It seemed like it all happened so fast - you graduated, you moved out and you started college. It’s an exciting, brand new phase of life, and it doesn't take long for you to realize just how much you’re actually responsible for…because you’re responsible for everything. Be it groceries, or eating out, or going to sporting events, concerts, museums, or day to day activities that you do in your free time, expenses can add up very quickly. Today, I’m going to help you out with managing some of those expenses by teaching you how to create a budget.
Just like most things, the first step is always the hardest. Our first step here is to be realistic about the money that you’re actually bringing in. First and foremost, you can’t know how to manage what you have if you don’t know what you have. Money can come from a few different sources, so it can be easy to lose track of what you’re bringing in, and a nice surprise when it simply shows up in your checking account. But really, get your sources together. Are you making money from a job? Do you receive financial aid? Are your parents contributing a certain amount each month? And how often are you receiving what you do? Once you have your sources straight, it’s much easier to figure out how to use them.
After your sources are together, the next step is to distinguish wants from needs. This can be tricky, because it is different for everyone. For instance, I consider coffee to be an everyday need while some only consider it desirable during finals week. Whether from a coffee shop or brewed at home, I set aside a pretty significant amount of money for coffee each month because I’m at the point where I see it as a necessity to everyday life. Think about what this is for you. You need groceries, you need to pay your rent or mortgage, and you need to pay your tuition when you’re a student. These are not options for you. You might not need those concert tickets or that $50 pair of jeans or to eat out for the third night this week when it comes down to it. That’s up to your interpretation, but it’s definitely something that has to happen in order to map out how to spend your money. Which brings me to my next point…
Make goals. This is another step that can be up for interpretation, because as everyone is in a different phase of life, so are their financial goals. A goal could merely be to be able to live comfortably and not run out of money each month, and that’s a good goal. In fact, that’s most of American’s goals according to a GO BankingRates survey that determined that 69% of Americans have less than $1,000 in their savings accounts. Another goal, however, could be to take a trip that year or attend an event or major theme park, or to save for something extravagant, or just save in general. Everyone has their own goals, and none are too unrealistic, so figure out what they are and express them.
Once you’ve done that, your next step is to make a list. You figured out what you actually need, now prioritize those categories first. You figured out your goals, now throw those in there. Personally while making my budget, my categories are broken down into seven, as follows: groceries, eating out, coffee, recreation, gas, spotify and savings. With your income in mind, demote a dollar value to each category that you make.
The last step in this process is to manage. This is easier said than done, but now that you planned out where your money goes, all you have to do is keep track of it. There are a few different ways to do this depending on what’s easiest for you, one of the easiest being saving receipts. You can label them with their category, like this. After a few weeks, or a month of doing this, you can add them up to see your progress. Also useful is physically writing down and keeping a list of your purchases or entering them into an excel document that you can keep track of. Whatever you are going to stay consistent with is what you should use.
To wrap up, what I want you to take from this is that managing a budget does not have to be a hard, complicated thing. This mature move can be simplified in just 5 easy steps, and can be a crucial part in growing up and becoming an independent adult. It’s better that we learn sooner rather than later that if we do not manage our money, our money may end up managing us.
