The Basics of MBA Budgeting

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Track Your Spending

Because those little things—such as the morning cup of coffee—add up, Jerrold Mundis, author of How to Get Out of Debt, Stay Out of Debt, and Live Prosperously (Bantam; January, 2003) suggests keeping tabs on every penny you spend for at least 30 days, ideally for three months. Include everything from laundry to Starbucks (SBUX) to renting videos. That will help you realize how many costly things you could do without. "Just doing this reduces expenses by 10% per month," says Mundis.

Write out a detailed budget for yourself and decide exactly how much money you need to allocate for necessities (food, utilities, shelter, commuting, etc.), says Jason Rich, series editor of Entrepreneur magazine's Personal Finance Pocket Guides. Don't forget to include a column for miscellaneous things such as dental work, auto repairs, or travel expenses for a job interview. "It might be a cliché, but expect the unexpected," says Michael Scrafford, a second-year student at Kenan-Flagler. He suggests thinking of your tuition as only 50% of the B-school tab. The other 50% is for living expenses and all of these other costs that you might not have even thought about before returning to school.

Keep It Simple

Think about ways you can cut back on the unnecessary stuff. "Do you really need cable?" asks Rich. In fact, Carnegie Mellon's Lack says you should consider making a simple home for yourself for the two years in B-school. Forget video game consoles and stereo equipment, she says, because you'll rarely be in your room anyway.

Lack even suggests that graduate students consider getting a roommate to divvy up expenses. This might not be the right choice for married couples, but usually one spouse works while the other attends B-school. In those instances, the spouses should stretch any income that's coming in as much as they can.

Experts remind students that they can save money and still have fun. One route to affordable good times is taking advantage of student discounts and free cultural activities on campus or in the city or town where you're studying, says Mundis. Learning to cook and making meals at home is almost a requirement, say students. And life's luxuries—from name-brand cereals to flat-screen TVs—will have to wait until after grad school.

Families Face Special Problems

One Kenan-Flagler student/mother, Patrycja Krzok, found that caring for her son's financial needs was a challenge. Student loans don't factor in children. She has to pay more for medical insurance to get him covered, too, and he needs supplies for school. That's not to mention the usual food and shelter required for everyone, which is more expensive for families. Even Krzok's books were not covered by her loans, and they often cost up to $400 for each modular. Her son's grandparents pitched in to help her make ends meet for him, and she tried to get student loans to cover as much as possible. Krzok advises anyone entering school with a family to start living on a reduced budget even before B-school, so everyone can adjust to the new lifestyle—and you can determine how much you're really going to need.

Don't be too arrogant or too afraid to ask for help. Talking to an accountant is a great idea, says Rich, because a professional can advise you on how to get rid of debt, set up a budget, and understand the tax benefits to being a student (BusinessWeek, 2/20/07).

Keep the Long View

Most people who go back to school for an MBA are looking for a lifetime of benefit from the degree. "You will come out of it alive," says Krzok. "It's about short-term sacrifices for long-term gain." Tuition may be upward of $80,000, rent could be well over $1,000 per month (even more at urban campuses), and dinners out could cost hundreds. But an enriched mind, after all, is priceless.

Di Meglio is a reporter for BusinessWeek Online in Fort Lee, N.J.