Budgeting 101

Ever worry about rent money? Or if you’ll have enough cash to last you until the end of the month? Got your financial aid refund and find that you’re still short on cash? Don’t know where your paycheck went? If you’ve answered yes to any of these questions, you need a budget to get you back on track!

Creating a budget will help you to identify wasteful spending, get in the habit of saving and enable you to achieve your financial goals. Let’s start making your money work for you!

A budget is a plan of how you are going to spend your money. Once you understand how money flows in and out of your life, you can better see what changes you may need to make in order to reach your financial goals. "A budget is telling your money where to go instead of wondering where it went." Dave Ramsey

Most of us know how much money we have, but few of us know exactly where we spend our money. To find out you need to track your income and expenses. Be honest with yourself, even the smallest of expenses can cause you to blow your budget. Getting a $4 coffee 4 times a week will cost you approximately $64 a month or $832 a year!

  1. Determine your financial goals.

    Financial goals vary from person to person. Your goal may be to have enough money to pay for a new laptop by the next school year. Your friend’s goal may be to take a trip during spring break. Regardless of your specific goal, it requires clearly defined parameters. One method of ensuring you stay on track is to use the S.M.A.R.T. method to make your goal a reality. See an example of a S.M.A.R.T. goal below:

    S. Specific: Purchase a new laptop
    M. Measurable: Have $900 (the cost of the laptop)
    A. Achievable: Save $75 a month
    R. Relevant: You are motivated because you need a reliable laptop for school
    T. Time-based: Reach your goal in 12 months

  2. Where does your money come from?
    • Grants
    • Federal Student Loans
    • Scholarships
    • Gifts
    • Parents
    • Savings
    • Income from a job
    • Private Loans

     

  3. Where does your money go?

    A budget will have two types of expenses, needs and wants. Needs are what you need to survive, such as housing and food. Wants are expenses that help you to live more comfortably. Needs and wants won’t be the same for everybody and aren’t always clearly defined. Food is a need, but the type of food you purchase can turn into a want. Some things you need and some things you just want. Budgeting correctly will enable you to spend your money on both.

    After budgeting for necessities, pay yourself first and watch your savings grow!

There are various budgeting methods. Choose the one that works best for you.

  • Track all your expenses by using a debit card FOR EVERY SINGLE purchase. Your bank or credit union will have all the expenses documented for the previous month. Looking at past spending habits can help you determine where you want to allocate funds going forward.
  • Track your income and expenses on an Excel spreadsheet or in a spending journal. Divide the page into three columns: “Description of Income and Expenses”, “Target Amount” and “Actual Amount”. If you can’t jot down each expense as you go, keep an envelope handy to store receipts until you’re able to record your expenses.
  • Envelope method – Allocate an amount for each expense category and put cash in a corresponding labeled envelope. Once the envelope is empty you can’t spend from that category until you are able to replenish the funds in the envelope.
  • A budgeting app - Mint – free (iOS, Android)
  • A student budget calculator - Bankrate.com

Expect the unexpected. Don’t forget to budget for unforeseen expenses!

There is no sense in creating and trying to stick to an unrealistic budget. It is important to realize that a budget is not meant to restrict your expenses so that you can’t have fun. It’s simply a way to see where you spend your money and ensure that you are spending it on expenses that are important to you. So go easy on yourself. Don’t be afraid to move things around, and trim spending in areas that aren’t as important to you, to make room for expenses that matter.

Analyzing your budget and modifying your spending habits will enable you to live within your means, and reach your financial goals, benefiting you while you are in college and beyond!

You may receive the bulk of your income from financial aid. You know how much money you receive and when, but making your financial aid refund last through the end of the semester requires some planning. Taking that lump sum and dividing it by the number of months it needs to last, will provide you with your monthly income from financial aid.

If your financial aid refund is $2,000 and you need it to last from September until the end of January, when you receive your next disbursement, you have a budget of $400 per month.

$2,000 ÷ 5 = $400 per month

Determining your income on a month-to-month basis will help stretch your financial aid, ensuring you have enough money to cover all your expenses for the entire semester.

Things to consider:

  • How many "rents" do you have to pay with your financial aid refund?
  • What are your monthly utility costs?
  • What are your monthly food costs?
  • What is your monthly transportation costs?

Local fun on a budget!

  • Folsom Lake – 75 miles of shoreline, some areas require a small donation. Check website for details.