How to Create a Budget
For most people, college is a time to take on increasing responsibility and expand their financial independence. Oftentimes, this is the first time people are personally taking on regular purchases like groceries, rent, and other expenses. So, as this financial independence grows, it is important to be prepared by developing healthy spending habits early. Read on to find some easy tips and tricks for evaluating your current financial health, creating a regular budget, and preparing for the future.
1. Evaluate Your Financial Position
The best way to start taking control of your finances is to take stock of where you are now. Not just the amount you have on hand, but what you are spending on a weekly or monthly basis. This can be done easily through keeping a daily expense tracker. This is a simple way to make yourself aware of your spending habits, specifically the spending that is necessary and the spending that is not so necessary. Just use a journal or your phone to record all of the purchases you make in a day for the duration of a week or two, including prices and payment method.
2. Recognize Your Goals and Obligations
Now that you know what you have and what you spend and have cut back some of your unnecessary expenses, you can start thinking about your financial goals. This should usually start with any outstanding obligations that require paying back. For most college students, this might include student loans, but this can also include things like credit card payments. Beyond those obligations, every college student should think about establishing their emergency fund of 3-6 months. Establishing what you require for an emergency fund can be calculated through your daily expense tracker!
3. Create a Weekly To Monthly Budget
A budget should be a reflection of your weekly and monthly expenses, along with your financial goals. All a budget should do for you is control and allocate your funds to your most necessary purchases and to your savings. Start by calculating your income for one month and subtract necessary expenses. Once you have the amount of income you have leftover to spend, you can determine where you want that money to go ahead of time.
4. Other Tools
While creating a budget requires some time to understand your personal situation, there are some tools out there to help you put that information to use. These apps can help with creating and (most importantly) maintaining your budget:
Mint.com - Budget help and spending tracker
YNAB - (You Need A Budget) Helps set financial goals
Qapital - Focus on saving for your future
PocketGuard - Helps with strict budgeting goals
Unfortunately, there is no exact science to create a personal budget, because it’s just that - personal. It comes down to individual income, spending, and goals. However, taking the time to develop strong spending habits will make financial planning that much easier as you move on to making income and gaining more financial independence.
By Kristen Lopiano