A lot of people throw around the phrase “I’m on a budget,” but if you ask them about how they track their spending, they tend to backpedal. They might say something like this: “Well, uh, I don’t really have a budget. I just meant that I don’t have a lot of money.”
Well, in this economy, many people are learning the value of having a real budget. And many of them wish they’d started back when they were coeds, forming frugal spending habits before they had debt to manage and families to support. So if you aren’t on a budget, yet, why not start? Here are the three basic components to a budget:
1. Regular income or a spending stipend
Perhaps this is the hardest part to figure, if your campus job pays much less than the summer job you have at home. However, this amount is what you regularly earn, not extra income on which you can’t depend. If you have additional variable amounts, you can add them in, as well, but you don’t want to count on those. So the first step in creating a budget is to determine what your baseline monthly income, or spending stipend, is.
2. List of regular expenditures
This should not include bills your parents or others pay; only list items for which you are financially responsible. Start with regular expenses, first, like car insurance and your cell phone plan. Then estimate amounts for things like food and gas. While you might not use all the categories listed, this spreadsheet can help you get started.
3. Tracking system
You need to find a way to track your expenses in a way that works for you. One method is using index cards, one for every category in your budget. Simply write the category name on the top of the card, along with the budgeted amount. Then, each time you make a purchase, you can deduct the amount that you spent from the total. If the index cards are too low-tech for you, you may want to alter the spreadsheet linked above, or create your own. Regardless of the method that you use, saving receipts and recording each expenditure is key.
Now, in the first couple months, you may be tweaking with your budget categories, and areas like food and gas can fluctuate greatly. Some categories will be that way, by their very nature. For instance, if you pay car insurance every 6 months, you still want to budget the same amount for it every month. It’s just that you’ll carry over the total from one month to another, until you have to make that payment.
The main goal of a budget is to help you stop spending money you don’t have, and spend it thoughtfully, thereby saving more. You might be surprised how far below your means you can actually live, if you try. Besides, the next time someone hits you up for some fundraiser you don’t wish to support, you can honestly tell them, ”It’s not in my budget.”
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