Make a Debt-Free College Budget

College students are notorious for living outside of their means. I know you are broke, but go cry to that shiny new Nintendo instead of me. If you want to quit kicking your wallet’s ass, read on.

  1. You already have debt from loans.
  2. You have little to no income.
  3. Mommy and Daddy aren’t going to bail you out anymore.

It’s time to get this under control. Load up any kind of program that lets you keep track of money. Even if it is a simple spreadsheet, it’ll work. If you don’t want to use the computer, use a spiral notebook.

For the rest of this month, keep track of all of your purchases as well as income. Save receipts, bank statements, and anything else that has something to do with your finances. Try to keep things in categories such as food, entertainment, or alcohol. Hell, I’m even going to make it easy for you to start. Don’t worry about changing any habits whatsoever. Spend as you normally would for the rest of the month. Eat, drink, and drink some more.

By the end of this month you should have a list filled with some nice big red numbers. There are three categories of expenses: Absolute expenses, Nearly-Absolute expenses, and NON-absolute expenses.

Absolute Expenses

Absolute expenses include things like tuition and rent. These are bills that cannot be changed no matter how much more careful or frugal you are without making major changes such as a new lease or a new college.

Nearly-Absolute Expenses

Nearly-absolute expenses are books, electricity bills, water bills, internet bills, food, and gasoline. This stuff is required, but the amount spent or the amount consumed can be limited to maximize your budget’s breathing room.


Non-Absolute expenses are everything else. This is your tobacco, alcohol, eating-out, movie fund. None of this is required.

This is a detailed example for my stick-man college student, Bill Box. I’ll be writing down all of his income and expenses for him.

Bill Box is a 20 year old accounting major. He makes about 200 Dollars a month, assuming he gets good tips, delivering pizzas part-time. His Grandma puts 100 Dollars in his bank account if he has a 2.0 grade point average at the end of each semester. He currently has 300 dollars in the bank with his pizza check going in tomorrow. This puts Bill at a healthy 500 dollars for the coming month.

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That’s 125 dollars a week to blow! AWESOME…Not exactly.

Let’s look at Bill’s debt:

Bill signed up for two credit cards his first week of college. He makes minimum payments on both of them which adds up to about 80 dollars a month altogether; not too bad, Bill! Unfortunately, the combined balance of the two is 1200 dollars. The cards currently have 0% interest, but the 18.9% student interest rate will be activated in two months.

Bill is a sophomore. Combined with his freshman year, Bill now owes 12,000 dollars. He doesn’t have to pay it off until he graduates, though, so it’s no big deal, right? His student loans cover his dorm room and his meal plan, so he thinks he saves a ton of money by not having to pay rent, bills, or buy groceries. He also proudly bought all of his books at the campus bookstore.

The majority of his credit card debt comes from buying smokes and alcohol. Bill loves cigarettes – he smokes about a carton a week. He also likes 2 or 3 beers with his dinner. He refuses to smoke anything other than Camels and only Heineken will do. These two habits combined cost Bill about an extra 160 dollars a month.

Right off the bat, Bill’s net worth is an abysmal negative 12,700 dollars. Student loans aside, he is still looking at 700 in the red.

Bill still has these other bills to worry about, too:

  • Cell Phone – 50 Dollars a Month
  • Fast Food for lunch every single day – 150 dollars
  • Gas – He gets reimbursed for each pizza delivered, but he still plunks down about 50 dollars a month on gas.

The sad thing is that Bill will continue paying for all of this without even realizing that he is doing anything wrong. He’ll take his 1000 dollars of income per semester and barely stay afloat.

Bill needs to do the following:

Moderate his non-absolute expenses

By cutting his smoking and drinking habit in half, he can begin paying double on his credit cards. This is important because if he does not get them paid off soon, the interest will start canceling out every minimum payment he makes. This could continue in a vicious cycle for years.

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He can eliminate his fast food lunches entirely. A couple sandwiches made in the dorm cost about 90% less than eating fast food.

He needs to quit buying his books from the University bookstore. It is a complete ripoff.

Though he may incur a cancellation fee, it may be in his best interest to cancel his cell phone. A 150 dollar cancellation fee is cheaper than paying 600 dollars a year. It would be even more intelligent if he used a service such as CellTradeUSA to give somebody else the chance to take over his contract.

By doing these things, Bill will have no credit card debt in 6 months. (Assuming he passes this semester and Granny coughs up the cash.)

Reconsider “absolute expenses”

It turns out that some absolute expenses aren’t quite so absolute after all. Once Bill has paid off his credit cards, he can begin saving for an apartment. This will enable him to nix the meal plan, get out of the prison cells, and save a ton of cash. In smart ways to save money in college I have already explained how moving out of the dorms and dropping the meal plan will save you money. Open it in a new tab/window and read it when you finish this article.

In this example I didn’t factor in movies, dates, etc. because quite frankly there just wasn’t room in Bill’s budget for much of this. What I hope to teach you is that, for the most part, there isn’t room in your budget for everything you would like to do, either, until you have clawed your way out of debt.

Ask yourself these questions:

How much debt do I have? Before you begin saving money you need to be out of debt. Add up all of your loans, credit cards, etc. so you have a nice juicy miserable value and make it really visible and really red. All of your other decisions will revolve around wiping this out completely.

Do I have any large absolute expenses that I can change? If it is possible, and nothing is impossible, get out of your dorm and don’t buy the meal plan. Find a way out of your car’s lease. Do whatever you can to get rid of as many big expenses before worrying about the little things.

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What is my smokes and beer habit? You may not smoke and drink, but consider your expensive vice(s) as such. A former roommate of mine couldn’t stop himself from buying new books all of the time. He would spend around 30 or 40 dollars a week at Books-A-Million. Try to be honest with yourself. We all have something like this. (Mine is Ebay.)

To create your budget, think about how your life relates to the example.

List your current savings and the previous month’s income. Then, using the three categories, list every expense. Does anything surprise you? I understand that you may be shocked how quickly certain things added up just over the course of one month. In any case, try to feel good because you are on the road to recovery. You should already have in mind which absolute expenses you can eliminate. For anything that you are removing completely, put a line through it. For those which you cannot or do not wish to eliminate, lower the dollar amount appropriately.

Though most budgets promote depriving yourself, I lean more toward rewarding yourself when it comes to non-absolute expenses. Instead of saying ‘I will spend no more than 40 dollars’, adopt the mindset of ‘I refuse to spend any less than 15 dollars’. By constantly reinforcing positive thoughts, you will eventually feel like you are not missing out on anything. TIP: If you have so little self-control that you cant do this, go ahead and be deprived…just keep in mind that this article isn’t targeted toward weak-minded individuals.

All bills aside, how much money do you have left? If the number seems small, don’t panic. This number will be much larger once you get rid of some of your larger expenses I mentioned earlier. Regardless of the amount, any money you have left over each month needs to go toward paying off your debt until you have none.

Once you become debt free, you can slowly begin integrating more non-absolute expenses into your life, no matter how much you make. Your income doesn’t equal your outcome. Get out of debt, spend sparingly, and save and invest frequently. Your future-self will thank you.