Creating a budget is the first step to developing a workable spending plan. Your budget will help you manage your expenses and keep you on the right path to achieve your financial goals.
Before you can create a budget, you need to know what you spend in an average month.
Recurring expenses can be fixed or flexible.
Fixed expenses are the same amount every month. They can include:
- Room and board ,if you live on campus
- Car loan/Transportation costs
- Insurance (Auto, Health, Dental, etc.)
- Cell phone
- Student loans
- A gym membership
- Entertainment subscriptions (netflix, hulu, amazon)
- Savings goals (a fixed amount that you put into your savings each paycheck)
Flexible expenses change from month to month. They can include:
- Utility bills
- Food (including that latte you grab on the way to class or the office)
- Books, if you are student
Incidentals spent on extras that you don’t need, but enjoy. They can include:
- Restaurants and bars
To understand what you are spending on flexible and incidental expenses, it might be helpful to track what you spend each day for a month. Start a log in your smart phone, download a free app, or go old school and carry a small notebook.
Once you know what your expenses are, create a spreadsheet or use a budget worksheet or a tool such as Mint, and enter your resources and expenses.
If your resources are more than your expenses, great! If not, you’ll need to take a hard look at your resources and expenses. Be realistic – it doesn’t make sense to create a financial plan that’s so restrictive you can’t live with it.
Be sure to include a line for emergency expenses, where you set aside a certain amount each month in a separate account in case your computer crashes or your car breaks down. Your goal should be to have less money going out than what is coming in.