Most students do not know how to manage their first budget. As soon as they get to the point when they have to do it, they feel overwhelmed and confused. Yes, most likely you will not get these skills in college, but it does not mean that you cannot develop them. Read this article to learn how to build your budget.
List your incomes
In case you have an irregular income, you should create the lowest-budget plan possible. Just think of the lowest possible numbers. It will help you set up a budget you can afford. And when you have some extra money, you will only be happy about it.
List your expenses
Think about everything you pay for on a regular basis. If it is difficult for you to make this list, take a look at your previous bank statements or at our list of the most probable expenses:
- College: tuition, books, supplies
- On-campus: dorm room, food (meal and non-meal plan)
- Off-campus: rent, bills (water and energy), insurance, food
- Transport: public transport, car (maintenance, insurance, gas, and parking)
- Medical costs: insurance, medications
- Communication: cell-phone, the Internet
- Personal: clothes, haircuts, cosmetics, etc
- Entertainment: going out with your friends
If your parents pay for any of these things, do not include them into the list. Include only those you pay for yourself.Fixed vs. Variable Expenses
You might notice that some of these expenses are regular (your rent or insurance), while others are variable (you do not buy books or medications every month). List all the variables into another category and name it “other” or “extra.”
Wants vs. Needs
In case your expenses are too high, you should differentiate your wants and needs. For instance, you obviously need to pay for food, rent, and insurance. Meanwhile, you probably do not need those new shoes or an extra night out with your friends. See what are the least important things so that you can cut them off.
You need to save money for several areas:
- Big-budget items (a new laptop, for instance)
- Long-term savings for your financial security
It is recommended to save 10-15% of your income. If you can make it 20%, it is great.
Balance Your Budget
While doing it, remember that your monthly income should be higher or at least equal to the sum you spend and save during this month.
Review Your Budget
Take a look at your budget to make sure that it fits you and your values. Maybe you want to add something or start spending less on something else? Reflect on it and rebalance your budget to make it perfect.
Those are the useful first steps to build your budget. Start taking those steps today to make things easier for you in the future.