If you don’t know how to create a budget, or haven’t been advised just how important it is to have one, then this article is for you. If this the first time that you are on your own, and you aren’t able to get a handle on the various school expenses, then you may find that college life may be difficult. Not being able to manage your money responsibly can cause financial difficulties, increased debt, and other concerns that you really don’t need to have.
You may be a very talented individual, especially in the field of study that you are pursuing, and college is expected to help you to take advantage of those talents. You need to expand your mind and learn to function as an independent and responsible adult. It’s very important that you are able to focus on your education, and at the same time, enjoy the social life and extracurricular activities while in college.
To accomplish that, you will need to create a budget that contains a flexible spending plan. That means your variable and fixed expenses must at least equal the financial resources that are available to you. Hopefully, for you, the resources will exceed the expenses.
However, it’s important that you create a budget that is not only realistic, but is flexible so that changes can be made if necessary. Creating a budget does not require a doctorate degree in math. As a matter of fact, that’s the easy part. Following your budget is another matter.
If this is your first budget, you’ll soon see what a challenge it can be. Once you have your budget created, remember, it’s not cast in concrete. If you missed an item or didn’t calculate enough, then you need to make a change.
Do your very best to follow your budget or you may soon discover that your money is gone, and you’ve dug a hole for yourself that will cause additional stress. Generally, the category that causes the most problems when you create a budget are the discretionary expenses.
The best place to start to create a budget is to determine the amount of funds that you have available, and the expenses that are fixed for that school year. The fixed expenses shouldn’t vary.
Start listing the income sources such as a part time job, work study programs, and don’t forget money from mom and dad. If you’re fortunate enough to have income from a trust, be thankful. Also list any student loans, grants, or other forms of financial aid. Cash gifts also qualify.
Some examples of fixed expenses are tuition and related fees, plus room and board if you live on campus. If you are staying off campus, you will probably have rent and utilities. Added to this list of fixed expenses are also books, supplies, and equipment such as a laptop. If you have an auto loan, it will be in this category. Auto insurance and also medical insurance premiums will be a fixed expense, as well as your cell phone bill.
When you have completed the list of fixed expenses, subtract that total from the gross income to arrive at your disposable income. That remainder has to cover all variable expenses such as food, snacks, and other personal expenses, such as laundry, haircuts, etc. You will need to factor in social activities and recreation as well. Gas and maintenance for the car, plus any parking fees are included in these expenses also.
We hope that after covering the variable expenses, there will be discretionary income that should go to savings and/or an emergency fund to cover some future expense that is sure to pop up.
You need to track your spending carefully during this time to make certain that you are following your budget. We recommend to our clients that they purchase a good personal budget software program that will make it so much easier to get a handle on all of those expenses.
This program will guide you every step of the way and will teach you how to properly maintain a budget. Most importantly, it will also teach you to eliminate debt as quickly as possible, especially credit cards that can lead you into a difficult financial situation quickly. You should have a good idea after you finish your first or second semester, of how much is needed in each category, and where you can make changes to adjust.
Don’t forget to keep track of all of your spending, and take the matter of budgeting seriously. When you create a budget, you can’t afford to fail. There’s no re-taking that test!