A budget plan is an effective tool to keep track of your finances and responsibly manage your monetary resources. College is the ideal time to start learning this skill because it's something you can continue to implement even after you graduate and enter the professional world. So how exactly do you start a budget? Well, it may be slightly different for everyone but they all share a few fundamental characteristics. Let's take a look at what exactly these are.
Establish a Time Period
One of the primary components to identify is the time period. Do you want your budget to run the course of a week, month, semester, or year? Once you pick a timeframe you'll be better able to distribute your resources. Next, make a list of your income including categories like financial aid scholarships, grants student loans, savings from employment, and any financial aid from your parents.
Jot Down Your Expenses
After you've rounded up where your cash inflows are coming from it's time to address your expenses. What exactly are you spending money on? Designate your purchases into categories like:
- Tuition (institutional fees, textbooks, related materials) If you're not entirely sure how much a four-year degree will cost, try out this cost projector calculator offered by FinAid.
- Transportation (car insurance, maintenance, gas, etc.)
- Groceries (meal plans, dining, snacks)
- Housing (rent, electricity, cable, household goods, other necessities)
- Insurance/ medical costs
Do the expenses you incur each period outweighing your estimated income? If the answer is yes, then budgeting will be of great benefit to you. The goal is to cut out any unnecessary expenses in order to create a nice buffer zone.
By separating them out in this fashion you can strategically plan cuts or additions to certain categories. For example, if you're spending excessive amounts a month on entertainment but come up short when it's time to pay for your tuition and fees, then it's probably a sound choice to redistribute your income. The main lesson to take away from this is simple-if your cash outflows exceed your inflows, you will wind up in debt and that is a road you want to avoid at all costs!
Stick To The Plan
Sticking to this type of budget may seem like an all-consuming process but it's really not that challenging once you get the basics down. Take your time when making big purchases, shop around for the lowest possible deals, and avoid spending money on unnecessary things. By keep those few points in mind, you'll eventually have a better grasp on your money and learn to spend cautiously.