How many high school students actually know how to effectively budget? Now, how many of you are high school seniors? The numbers can be astonishing. Budgeting makes up such a large portion of university and college. Most high school students may know the basics, but lack where it counts.
Budgeting seems like a simple concept: You manage inputs and outputs, hopefully keeping the latter higher than the former. Today, we will be addressing the five main concepts associated with budgeting.
Let's begin!
1. Do I even need to budget?
This may seem confusing given the subject of the article, but realistically, do you even need to begin budgeting right now? Budgeting is a very helpful process when trying to account for your money. We use budgeting so you don't have to last another week on $20 before your next paycheck. We've all been there. Budgeting is supposed to be a fairly simple process, basically just keeping track of your purchases and sorting it into categories.
The easiest way to categorize falls into two distinct sections: the wants and the needs. This can be confusing at first, but you'll soon get the hang of it.
2. What are my financial goals?
When asking about financial goals, it's much easier to comprehend when you know what they are. Financial goals are accomplished through a financial strategy, so in order to understand goals, you must first understand the overall strategy. You're going to want to set goals that make sense based on what you want out of life and what your current situation is. Be optimistic, but also realistic. This is where people can overshoot, being optimistic and realistic can be viewed as a daunting task, but it's simple really.
By doing this it will help you create the systems that'll start moving you forward. For example, a realistic financial goal could be spending less on want items, or only eating out once or twice a week in comparison to four or more times. They don't have to be big, they just have to be manageable.
3. What is credit?
Credit is when you receive something of value now and promise to pay for it later, often with an interest charge added by the lender. You can use credit to buy almost anything, but should you? This is where it gets tricky. Let's say that you get paid Friday, and it's currently Wednesday. You need gas, and groceries, so you put $40 in your gas tank, and another $35 in your fridge. That's $75 you can pay back two days from now when you get paid, and will. If it's Wednesday and you want to go to the movies, and clothes shopping, that's a different story. It's about balance. In order to build your credit you need to make purchases, and pay them off without missing a payment. By missing payments, and not paying off your card can have a negative impact on your credit score.
4. How do I save?
As you embark on the college/university journey, it becomes important to save for semester expenses. Semester expenses are things such as tuition (which isn't cheap by any means), campus fees (those ridiculous things they string together to make an $100 plus off you), textbooks (be prepared to spend $200 plus on a textbook you're only going to open once) and endless supplies (these consist of your notebooks, binders, pens, pencils, etc.).
It's not a cheap route, so you have to be prepared because even with a great financial aid package, you're still going to have out of pocket expenses to cover. Save, save, save! You can begin by figuring out your gross monthly income (the total amount of money you make per mouth), average out what you spend, where it goes (needs and wants) and cut back on the amount you spend. Fun, isn't it?
5. How do I get my spending habits in check?
Spending habits, they can either make us, or break us. This is the part of the budgeting process where people start getting stressed. People get stressed because their spending habits don't match up with their goals. So you've paid all your bills, are stocked up on all the necessities. So what's left you spend on the wants, right? Wrong.
This is where saving really kicks in. You want to have extra money to fall back on in case of an emergency and for the future, so now is the time to begin saving. It's the same steps you take when trying to save and planning financial goals. You cut back. Instead of buying the pair of gray shoes that a month from now you're gonna wish were tan, just buy the tan shoes. You can make them go with anything. Instead of buying the ridiculously clumpy five dollar mascara that'll last you two to three weeks, put it back and grab the $18 that will last you two to three months.
It's about making smart decisions and buying the product that's going to give you the best result (and usage) for your money. It's all about balance, which has been mentioned more than once.
