By building a budget, you will better understand your financial situation and be able to set S.M.A.R.T goals to get to your financial future. A college budget puts you in control, teaches financial management skills and helps you prepare for the future.
Budgeting is more than simply adding your expenses for the month and subtracting from your income. It’s about learning how to prepare and plan for the future.
Start today by:
Step 1: Start your budget by reviewing your past spending. If you have a checking account, use your checking account register to analyze your income and expenses for the past six months. If you do not have a checking account, begin tracking your expenses and income.
Step 2: Collect all sources of income. Include all sources of income: job wages, financial aid funds, work-study funds, and parental contributions.
Step 3: Collect expenses information. Gather all expenses: receipts, bills, and credit card statements. You may want to separate them into variable and fixed expenses. Fixed expenses are expenses that do not change from month to month (ex. rent, car payment); variable expenses are expenses that can differ from month to month (ex. fuel, groceries). Next, list the types of expenses under each category (variable or fixed) but avoid grouping similar items together.
Step 4: Subtract your monthly expenses from your monthly income. What did you notice about the result? Do you have a budget deficit or a budget surplus? Once you have taken a look at your past spending habits, you can begin to plan and create a spending plan for the future.
- If you've been coming out ahead each month, excellent! How is your savings account? Experts recommend 10% of your monthly gross income be deposited in your savings account, but remember to pay yourself first. This is one important piece of the budgeting process that tends to be ignored. Not having a savings account is the fastest way to ruin even the best budget!
- If you are having trouble covering your expenses or are covering your expenses but have nothing in savings, it's time to examine where your money is going. How can you cut back or adjust your spending?