How to Create a Student Budget | Money

Introduction: 

Problem/purpose 

When students enter university or college, they experience being on their own and out of the comforts of their homes for the first time (Gutter et al. 2016). For most of them, staying at the university implies managing their finances for the first time. Budgeting is one big challenge that the students confront. Inevitably, the students possess more money than ever before, perhaps from the parents, relatives, student loan, or a summer job (Kim & Torquati, 2019). Particularly, this becomes a problem when there is an unexpected change on the budget items. This is both a heady mixture and a challenge at the same time. Creating a budget enables a person to know in advance whether there is enough money to do the things that one intended to do (Gutter et al. 2010). Failure to balance income with expenses means that an individual will spend more than the income, and this is problematic. Many students do not realize that they do not earn, but they spend more, and hence they slowly sink deep into debts. The primary purpose of this essay is to examine the problems with student budgeting. This study draws solely from secondary sources. Secondary sources are the information written or recorded by an individual who did not have the first-hand experience in the event being researched. For this project, secondary sources will generally be scholarly articles and books. The essay will focus primarily on the topic of student budgeting problems. However, this topic will be broken down into the following subtopics; background information, research strategy, analysis of research findings, the potential course of action and a closing summary. These topics will be discussed in the order as they are listed here. 

Definition of terms 

Budget – according to the Merriam Webster dictionary, a budget is a plan of spending. 

Budgeting – budgeting is the process of formulating a plan of how to spend money. Simply, budgeting is the act of balancing income with the expenses. 

Spending- it refers using money to meet a certain purpose. In the case of students, they spend to buy food, school items, and paying school fees among others. 

Body: 

Background Information 

University students are perceived as money-spending machines. Besides the thousands of dollars that families and students spend on tuition, while students are on campus, they also spend on food, clothing, drinks, and other things. Though these consumption behaviors appear harmless, in the context of no or limited income, large student loans, and accumulating credit card debt, the deficit spending may damage the future financial health of the individual. As Delayco & Biana (2015) reveals, it is estimated that two-thirds of University graduates are in debt as at the time of graduation. 

From the economic theory perspective, how students save and spend money throughout their University life is a rational act. Moreover, according to the permanent income theory, people tend to smooth their consumption according to their income. This means that any changes in a person’s financial status must elicit a similar impact on consumption, regardless of the source of the finances. The emergence of debit and credit cards has worsened how students spend money. According to Gutter & Copur (2011), the more efficient and easier it is for a student to get money, the more difficult it will be to resist spending. Today, the problem facing students is not only limited to the patterns of deficit spending but also the use of debit and credit cards. Recently, the New York Times and the Wall Street Journal headlined that student loan debt was higher than it has ever been, unemployment rates are up, the economy is unstable, the job market is down, and using debt for spending has become a norm. Combined, student loan debt and credit card debt contribute largely to the detrimental of financial stability of students. 

Research Methods/Strategy 

Focus group is the research method chosen for this project (Gill & Johnson, 2010). A focus group is defined as a form of qualitative research tool that involves interviewing a group of people(Gill & Johnson, 2010). This group is normally composed of a moderator and several participants. The researcher relies on the interaction among the group members based on the topic under investigation to have an emphasis on a particular issue. 

The advantage of using this approach is that it enables the researcher to draw upon various aspects from participants in a manner that would otherwise be impossible in applying alternative methods (Gill & Johnson, 2010). These aspects include beliefs, experiences, feelings, and attitudes of the respondents. These aspects only emerge during a social gathering when group members interact amongst themselves. Using this method, the researcher can collect a large volume of data within a short period unlike other research methods. Also, the focus group is valuable in allowing members to ask other the reason for holding particularly opinions (Gill & Johnson, 2010). 

Given its numerous benefits, the focus group research approach is not only used extensively in the field of research but also for other reasons. For instance, politicians use this method to shape their public image as well as predict the results of elections. In addition, film producers prefer this method to determine the right time to release a new film or to decide what film will sell most (Gill & Johnson, 2010). 

Analyze Findings 

From this research, I learned that managing money as a student is a challenge. Students face a number of serious budgeting problems, which include not sticking to the budget, not living within their means and failure to differentiate between wants and needs. 

Most students do not know where their money is going (Delayco & Biana, 2015). Indeed, when in college, they tend to live outside their means. They end up not controlling their spending. Their financial decisions are not based on the money they have available, such as only buying what they need instead of what they want. In their work, Delayco & Biana (2015) discovered that overspending is a problem for most students, especially those at the freshman level (Gutter et al. 2016). Rampant cases have been recorded of freshmen who drain their accounts within the first few months of entry in University and then forced to do part-time jobs to cater for their basic expenses. 

