibly, you can pull it off. Remember that it's been done before - it can be done again.
A view to room
Some students like to live off-campus by renting an apartment, room, or a house. Sharing with one or more roommates is a great way to keep down your living expenses. Most colleges have bulletin boards in the Student Union or other key locations advertising various kinds of accommodation. (At Fanshawe, you can also check outside F2010 and down by the Harvey's Cafeteria.) You should also check this student newspaper's classified ads for rental accommodation for people looking for roomies. A word of caution, though: don't move in and sign a lease for a year unless you are sure you like the people in case they turn out to be horrible just because it is right conveniently close to the school. Be selective: it could turn out to be worse than Survivor with Richard running around naked all of the time!
The laws of the land
Some landlords may require you to fill out an application. Once they agree to rent to you they usually request first and last month's rent. SECURITY DEPOSITS ARE ILLEGAL IN ONTARIO! DON'T LET THEM FOOL YOU OTHERWISE! Make sure you find out if utilities are included with the rent - and get it in writing. If they are not, then remember to budget for them. Also remember that a one-year's lease is generally for TWELVE MONTHS. School is usually EIGHT MONTHS unless you are on a fast-track program. If you move out at the end of eight months, you still owe the landlord for four months rent and he is not going to forget that. You are then talking about subletting or living there for the summer or paying for an empty apartment as you are now a responsible adult with a lease. (And I can pretty much assure you he will not just "forget about those four months as he likes you"!)
The laws of the home
Make sure all of the roommates co-sign the lease and contribute to any deposits. It's also a good idea to have a written agreement that spells out each person's financial obligations and the sharing of chores. Talk to your roomies: if one has a boyfriend or girlfriend who starts to stay over all the time, have it in writing that that person's mate starts paying a percentage of the rent so you don't get ripped off if they are basically living there full time. (I.e. if it is a two-person apt. and your roomie's other half is there all the time; you should be only paying 1/3 of the expenses!)
Talk it out before it becomes a bone of contention. Living off campus possesses a whole new set of budgeting problems such as the majority of your expenses are shared among a group of people. Suddenly your lone budget that seemed simple has now become all tied up with other people and their budgets. Managing these complex financial relationships with your roommates can sometimes be simple, but can also turn into rather ugly situations. Who pays for what? And how much do they pay? Is it fair to split the electricity bill equally when all you own is a lamp and an alarm clock, but one of your apartment mates owns a computer, stereo, TV, and many more electricity hungry devices?
If utilities are not included with your rent, a one-time installation fee may be charged - same with a new phone line. If you have never had a phone before, they may ask for a deposit. If you have a cellular phone with a good package (i.e. unlimited daytime calls), you may wish to stick to that phone and that phone alone. (But watch it and don't get a huge cellular bill like some students end up with!)
Pre-paid long distance cards are AMAZING: five to seven cents a minute anywhere in Canada or the USA anytime of the day and are available in the College Bookstore: CiCi is usually the best deal as it has no connection fee. (And no, I am not getting any kickback from them for suggesting that particular card!)
CallMe Cards are the best way to call Mom and Dad (if you are still speaking) as it is like calling them collect but you don't pay the $1.75 connection fee. Call 310-Bell to arrange one --- they get the bill on their bill!
If you can bring furniture from home into an unfurnished accommodation, that would be great. For good furniture deals, try garage sales, Goodwill, Value Village (Clarke and Dundas Street) or Salvation Army, or other second hand furniture shops.
Turning lights off, fixing dripping taps and turning the heat down low with a warm blanket and wearing sweats or sweaters are good ways to keep the utility bills down. (No electric blankets --- unless utilities are included - they suck up so much electricity it is staggering!)
Insurance is something to consider if you own property of value including furniture, appliances, a computer, electronics, etc. Before buying insurance, check with your family to see if their home insurance policy can be extended to cover your possessions. (If your parent's insurance does not cover your possessions, insurance starts at about $7/month and is INVALUABLE especially if your roommate burns down your apartment while trying to cook like mine did --- or any loss if you get broken into!)
How To Stretch Your Budget While at School
- Don't smoke --- you might as well light 20-dollar bills on fire and throw them out the window.
- Clip coupons and/or obtain a discount card from your local grocer.
- Determine a food budget and make menu plans. Stick to both.
- If you cook in groups with friends you can get more variety --- i.e. cook lots of different things and split it all up.
- Get to love beans and pasta - a lot cheaper than meat and better for you.
- Read labels and use unit pricing to calculate the best buys. (The label below the item usually has the price per 100 grams so you can tell which is cheapest --- remember a sale is not always a sale!) --- Try store brands or generic items for best price!
