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Budgeting

Reasons to Budget

Student with calculator

  • You are in control of your money
  • Understand where your money is going
  • Improves your ability to pay all of your bills
  • Pay down debt
  • Save for things you really want
  • Reduces stress
  • Helps you prepare for emergencies
  • Can make it easier to save for retirement

Steps to Building a Budget

Monthly Tracking

Take stock of your daily expenses, including recurring bills and subscriptions. Assess your grocery shopping frequency and takeout orders each month. Consider the cost and frequency of filling up your gas tank, or if you don't own a vehicle, evaluate your transportation expenses. For independent students, factor in the costs associated with dependents you may be caring for. Additionally, track any miscellaneous living expenses such as household items like hand soap and trash bags. This comprehensive assessment will provide insight into your spending habits and help identify areas where adjustments can be made to improve financial management.

Needs vs. Wants

Separate your expenses into two categories—needs and wants. Needs are things that are required for people to survive. Examples of needs are food, water, gas and shelter. Wants are things that people would like to have, but are not needed to survive. Examples of wants include concert tickets, streaming subscriptions and fast food meals.

Pay Schedule

Some people get paid bi-weekly and others get paid monthly. Knowing exactly when you get paid will help you structure your budget so that you can pay your bills on time and have adequate money throughout the month.

Budgeting Methods

Use a mobile app connected to your personal bank. Most banks provide an app where users can keep track of their spending and create a personalized budget and limit system to avoid overspending.

Practice the 50/30/20 rule. This method recommends splitting your money into three categories: needs, wants, and savings. With this method 50 percent of the money you receive goes into the needs portion, 30 percent goes into the want category, and 20 percent goes into savings.

Utilize the envelope method. This method is similar to the 50/30/20 rule, with the difference being that you’re allowed to have more categories, hence the term “envelope.”

If you aren’t interested in downloading an app and just want to check your total monthly disposable income, a website that includes a budgeting worksheet is a great option. It’s as simple as entering your monthly income and expenses—no sign-up necessary!

A great option for a visual picture of your budget is available through an online spreadsheet. You’ll even have the option to print out your spreadsheet for easy reference.

Reduce Your Spending

Once you have reviewed your expense data, consider ways to reduce your spending. Opting for more affordable alternatives, such as shopping at Walmart instead of Target and canceling unused subscriptions (unsubscribe if a service is not utilized at least four times per month) are effective strategies. Staying committed to these alternatives can contribute to long-term savings over time.