Easing the financial headache for students

Most of us have a tendency to spend what we have, and that's particularly true with students, so its essential parents help guide them toward prioritizing and managing their own financial budget. Build the template and have your students fill it in or at least track it each month. Before you begin developing the budget, talk to your student about the concepts of the budget, including topics such as unplanned expenses, being conservative, remaining flexible, and most importantly, being realistic. You can use websites such as www.getsmarteraboutmoney.ca for valuable tools like the University Expense Planner.

Once you are ready to begin building your budget, consider this five-step process:

Step 1: Build your budget in a spreadsheet or on a sheet of paper. Identify all sources of income (inflows) the student may have. This can include one-time items such as RESP withdrawals, graduation gifts and other savings, parental support or part-time income. This should be the first section and if possible should be structured as monthly inflows.

Step 2: Create a section for expenses, which should be divided into fixed and variable expenses -- or the more student-friendly terms: needs and wants. Fixed expenses will include rent (or if in residence, you may want to show the monthly portion of the annual costs); food or meal plan (if in residence); cell phone bill; textbooks (although this is likely a one-time fee) and any other fixed expenses such as utilities. The variable expenses are where it gets tricky. These are discretionary items, which are difficult to manage for an inexperienced budget manager. Variable expenses include movies, snack food, drinks and supplies.

Step 3: As with any good budget, there should be a portion that goes to savings. This will help establish the discipline with your student and more importantly, will create a fund should they encounter any unforeseen expenses or emergencies. A guideline to aim for is % to 10% of the total budget.

Step 4: Now the important step. Calculate your budget to see if it balances. If there is a surplus at the end of the month, increase the savings component or consider reducing the parental support (income) provided. Unfortunately, in most cases there will be a shortfall, but discretionary or variable spending means there is flexibility so task your student with reducing variable expenses until the budget balances. For example, your student may have budgeted a lot on fast food and takeout. You can guide him toward allocating more to food from the grocery store so he can prepare at least two meals at home per day. In addition to reducing variable expenses, suggest that he consider a part-time job or filling in as temporary staff during holiday periods.

Your student may also have some expenses that are predictable but only occur a couple of times during the school year, such as tickets to formal events or concerts. The way to budget for these items is to take the total cost for the school year and divide by the number of months in the school year.

Step 5: Perhaps the most important step in the budgeting process is tracking. One of the mistakes most students make is creating the budget and then forgetting about it. Discipline is crucial in sticking to a student budget. Banks, for instance, will try to tempt you with all sorts of credit-card offerings. At this stage, credit cards are not your friends. They are a temptation to draw you away from your well thought-out budget and therefore, should be avoided until you have consistent success using this method.

Tips to help your student ease the pain of living on a budget:

• Learn to cook. Take a lesson or two before heading off to school. It's a sure-fire way to save a lot of money on food. Buying in bulk with friends and roommates should also be explored. When shopping, learn to compare the prices per hundred grams on the grocery-shelf label or on the food package itself.
• Cash is king. Use cash for just about everything. At the beginning of each week withdraw the appropriate amount and spend according to your budget. However, ensure that your withdrawals are from your own bank's ATMs, since the use of other bank ATMs is a convenience that comes with exorbitant service fees.
• Buy used textbooks. Before the start of the school year, research online textbook exchanges to try and find used textbooks. Also, make contact with students who were previously enrolled in your program.
• Shop for bargains. Furnish your room, apartment or other off-campus residence with used furniture. You can shop for deals through local classified ads and/or online marketplaces.
• Look for student discounts. Take the time to learn about this money-saving option. Almost all consumer goods and services providers near the main campus will offer discounts. These can apply to just about anything, from household items like toilet paper, to personal services such as haircuts.
• Don't double up. If you already have coverage for health and dental expenses through your parents' employer, be sure to opt out of any group plan offered by your university or college and be reimbursed for that portion of your tuition fees.

Despite following a budget process religiously, your student's actual spending will usually differ from what was budgeted. However, the variances can be reduced over time through periodic reviews. Creating a budget and adapting it as needed will not guarantee your student will remain stress-free during university, but it should certainly help.