- Buy produce and fresh fruit in season - check the "seconds rack" --- if you cut out a bruise it is often just as good.
- Use a grocery list and don't shop when you're hungry.
- Never buy ANYTHING at a variety store, as the price is usually triple when it comes to any food item other than milk!
- Use coupons wisely; buy multiples of sale items that you use frequently.
- Read ads for food specials.
- Avoid buying convenience foods; they are much more expensive.
- Go shopping with a couple of friends -- car/cab/bus-pool and buy large size items that can be divided up between you.
- The food bank is open on Saturdays JUST FOR STUDENTS --- TAKE YOUR STUDENT CARD OR THEY WILL NOT SERVE YOU!
Books and Supplies
- Buy used books whenever possible, but be sure to check for current editions.
- Share or exchange books with classmates when possible.
- Check out library volumes or use texts placed on reserve.
- Conserve notebook paper; write on both sides.
- When selling used books, be selective. You may want to keep some for research or graduate study later on. If you do sell your used books, first try to sell them to other students instead of back to the bookstore. Often you can get a better price.
- Many supplies (such as paper, pencils, and pens) cost less at chain grocery or discount stores.
- If purchasing a computer, build the expense into your budget and buy what you can afford -- it may mean buying a used computer and/or last month's(!) state-of-the-art. BETTER YET: USE THE HOMEWORK LAB IF YOU DON'T REALLY NEED A COMPUTER. It will be out of date the day after you buy it! (Check the cheapo section of the newspaper if you really feel you need one!)
- If you are really broke, ask your Prof. if you can e-mail your assignment into them!
- Don't miss class as it costs 10 cents a page to photocopy missed notes - it is cheaper to be there and take the notes yourself!
- Shop during sales and buy only the items you would ordinarily buy.
- Take advantage of free concerts, plays, lectures, and other activities on campus and in the community. The public library is amazing for these! I took an amazing course on printmaking and bookbinding last year that was fascinating (I know --- yawn! But it was really interesting and the instructor had artwork from the mid 1400s on display!)
- Try the bartering system with skills such as typing and baby-sitting.
- Read ads carefully for items you need. The Pennysaver is a godsend and is free! (The London Free Press is free online as well --- www.lfpress.com)
- If you are like me and never have change when laundry day rolls around, here is the best tip I ever found. When you come home from school every day, put your loonies and quarters in a jar you keep in your room. When laundry day rolls around, surprise, you have the money. When roomies come a beggin' SELL them the change, DO NOT GIVE IT TO THEM. No credit allowed. Wow, you now have bills to buy laundry soap with, buy groceries with, heck; you can go to the movies. I discovered this enterprise in university and always had a source of extra cash and no one ever owed me laundry money --- excellent! (Just keep moving the jar so they don't find it and raid your stash!)
- Never owe more than 15 per cent of your monthly income. (Especially to a fellow classmate or roommate! He probably needs it more than you do!)
- Deposit enough money in a separate savings account each month to cover your fixed expenses. Don't use that money for anything else.
- Shop infrequently. Understand why you go shopping. If it is because you're bored or depressed, find something less expensive to do instead. Talk to a friend on the phone if you are depressed: it is cheaper than those $200 boots are. If you HAVE TO BUY THEM, do it but return them the next day: check the returns policy first and don't wear them and scuff them! If this gets to be a habit, talk to someone in counselling about your depression: F2010: they're wonderful for talking out the problems!
Leave your credit card at home to avoid impulse buying. Avoid those credit card application forms that are left around the school like the plague --- they are addictive and the payments they want monthly add up!!!!
The Nitty-Gritty of Budgeting
Budgeting is a personal matter, (No one else is in the same exact boat as you) and you should find the system that works best for you. You may like a detailed budget plan, or you may manage better using a few simple techniques. The following basic steps to budgeting are the same no matter what system is used:
- Estimate your income for the budget period. Include your savings, scholarships and bursaries, student loans, summer job and school year earnings, and contributions from your family if you are lucky.
You need to know what it REALISTICALLY IS so you will not be broke and have to drop out and make a realistic expectation of what your expenses can be. That you do not go crazy buying clothing or electronics in the fall and have to drop out in February as you cannot afford the second semester's tuition.
-Estimate expenses. Fixed expenses such as tuition and fees should not vary within the academic year. Other costs, such as off-campus room and board, transportation, and personal expenses may vary, but are within your control. Anticipate special expenses such as deposits, telephone installation fees, and gifts, and include these in your planning.
