Contrary to popular belief, budgets are not preventative measures to keep you from spending money. In fact, a budget is actually a spending plan that divides your income to cover expenses and tracks how closely your actual spending matches what you planned to spend.
If a budget is too restrictive, you will be far less likely to stick with it. It's best to create a budget that balances your desire to reach your goals with the desire to be satisfied with the journey.
To see how an effective budget can help you meet your future goals, review the infographic available at this link on the power of saving and compound interest, via Next Gen Personal Finance and Visual Capitalist.
Prior to starting a budget, it's important to write down all of your expenses and sources of income during a given month, even if you may think they are small or uncommon. Once your expenses and income are recorded, the next step is to separate needs from wants. If you aren't sure if something is a need or a want, do without it for a period of time. If after that time you truly can't live without it, it may be a need. Below is a brief summary of some important steps to take before making a budget:
- Understand your income: How much and from what sources
- Know and track your actual expenses and when they happen (rent, books, travel, etc.)
- Organize your records (bank account, credit card statement, utility bills, etc.)
- Talk about your plan to budget with everyone involved in paying for school
- Plan for the future. Once you master your spending plan, start to include extra saving or paying off student loans as part of it.
Do you have questions about how your living arrangements (on-Grounds or off-Grounds) factors in to your financial aid offer? This is a common question asked by students as they decide where to live each year. The most simple explanation is, living arrangements do not affect the amount of financial aid received. A student's Cost of Living allotment is based on factors such as housing, dining, books, etc., and is consistent for all students based on their in-state or out-of-state status. For example, the standard housing limit of $7,110 will not be increased if you live in an apartment or house that costs more than $7,110 annually. For more information, please visit our Personal Finance and the Student Lifecycle page.
Regularly eating out can be a significant financial drain, especially if the cost is not factored into your budget. Planning in advance and grocery shopping on a weekly or bi-weekly basis can be a healthy and efficient way to cut back on the amount of money you spend on food each month. Before going to the grocery store, consider these tips:
- Use a weekly sales ad before going to the store
- Plan out your meals for the week
- Make a list and stick to it
- Use unit pricing to compare items. Follow this link for an explanation of what unit pricing is, and how to use it while shopping.
If you are concerned about being able to maintain a healthy diet while sticking to your budget, visit ChooseMyPlate.gov for shopping tips, recipe ideas, and more.