“Budgeting” is one of many words most college students don’t want to hear.
On top of studying and exams, deciding what to do with your money every month is often seen as a time-consuming chore. Why deal with the stress when you have a busy schedule? But going without a monthly budget will cause more stress than prevent it. Nobody enjoys being behind paying rent or not having enough money to fill up a tank of gas. Taking 15 minutes out of a day, even a busy one, can help you be more financially responsible, feel empowered over your income, and save you from the anxiety of an empty bank account. Below are some steps, strategies, and tips for starting your own budgeting plan.
Step 1—Determine Your Income and Your Spending Habits
To make a plan, everyone needs to know what materials they have to work with. It’s the same idea when making a budget. Knowing how much money you receive in one month will give you an idea of where your money can go, and knowing how much money you spend will show you how you may need to change your spending habits.
To do this, you must keep track of the amount of money you make throughout the month. You will also need to make notes of how much you’re spending and on what. By the end of the month, subtract what you spent from what you earned.
If the number you calculated is a positive number, that means you have leftover money and you are not spending more than you’re earning. This is a great place to be. This leftover money can be put in a savings account, go towards a payment or be used to treat yourself and your friends to something nice.
If the number is zero, that means you spent all of what you received that month. Whether you’ve come here because you were conscious of how you spent your money or not, this is also a good place to be. As long as your financial necessities are being met (things such as rent, gas, groceries, etc.), this is a very sustainable monthly spending trend.
If the number is negative, that means you’ve spent more than you’ve earned that month and may need some changes in your budget plan or spending habits, though sometimes this is caused by making large but necessary payments. If not, then this is likely caused by spending too much money on things you don’t need. But never fear. Changing your spending habits doesn’t have to be a difficult endeavor. Just taking some time to think through how you can be more responsible with your money or find another means of income can help you get back on the right track to being financially stable.
Step 2—Choose a Budget Plan
You can create your own budget plan, or you can choose from a variety of plans that can be easily found online. Below are some popular budget plans that have been collected from the web:
The 50/30/20 Plan
This is a classic plan that has been used for decades by countless people across the globe. In this plan, you would use 50% of your monthly earnings for the things you need (such as utilities and rent), 30% for things you want and 20% for your savings account. The aim is to cover your immediate needs and build up your savings while still having room to treat yourself every once in a while. Of course, if tweaks are needed here and there to make this plan work for you, that can certainly be done. Some plans may look more like 60/20/20, or 75/15/10. What’s best to remember is simply that a plan like this is designed to make you prioritize spending money on your necessities to avoid going without things you need to live and work.
The “Pay Yourself First” Plan
In this plan, “paying yourself” refers to “paying” your savings account. Once you receive your paycheck, you would choose a certain amount of money to put into your savings account, however much you want. This would be “paying yourself.” After this, you would pay any bills you have or cover any other necessities. You would use the leftover money for whatever you want. This budget makes sure you always have “backup” money (money in your savings account). By having a store of cash in your savings account, you can be more sure that any surprises life throws at you can be monetarily covered, such as medical bills, an oil change or tuition.
The “Zero-Based” Budget
The “zero-based” budget is a plan requiring you to spend all of your monthly earnings. That is, every dollar will go towards something, whether it be necessities, a bank account, or something nice for yourself. The intention is to strategically plan and think out where your money will go and leave no extra money to spend. By leaving no “wiggle room,” you eliminate opportunities to spend your money spontaneously and unwisely.
Some Tips for Budgeting
As you get accustomed to maintaining your budget, here are some tips from financial counselor and speaker, Rachel Cruze:
Cover Your “Four Walls” First
The “Four Walls” Cruze writes about are your necessities: food, shelter, utilities and transportation. Though nobody can go without them, these are often some of the easiest purchases to stress over, most commonly because money had already been spent on niceties.
Stick to Debit Cards and Cash
Being financially stable means keeping as few bills on the table as possible. While utilizing a credit card to your heart’s content seems tantalizing because you can pay for your purchases later, this offers a wide door of stress and trouble to open. Using a debit card and cash makes your payments a one-and-done deal, allowing you to work with real money and avoid overspending.
Make Cuts and Changes as Necessary
It’s normal for your income and your financial needs to fluctuate over time, and your budget is no exception. Changes can happen at any time. Accommodating for those changes is part of a normal and healthy financial life. If you need more gas than you expected for the month, or if a surprise medical bill comes to your door, know that cutting down on other types of spending is not your enemy. Going without date night or a few trips to the vending machine can help you stay stress-free, overcoming any screwballs life throws at you.
