Budgeting

Even if you are pretty good with money, knowing where your money is coming from and where it is going is key to becoming financially healthy. A budget can help you see in a month what is happening with your money and where you can improve.

What Are Your Goals?

Why are we even doing this in the first place? Everyone knows that budgets are a smart thing to do, but we often forget why we want to do them. Is there something you want to be able to afford in the near future? Maybe it’s to set up an emergency fund in case something happens. Maybe you want to save enough money to quit your job and just focus on school. Maybe you want to save up enough money for a new video game system or to go study abroad. Whatever your reason why, make sure it is a very powerful and personal reason. The more personal and important to you, the easier to stick to your budget!

Step 1:

Your first step when making a budget is to track all your expenses for at least a month. You can do this by writing down everything in a notebook or you can use a spreadsheet to track your spending. Don’t try to limit yourself, just see where your money naturally goes. The key thing is knowing how much, where, and what you spent it on.

Step 2:

Now we are going to make a budget and control our spending a bit more. Take your total monthly income and subtract your total expenses. If you have money left over, awesome! If you don’t, look at your Fixed, Necessary, and Discretionary expenses. Are there things you can adjust to make sure you spend less or equal to what you make?

Fixed Expenses:
Fixed Expenses are monthly charges that are the same every month. Usually things like rent, insurance, utilities, and other bills fit into this category. These are our number 1 priority to pay. Fixed Expenses are also the most difficult to cut without taking drastic action- if you want cheaper rent, you will have to move. Find out how much you owe in fixed expenses each month and make sure you are earning at least that much.

Necessary Items:
Necessary items are things that are necessary but also change monthly. This would be things like groceries, gas, home essentials, etc. These items are a little bit harder to control, because depending on our spending, they can go over or under the amount we earn. These expenses are easier to cut, because even though we have to spend, we can spend less.

Discretionary Spending:
Discretionary Spending is stuff we spend money on but isn’t necessary. This includes items like entertainment, unnecessary shopping, online subscriptions, etc. These items are technically easy to cut since we don’t need them to survive , but many times we have a personal attachment to things we don’t need.

After looking at your expenses, see where your money is going. Are you spending a lot on fast food? Entertainment subscriptions? Take a look and see what you can do better in order for you to make the most out of your money.

Step 3:

Continue tracking your spending! After about a month, look at your budget compared to what you actually spent. How did it go? If you need to, readjust your budget and prepare for the upcoming month. Make sure to remember holidays, birthdays, and special events that will happen that month.

Step 4:

Keep trying! No one gets the perfect budget right away and things are always changing: your expenses, your income, life events. The important thing is just to make sure that you are taking time every month to examine your finances and remain in control.

Tools

• Consumer.gov
  Free-to-use budget worksheet to help you better manage your finances.
• Everydollar.com
• Mint.com
  Mobile and online budgeting tools to help you keep track of monthly income and expenses.