I can assure you the best gifts you can give your family are homemade if they know you are having a hard time making meeting expenses! You should know which expenses, such as tuition and fees, must be paid in full and which expenses can be paid by instalment or monthly. Talk to the Registrar's Office if you need assistance setting this up. Plan ahead and set aside the money in advance for these expenses.
- Keep a record of actual expenses. You should keep a budget notebook and write down what you spend. Listing expenses in categories gives you an accurate picture of how you spend your money. For example, you might separate direct and indirect education expenses or fixed and discretionary expenses. Whatever method you choose, make sure the categories you use are not too broad. This may result in you losing track of exact expenditures.
A Tale of Two Budgets
The first month of student life is ALWAYS the costliest. There are moving expenses, installation charges, and all kinds of other wonderful surprises. Figure on laying out tonnes of cash in one shot.
KLEENEX IS OPTIONAL.
During the academic year, there will be ongoing costs including rent, utility and service bills, food, clothing, and life. Review your income sources (savings, awards, loans, and employment income) and the expenses you anticipate to help you create a reasonable budget. It's homework, but it's one of those good habits to develop that will let you to focus on your studies.
And next year it will be easier. I swear.
Top 10 - First Month Expenses
- Tuition, student fees
- Moving expenses
- First month's rent/deposit
- Telephone connection charge
- Electricity, gas, water connection charge
- Cable TV connection charge
- Personal property insurance
- Groceries, cleaning supplies
- Unexpected Expenses
Keep receipts from all your moving expenses, as you may be able to deduct them from employment income taxes or award money that you receive. (If it is over a certain number of km you can deduct the moving expenses to and from school! - I did it to and from Thunder Bay all four years I went to Lakehead to and from summer jobs!)
Top 10 - Ongoing Expenses
- Additional tuition, student fees
- Electricity, gas, water
- Cable TV
- Personal property insurance
- Groceries, cleaning supplies, toiletries
- Longer term investments
- Semblance of a life
Err on the side of things costing more than you think. Review your budget on a monthly basis. It's not cast in stone; it's intended to help manage income and spending. Catch and correct bad spending habits, and pat yourself on the back for the good ones. It may sound cheesy, but these are good lessons to learn for life.
As you develop your budget, think about what your financial goals are for the first year and the second year. You may just want to "get through it all" with as little debt as possible. On the other hand, you may decide this is as good a time as any to start putting a little bit aside each month for starting out after school if at all possible. Five dollars here and there in an unbreakable jar (if you think you can live without it - give it to Mom and Dad and tell them NEVER TO GIVE IT TO YOU NO MATTER HOW HARD YOU BEG - can make a big difference in the long run.
It takes upon average, six months to find a job after school. You also have to start paying back OSAP six months after you finish school. Bankruptcy is not an option :-(
A graduate of UWO, Murray Baker, has written one of the best books I have ever read on helping students manage debt. "The Debt Free Graduate: How to Survive College or University Without Going Broke" is available through our college library and the London Public Library. This is the best $15 you will ever spend if you do not want to borrow it. (Go to our library: it is an amazing place --- trust me on this issue: it is on the way to the bar and they are more than willing to assist you.)
Budgeting can be a tough process at first but there are people here on campus that are willing to help you and resources aplenty if you are wanting to work on your own. (Go to www.google.ca and put in "student budgeting" and there are results in the thousands as this is an issue almost every college and university has put into place to assist students such as myself and you with this needed process.)
There are bursaries and scholarships out there that people never apply for!
The staff in financial aid are a plethora of information and wonderful people to boot: please talk to them about budgeting if you want assistance or any information about financial aid in general. They are fabulous and warm and wonderful people who can help you get money to get you through school!
I am not saying that budgeting is easy: it's not. It requires a lot of caffeine, frustration, hair pulling, deep thought and thinking. It requires realistic thought, hard work and realism. But going to college makes us realize we are not (ahem) supposed to be adults. What a scary thought. But budgeting is not about a burden of debt that is to hang over our heads for our entire life. It is about dealing with a few years of our lives without drowning ourselves with even more financial problems than we can deal with down the road.
It is time to pull up our socks and think hard about how we want to spend these years at Fanshawe. We want to have a good time, but we don't want to spend a decade or more literally paying for it. Happy planning: I will have more to say over these upcoming weeks: write me if you have questions, thoughts or concerns and I will use all the resources that I can tap to answer your questions.
Janet Romanov is a second Year Hotel Management Student whose father, husband and personal banker are still laughing at the thought of her writing any thoughts on budgeting, finance and saving money. She still owes Columbia University $150,000 USD. Plus interest. Janet can be reached at email@example.com