Creating a budget is actually a pretty simple task to accomplish. However, creating an honest and practical budget can be a little trickier. It is human nature to want to spend money on frivolous purchases, so it can take some determination and discipline to create an honest budget for yourself while you attend college. College has many expenses associated with it, so it is absolutely important that you have a firm grasp on your incomes and expenses. Otherwise, you could end up in serious financial debt.
The first step in creating a budget is determining what interval you are going to base your budget on. The most useful time interval is monthly. Usually, many of your bills are due once a month, and if you are working you receive one to three paychecks a month. After determining how your budget will be structured, you will want to look at your incomes and expenses. Please use the following tips to aid you in the creation of an honest budget.
- In order to keep an accurate budget, you will want to make sure that you have all your financial documents in order. For example, credit card receipts, paychecks, and school refund checks should all be kept and referenced when creating your budget.
- Make sure to include all of your income. If you are working, your paycheck probably serves as bi-weekly income. However, income such as a refund check or other type of financial aid award should be budgeted. Usually these come in one lump sum every semester, so it is up to you if you want to include it only in the month you receive it, or spread it out over numerous months.
- When adding your expenses (both current and projected), make sure that you are being honest with yourself. Most college students will not have much discretionary income, so you have to make a concerted effort to cut out excess spending. The “fun and entertainment” category of expenses is unfortunately the first that has to be cut if you want to be in a good financial situation.
- Once you have created your budget, stick to it. If for some reason your financial situation changes drastically, you will need to create a new budget. However, for most college students, their financial situation stays mostly static from month to month. If you determine that you only have $100 a month to spend on entertainment, make sure that you only spend up to $100 a month.
Budgets are not necessarily a fun document to create. They will probably reveal that you do not have much discretionary income. However, if you create an honest budget and stick to it, you may see your fortunes increase sometime in the future. Learning how to manage your finances may be the most important skill you will ever learn. Make sure that you learn this skill as early on in life as possible.
By Ryan Laspina
Senior Specialist, Red Flags and External Reviews at APUS