(continued from How to Save Money Living Off Campus)…
A budget is a plan for spending money. Now that you have learned how to earn money in college, it’s important that you know how to budget that money.
Budget an Amount for Each Expense
Expenses are divided into different types:
Fixed expenses are expenses you know you have to pay every month; the amount doesn’t change month to month. An example would be rent.
Variable expenses are the expenses you incur for daily life. They occur monthly but the amount may vary. Examples include groceries, clothing, gasoline, etc.
Periodic expenses are those expenses that are not paid on a regular basis, but rather when they occur. Examples include medical expenses, car repairs, etc.
Figure Out Your Net Income
Use your pay stubs and bank statements. Don’t forget to include other sources of income such as money from financial aid or scholarships, money from your parents, or income paid in cash.
Calculate Cash Flow (Disposable/Deficit)
This tells you how much money you have left over every month. This should not be a negative number. If your cash flow is negative, reassign the amounts budgeted for expenses until you have a positive cash flow. For example, trim your entertainment budget or try to cut transportation costs. (But try very hard not to cut savings.)
Track the Money You Actually Spend
At the end of the month, use your records to track what you actually spent your money on. You can use bills, your checkbook, and receipts for cash purchases to keep track. If you have online banking, it will be very helpful for reviewing all of your spending. If you find that you’re spending more than you budgeted for, look for ways to cut back.
Review Your Budget Regularly
This will help you see how well you’re meeting your goals and where you need to make changes. You may not get your budget right the first time. Don’t give up. Here are some suggestions to help you stay on track:
Pay yourself first.
Make your savings a regular bill. Pay it first. Plan on meeting your other expenses with what is left. You might think you can’t save in college because of all of your expenses and a limited income, but even saving just a few dollars per week will put you in the habit of saving and will help to build strong money management skills for the future.
Plan for big expenses.
If you know you will have to purchase an expensive biology textbook next semester, set aside a small amount each week. That way you’ll avoid having to reach for your credit card when making the purchase.
Be flexible.
Be prepared to change your budget when needed. For example, plan what to do if you have to pay a sudden bill to the health center.
Use unexpected money wisely.
Your family members might send you a little extra money here and there or you may make some extra money selling back your text books. It is tempting to use this money for a night out, but use it to get ahead on your financial plan or to put toward a purchase you are already planning to make.
Don’t forget to budget “fun” money.
You don’t have to deny yourself every pleasure to manage your money well. Just be sure to include the spending in your plan. For example, although late night fast-food runs may seem unexpected, try your best to budget for these types of expenses.