Another problem is the failure to create or stick to a budget (Delayco & Biana, 2015). It is important for students to budget as much as possible. They can begin by simply adding up how much they must spend monthly and then determine how much they can afford to spend weekly and even daily. Students can do away with things such as Dunkin Donuts or Starbucks coffee. Given that students have a limited income stream if any, it is very important to understand the want verses need decision. Of course, if the budget allows, a student can buy that expensive Dunkin donuts, Starbucks coffee, and other things they do not really need (Kim & Torquati, 2019). 

Failure to determine needs verses wants is another budgeting problem facing students (Gutter et al. 2016). Though this sounds somehow basic, many students end up not living within their means because they have not categorized their expenses. They do not understand what they need and what they want. For instance, students can probably do without coffee, which is a want but they cannot do without food because it is a need. Categorizing needs verses wants can go a long way in helping students avoid overspending and impulse buying. 

The Potential Course of Action 

This section recommends the following courses of action to help students overcome the aforementioned budgeting problems. These money management and budgeting techniques are easy solutions to aid students avoid making these common budgeting missteps. 

For students to know where their money is going, the first thing to do is to create a spending plan (Gutter et al. 2010). This plan will allow students to have an overview of where their money is going and areas where they can cut spending. Students can try easy to use and free budgeting software like http://www.mint.com (Gutter et al. 2016). This software can automatically generate a basic spending plan, which students can easily personalize. When students are creating a spending plan, the most basic thing they do is compare their income to their expenses. The goal is to have more income than expenses or balance the income and expenses. This will imply that the student’s financial life is balanced, and he/she is living within his/her means. However, when the student’s expenses exceed the income, it would imply that the student is overspending than he/she is earning and hence, there is a need to adjust the spending habits. 

Another approach is to differentiate between needs and wants. In money management and budgeting, the most important concept is to know the difference between things that you want and those that you need. Gutter & Copur (2011) define needs as those things that one must have for survival. Such include clothing, water, food, and shelter. Without food, a student would not live. For students, needs can also represent things that can help them succeed in their education. A good example is having the appropriate books and class materials. On the other hand, wants are things that a student would like to have, but the student can still survive even without them (Kim & Torquati, 2019). Examples include the latest mobile phone, Dunkin Donuts, Starbucks coffee, and video game. 

Close: Summarize Key Points 

Entering college life is one of the most interesting stages in life. It involves one leaving home, experiencing new things, meeting new people, and being in charge of your life, including finances. Student life can be as adventurous and exciting as one wants it to be. It comes with a great deal of freedom and responsibility, about not only studies but also money management. If one allows it, college life can be expensive. However, with sound budgeting habits, one can successfully keep his/her expenses to a minimum. 

Managing cash properly and making sensible financial decisions is not only a good behavior for students to learn but also contributes to their future financial success. In any country, students are perceived as the bock borne of the economy. Therefore, it is important to equip them both mentally and physically for the strong foundation of the country in the future. Practicing good budgeting skills among students is not only good for their bright future but also the society and country at large. However, students face a number of serious budgeting problems, which include not sticking to the budget, not living within their means and failure to differentiate between wants and needs. They always stay updated on the latest model vehicle, expensive mobile phones, the latest fashion trends, and branded clothes. However, students can overcome these problems by creating a spending plan and differentiating between needs and wants. 

Information in this document provides key insights on the budgeting problems that students face and effective budgeting and money management practices. Considering these recommendations while in school will help students gain control of their debt, expenditures and navigate their life successfully. 

References 

Gutter, M. S., Garrison, S., & Copur, Z. (June 01, 2010). Social Learning Opportunities and the Financial Behaviors of College Students.  Family and Consumer Sciences Research Journal, 38,  4, 387-404. 

Gutter, M., & Copur, Z. (January 01, 2011). Financial Behaviors and Financial Well-Being of College Students: Evidence from a National Survey.  Journal of Family and Economic Issues, 32,  4, 699-714. 

Delayco, M. L. C., & Biana, H. T. (January 01, 2015). Dine in or out: Understanding the budgeting and eating out behavior of de la salle university students.  Dlsu Business and Economics Review, 24,  2, 136-149. 

Gill, J., & Johnson, P. (2010).  Research Methods for Managers . London: Sage Publications. 

Gutter, M. S., Copur, Z., & Garrison, S. (January 01, 2016). Do the Financial Behaviours of College Students Vary by Their State’s Financial Education Policies?. 

Kim, J. H., & Torquati, J. (June 15, 2019). Financial Socialization of College Students: Domain-General and Domain-Specific Perspectives.  Journal of Family and Economic Issues, 40,  2, 226-236.