College Budgeting 101: How to Spend Less in Grad School

Ouch! With the average federal student loan debt at $37,853 per borrower, reducing expenses while in grad school is absolutely crucial. Since many funding sources only pay for direct schooling costs, you may end up looking for other ways to pay for daily living costs in addition to leftover school expenses not covered by financial aid. However, this financial strain can be an opportunity to learn core skills that will set you up for financial success in the post-grad world.

This guide shares some key tips and real-world strategies to help current and future graduate students learn to manage their money. It includes information on improving financial literacy, learning to budget, and employing creative ways to save money and live on less. It’s not only important for you to learn budgeting as you save for graduate school — it’s also a skill that ties into your life-long financial success. Stick with us, and we will show you how to get started.

Knowing the key terms and concepts identified below will make the rest of this guide easier to understand. Just like you learned core terminology in undergrad before moving into the details of your field, learning basic budgeting terminology will help you build a strong knowledge base for understanding larger concepts. This information will also benefit you after grad school when you’re budgeting and making larger financial decisions like planning for retirement, making investments, or buying a home.

Income refers to the money you earn or receive each month. For most people, income includes earnings from a job or an investment (e.g., interest or dividends). In the context of paying and budgeting for education, however, income is a broader term that generally includes any source of money that can help pay for the cost of education, including living expenses. Therefore, student loans, grants, scholarships, and cash in a savings account can be included as sources of income.

These are your monthly costs related to daily life. Expenses are categorized in two main ways. First, fixed expenses are relatively stable and consistent, while variable expenses can quickly and easily change. Common fixed expenses for a graduate student are tuition, rent/mortgage, and car payments. Common variable expenses include gas, entertainment, certain utilities, and food.

The second main way to categorize expenses is as necessary or unnecessary. Necessary expenses are essential and must always be paid. Unnecessary expenses are those most people can do without. There is some variation in how someone defines a necessary expense, though. For example, some consider health insurance a necessary expense while others consider it optional. Food costs, however, are necessary expenses for everyone. How you define an expense affects how you prioritize them when creating a budget.

This is money for true emergencies. Ideally, your emergency fund has enough cash to pay for all your necessary and unnecessary expenses for three to six months. This isn’t realistic for most students, so a more modest emergency fund with enough cash to pay for necessary expenses for one or two months or to cover the costs of an unexpected small emergency like a flat tire or a moderate illness will likely suffice. This might look like $1,000-$2,000 while you are in school but only you can determine the number that is right for you.

It’s important to know what your savings goal is and gradually work your way up to that number. Then after you graduate and begin working, you will want to reevaluate that number and try to increase it to 3-6 months of expenses so you have a safety net if needed. Additionally, one of the biggest missteps people make with emergency funds is that they use them for non-emergencies, so putting these funds in a high-yield savings account that is not attached to your checking account is one way that people avoid dipping into this account for everyday extras.

This is the amount of money you owe someone else. Common examples include mortgages, personal loans, school loans, car loans, and credit card balances carried over each month. Not all debts are the same, though. Like expenses, they should be prioritized based on necessity, interest rate, and amount. Prioritizing debt is important when creating a budget to decide how much money each month should go towards paying off each debt. For instance, you’d spend more money to pay off a debt with a high interest rate than one with a lower interest rate so prioritizing paying off higher interest debts first can reduce total money owed in the long run.

Before you can make any major decision on how to manage your income and expenses, you need a clear picture of what those are and how they affect your overall financial situation. The best way to do this is to create a budget. The following section explains this process and gives examples to help you better understand the concept, so you can create your own budget for graduate school.

The main sources of income for graduate students are wages and financial aid. Most income does not arrive monthly; instead, it comes in every two weeks, every quarter, or each semester. So, you’ll need to do some adjusting to determine your monthly income rate.

Also consider when the income comes in. For instance, if you received a $12,000 scholarship that pays $6,000 each semester, and each semester is four months, you might decide to divide the $12,000 over eight months, which is $1,500 per month, not $1,000 per month. However, you’ll need to account for the fact that during the summer months when you’re not in school, you won’t have this income.

Alternatively, you can apportion the scholarship money each month, even for months you’re not in school. This is simpler to organize and plan around, but it won’t accurately reflect your actual cash flow throughout the year.

Below is a table with examples of monthly income with amounts to illustrate this concept.

Below is a chart of potential expenses a graduate student may encounter. Remember that the following expense amounts are just estimates, and, depending on where you live, they’ll be higher or lower. Also, some of these expenses are not necessary or may not apply to all students. For instance, if you’re still on your parent’s health insurance plan and they’re paying for your premiums, you won’t need to worry about that expense.

Depending on your approach to budgeting, money set aside for savings or to build an emergency fund could be an expense. This is not illustrated in the chart.

If your expenses exceed your income, you’ll need to figure out how to balance your budget. One way to do this is by increasing your income by working more or applying for more financial aid. In the above table, the hypothetical graduate student is already receiving some financial aid. This student should consider also applying for other forms of financial aid like student loans, a fellowship, or a graduate assistantship.

Another way to balance your budget is to reduce expenses, such as by cutting back on entertainment or other unnecessary costs. Don’t cut back too much on unnecessary expenses, however, since you’ll need some disposable spending to avoid financial burnout. When it comes to budgeting, the challenge is as much psychological as it is economic.

