In our previous blog we noted that the first step to managing your money is setting goals and working towards. Whether you are trying to save for a trip or want to eliminate some of the stress at the end of the month; these goals are important to financial success. But to reach those goals you have to have a plan in place. At Money Management we encourage students to think of budgeting as the road map to your financial goals. Your budget can be as simple or as complicated as you want it to be.
The main purpose of budgeting is to figure out what money is coming in and where it’s going. With payment apps, credit cards and debit cards is really easy to get swipe happy and completely lose track of where your money is going. Monthly budgets allow you to keep track and find trends in your spending and where you might be able to find room to save.
Where do you start?
Below are a few steps to get you started but you can always make an appointment to get one on one help with setting up a budget that works for you and yours goals. For a sampled budget, click on the link below to see all the steps
Step 1: Identify how you want to setup your budget. The money management has a budgeting worksheet on our resource page(make a link) but you can also try making your own excel file or signing up for a budgeting app (make sure to do your research!) Either way figure out something you are going to keep up with and try it out for at least 2 months. I tried several different methods of budgeting before I settled on a budgeting excel sheet but it was something I could open even on my phone and I could make tables for different expenses.
Step 2: Figure out what money is coming in. For students this could include refunds for financial aid and scholarships, paychecks from part time jobs or help family. The main purpose of this is to track how much money you really have to spend and to divide your money accordingly. This should go into the top section of your monthly budget so you can know how much money you have to spend that month. Remember if you get one large payment every few months you will want to divide that money over several months as evenly as possible.
Step 3: look at where your money is going. The best way to figure out where you money is going is to look at your card statements or monthly transactions. I recommend students list all of their expenses on a budget sheet and try to lump items into specific categories such as personal, utilities and entertainment. Once you have built your list of monthly expenses you are halfway finished!
Step 4: Start dividing your money between all your expenses. Some of your expenses will be set and easy to plug in the amount you spend each month, others you may you have to make an educated guess based on your past transactions. For set cost like rent and utilities you will want to plug in the exact number if it stays the same each month or round up if it moves month to month. Once you have given yourself a budget for each expense, make sure you have not spent more than you have coming in. The simplest way to do this is to subtract your total income from your total expenses. if you over spent look to see where you can reduce your budgeted amounts.
Step 5: Try it out. Once you have plugged in your numbers and your budgets are built test it out for the month. See at the end of the month set aside 30minutes to an hour to review if you stuck to your budget. Some budgeting apps will even notify you via test when you are reaching your budget for a given expense.
Remember that no one is 100% perfect when they started budgeting! It takes time and practice but anyone can do it and Money Management is always here to help!