Three Steps to Manage your Student Budget in Alberta

To start creating your budget, you’ll need to start by figuring out your expenses for the year. These expenses can be divided into 3 different categories: fixed, recurring, and non-recurring.

Fixed expenses are ongoing and happen at regular payment intervals such as bi-weekly or monthly. Payments for fixed expenses are usually the same dollar amount each time and include things like your cell phone bill, car loan, rent, utilities, streaming subscriptions, and more.

Recurring expenses are the next category and include day-to-day spending that happens throughout the month. Recurring expenses don’t have a fixed schedule and include variable costs for things like groceries, gasoline, eating out, clothes shopping, etc. On the other hand, the third category includes non-recurring expenses that usually only happen once or twice a year. These non-recurring expenses can include big purchases like car registration fees, annual subscription fees, tuition, etc. These expenses are often forgotten since they only happen rarely, but they still need to be factored into your budget, especially if they require you to save up for them.

These are the three basic types of expenses, but you should also consider unexpected expenses for things like your car breaking down or your laptop crashing. To prepare for life’s curveballs, you should also have an emergency fund accounted for in your budget to cover your bases. An emergency fund helps to cushion your finances when sudden expenses come out of nowhere. Having this wiggle room in your budget will allow you to keep your budget on track when faced with surprise expenses. To figure out how much you should put into your emergency fund, add up all three of the monthly expense categories and make it your goal to save up enough money to cover 3–6 months' worth of expenses to give yourself a nice financial safety net.

After you determine your expenses and how much money needs to go into your emergency fund, it’s time to look at your sources of income.

If you are planning to work during the school year or while you’re on summer break, be sure to add that income into your budget. Any savings that you, your parents, or other people in your life who are going to be contributing towards your education can be added as income in your budget. Registered Education Savings Plans (RESP), scholarships, bursaries, and government financial assistance should be listed as income in your budget as well. After you add up all your income sources in your budget, subtract your expenses. If your income isn’t going to cover your monthly and annual expenses, you’ll need to find an additional source of financing to cover those extra costs. A student line of credit or government student loans can help fill in this income gap. Many students take on debt to fund their education, and a student line of credit gives you access to cash whenever you need it up to a maximum limit set by your financial institution. This can be helpful to cover daily living expenses when you’re working part-time or if you’re not working during school. A student line of credit typically comes with a competitive interest rate and flexible repayment terms. Interest-only payments for up to six months after graduation make repaying your line of credit manageable while you work towards completing your education.

The Government of Alberta and the Government of Canada have several funding programs available for both full-time and part-time students in the form of loans, grants, scholarships, and awards. Applications for funding through Alberta Student Aid allow you to be evaluated for federal student aid within the same application. Government loans are interest-free while you’re in school and for six months after you graduate, and do not need to be repaid as long as you are enrolled in your program. These government funding options are great way to help pay your tuition in one lump-sum that often goes directly to your institution.

If the idea of taking on debt makes you nervous, your can work with your funding provider to figure out what a manageable amount of debt is for you. They will look at what your future potential income could be once you graduate and will give you a sense of how long it will take to repay your debt according to a repayment schedule of about 10–15 years. Based on your repayment term, your funding provider will also let you know what your monthly payments will be, so you can decide if you are comfortable with the long-term financial commitment.

There are also funding options that don’t require repayment or taking on debt – giving you free money for school. ScholarshipsCanada and Yconic are great resources to find scholarships and awards that don’t need to be repaid. You can also look into what types of scholarships, bursaries, and awards you are eligible for at the post-secondary institution you’re attending, as most schools offer additional funding you can apply for.

Keep track of money in and money out

If you have a Registered Education Savings Plan (RESP) that has been set up for you by a parent or guardian to help pay for your education, you’ll want to understand how RESP withdrawals work, how much you can withdraw and what the funds can be used for. Similarly, if you’ve applied for student loans through the government, you’ll want to understand the terms of the loan, what your disbursements dates are to align them with your tuition payments, how much of your loan is going to be disbursed and if your institution will be paid directly, or if the funds will be disbursed to you.

Make sure to keep track of any payments that go directly to your school so you know if there is an outstanding balance for tuition, or you don’t end up with an overpayment on tuition.

Organize your accounts

To budget effectively, you’ll need a chequing account to deposit your income from your job, student loans and awards, RESP withdrawals and more. You also can use this account for daily spending and to pay for your bi-weekly or monthly expenses. A savings account can help you build your emergency fund and organize your money for big upcoming payments like your tuition.

Picking the right bank account is important to manage your budget, and some people even open a few chequing or savings accounts to keep track of specific items in their budget. For instance, you might create separate accounts for your different budget categories for things like rent, monthly car loan payments, insurance, gas, and groceries, etc. Make sure that if you choose to manage your budget this way you understand how your financial institution manages accounts. For instance, they may have limits on how many debit transactions you can make, charge transaction fees, or have monthly account fees. For post-secondary students, a chequing account with unlimited transactions and low or no account fees is the best way to go. Explore if your financial institution offers special student accounts to help you with daily banking.

Save and invest smarter

If you have covered your monthly and yearly expenses and find yourself with leftover cash, consider putting it into a Tax-Free Savings Account (TFSA). A TFSA allows you to save money and earn a higher interest rate on your investment than you would with a regular savings account. You’ll also get extra money back on your tax return for all the savings you invest in a TFSA, and you can withdraw the money anytime if you need it.

Putting a little portion of money into saving and investing is a great habit to build in the long-term, especially early on. In the future, the money you put aside could be used for a down payment on your first home, to buy a new car, or just give you some financial wriggle room after you finish school.

Now that you know the steps to create a budget, keep track of your expenses, understand your income, and save where you can, you’re on your way to build financial habits that will help you now and after graduation. All that’s left is for you to ace your classes, which we will leave up to you!