Graduate school expenses are unique because they depend on many variables, including the type of school, living arrangements, type of program (i.e., online versus on-campus), and personal habits. A good example is a computer, which almost all graduate students need. Do you have a family member or friend who will give you an older laptop for free, or do you need to buy a modern desktop with the most advanced hardware? This choice can easily result in a $2,000 difference in annual expenses. Below is a list of common expenses that most graduate students must pay for with the only variation being how much these expenses change per individual.

Unless you’re lucky enough to have a full-ride scholarship or someone paying for your education, tuition and fees will be one of your largest expenses. The amount depends on the school, but expect these costs to equal at least a few thousand dollars each semester. Keep in mind that even though most schools are transparent about tuition costs, identifying additional costs (e.g., activity fee, facilities fee, health fee, student services fee, learning fee, etc.) ahead of time can be difficult.

The cost of educational materials is highly variable depending on both the school and the program. These fees are often about $1,000 per semester. Some need to be paid each semester, but others, like the cost of a computer, are one-time purchases.

Living expenses can be grouped into one of three categories. First are off-campus living expenses where you live in an apartment or house by yourself. These involve paying rent or a mortgage each month in addition to utilities like gas, sewer, water, trash, electricity, internet, and video entertainment (e.g., cable, satellite, or streaming service). Many of these expenses vary each month, especially utilities. Second are off-campus living expenses where you live with someone else and share some or all the expenses. Third, you can live on campus. This is usually a single, fixed payment you make each semester.

Almost every student has transportation expenses, but the amounts vary tremendously. A student living in a big city who lives next to their school might have no transportation expenses beyond the occasional bus, subway, or rideshare fee. In this situation, transportation costs might be just $50 a month. Someone who owns a car, however, would have expenses like car insurance, vehicle maintenance, annual state registration/tax, gas, on-campus parking fees, and possibly a monthly car payment. In this situation, transportation costs could easily top $500 per month.

If you like to go out with friends, say to try new bars and restaurants, expect to pay more for entertainment than someone who stays in and watches movies. Other entertainment costs include hobbies and discretionary costs that may relate to other necessary expenses, like transportation. For instance, someone who loves to try new hiking trails may put significant additional miles on their vehicle when driving to new hiking locations.

Sticking to a budget is challenging and often requires cutting expenses. This might mean doing without certain luxuries or some forms of entertainment, or it might mean finding creative ways to find lower-cost substitutes for what you were previously paying for. For example, watch movies at home instead of going to the theater. Another strategy to help you stay within your budget is to increase your income. Sticking to a budget is often about working smarter instead of harder. The following list provides suggestions to help you be a smart budgeter while in graduate school.

Apply for as many scholarships as possible. Even when it seems like you have no chance, remember that there are many scholarships only a handful of people apply to. Increase your chances of getting an award by applying for scholarships with unique eligibility requirements, such as going to school in a particular state or studying in a certain academic field. Learn more about scholarships for graduate school through our OMD Scholarships Hub.

This arrangement can easily save you hundreds of dollars each month. If you’re living at home, your parents might not charge you rent; if they do, it will likely be below the market rate for your area. If you have a roommate, you can cut your utilities and rent by 50%.

Instead of going out or getting takeout, try cooking meals at home. Make the most of your time in the kitchen by planning meals a week or two in advance to take advantage of sales and by cooking in large batches to make meals for later. Meal planning apps like Mealime are great tools to help with this.

Most bookstores have a plethora of used textbooks for sale at a notable discount. To save even more, see if a friend has taken the class you’re enrolled in and will let you borrow their book for free. Another option is to rent the book from a bookstore, but be aware of what condition the book needs to be in when you return it. If you must buy new, look online where you’ll probably be able to find exactly what you need for less than at your campus bookstore.

Garage sales and thrift shops are great for finding anything you might need, especially furniture, clothing, and household goods, for literal pennies on the dollar compared to buying new. Many people consider it a badge of honor to say they picked up a great deal at a local thrift store.

Many people give away items they couldn’t or don’t want to take the time to sell, and they often leave them on the curb or at the end of the driveway. Many students also have stuff for free at the end of a semester when they’re moving out of their student apartments or dorms. Free doesn’t always mean low quality, either, so get creative with how you acquire what you need.

If you have friends with similar clothing styles and sizes as you, set up a clothing swap. Make it into a fun event where you and your friends get together for an evening of hanging out and trading articles of clothing.

Finding a new and inexpensive hobby is a fantastic way to save money on entertainment. Try something free and challenging like geocaching or rock climbing. Relive an older TV show on YouTube. Find a national or state park to explore. Most communities offer a good number of free events regularly.

If you live close to campus, consider biking or walking to class to save money on gas throughout the semester. As a bonus, you’ll also avoid the dreaded parking spot hunt just minutes before class is about to start.

There are plenty of ways to work out for free, both at home and in the community, especially if you already have workout equipment or can find them for affordable prices. Many YouTube channels and Instagram feeds offer great information on how to work out effectively and safely. Your school might also have a gym available to students for free.

Take your student ID wherever you go and ask about student discounts. Many stores and restaurants want to encourage local students to stop by, so they’ll offer decent discounts or student specials.

Take advantage of your on-campus and local library. You can usually check out the new releases and DVDs for free, and there might even be a book you need for a class that you can borrow. Many libraries also offer classes and fun events, so they are often great sources for low- or no-cost entertainment.

A tremendous benefit of our digital world is the many free resources available, including those related to budgeting and finances. The list of digital resources below includes those providing strategies, tools, and services that can replace or enhance what you’re already doing.