Budgeting is the process of laying out your total income against your total monetary output to create a comprehensive outline through which you can manage your spending. You are no longer in high school; car payments, rent, tuition, gas and groceries are all harsh realities. If you don t know where you re money is going, it is impossible to make all the payments you re required to make and still have enough left over to grab the occasional cup of coffee.
A budget should be a physical piece of paper you ve either written by hand or printed off from Excel. That way, you can come back to it whenever you ve spent some money and subtract what you ve spent. This will ensure you always know where you re money is, and you don t run out of money by the 20th.
Step one: Figuring out what s important
A budget doesn t need to be the top 100 things you like to spend money on. Rather, it should be a compilation of 5 to 15 things that take up the majority of your money. This step is important because as you lay out your list on paper, you ll realize there isn t a whole lost you have to spend money on; and maybe some of the other junk you ve been spending money on isn t that important.
So, first things first: tuition and books. If you re reading this, chances are you re a college student in search of some financial guidance, and as we all know, paying for books and paying your teachers is easily the largest portion of the budget. Put those things on the top of your list.
Follow it up by the next important things, living necessities. If you don t have a house or food, you re probably never going to make it to your classes. Rent and groceries will take up the second largest portion of your budget, followed closely by auto expenses. This should follow rent and groceries because a car is not a necessity. You need a house, you need food, but you already have two perfectly good feet.
After all of these boring, uneventful bill payments you get to the fun stuff: entertainment. Budgeting money for fun is just as important as budgeting money for school. The reason it is lower on the list is because you need drastically less mullah to have fun. Entertainment includes going out to eat, going to the movies, purchasing video games, vacations, etc.
The last thing you re going to want to budget for, if it is possible, is savings. There was some debate as to whether savings should come before entertainment or not, but we finally came to the conclusion that, after a student has paid rent, tuition, car bills and all that fun stuff and their looking at the last few dollars left in their bank account, the last thing they want to do is save. However, if you can, we recommend saving 10 percent of everything you make so you have a little something to go off of when you graduate.
Step two: Living to your budget
It s quite simple, if you only have an income of $500 a month, you probably can t afford to go on a lavish vacation in addition to paying for school. However, everyone s budget will be different depending on their circumstances. Some students are fortunate enough to have scholarships or grants. Others are receiving financial help from family. Some receive no help and must pay for everything on their own. Regardless of which scenario fits you, it is imperative that you stick to the budget you ve designed.
The best way we ve discovered to lay out a budget is to first write the amount needed for each of the section in your budget. Start with tuition and books, and then move to rent and groceries, and so on. Obviously certain things, such as tuition and books, are not broken down into monthly payments. You can do one of two things. Incorporate those expenses into the first month of your budget, or break everything into monthly payments.
Let s say at the end of this process you discover you re going to need $800 a month to pay for everything because you ve got a few scholarships and your car payment is really low. Then you take what you know you can earn on a monthly bases and allocate those funds from the most important thing on down.
Last thing you must remember, stick to your budget. Saving receipts is the best way to do this. If you spend $14 at dinner Wednesday night, go to your budget the next day and subtract $14 from the entertainment section. Then, if it shows you ve only got $30 left in that section for the month, you know you can probably only go to dinner two more times.
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