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Now a fourth-year at Ashford University in Iowa, Teresa R. grew up the middle child of five. “Our family never had a lot of money and with five children, there was no money set aside for our college education. We learned at an early age how to budget in order to afford the necessities. My mom taught me how to shop on a budget and look for sales prior to purchasing,” she explains. Now, Teresa is able to attend college on her own funds and even save for her retirement.

Developing and maintaining a budget requires discipline, but once you know where you stand, financial stresses—like running out of money or accumulating debt—can be alleviated.

“Budgeting helps you to see how much money you have coming in and how much you have going out,” says Demerle P., a second-year student at Mission College in California. “It is also valuable in helping you plan for things you want to buy in the future.” By cutting out unnecessary purchases and putting more money toward savings, you’ll have extra to put toward important short- and long-term goals.

Building a Budget

Twenty-one percent of respondents to a recent Student Health 101 survey said they don’t keep a budget, and 35 percent of them said it’s because they are too busy.

While there are a plethora of software tools to aid in drafting a budget, you can also successfully create one in an afternoon, using simple tools like a ledger, spreadsheet application, or smartphone app. Here’s how:

Incoming Funds

  • Begin by calculating your average monthly income or how much money you have.
  • Include only fixed earnings that you can count on, such as a paycheck.
  • Don’t include uncertain income, such as bonuses, raises, or monetary gifts from family.

Outgoing Funds
Next you’ll need to track and list where your income is going.

  • Calculate your expenditures over the past three months in various categories, such as food, entertainment, school supplies, phone service, etc.
  • With a complete list of bank withdrawals and credit card charges in front of you, as well as all cash receipts, categorize all your expenses. In addition to specific categories, it is best if you create two broad categories such as “Fixed Expenses” and “Discretionary Spending.”
  • Fixed expenses are those that stay the same each month. Common fixed expenses include rent, school loans, car insurance, tuition, and utilities.
  • Discretionary spending includes expenses that change from month to month, such as groceries, restaurants, clothing, entertainment, travel, hobbies, and gifts.

Bring It All Together

Now, add up your earnings and expenses separately. If you earn more than you spend, pat yourself on the back. But if you spend more than you earn, you’ll need to make some adjustments.

Kimberly M., a second-year graduate student at Texas Woman’s University, shares how she stays fiscally responsible: “I have always been good about not buying things that I don’t need or don’t have the money for. One thing I ask myself when I see something that I want to purchase is ‘Do I really need that?’”

Like Kimberly suggests, the first area to examine is your discretionary spending. Are there any recurring purchases that aren’t really necessary?

Some of the most common items to derail a budget include coffee, tobacco, alcohol, restaurant meals, and technology. “I’ve bought limited-edition video games [and] the amount I spent is sickening. There’s so much to see in the world and I’m buying a video game so I can sit inside my dark room and play all day after school and work,” reflects Chris M., a third-year student at Ohlone College in California.

High-Tech Budgeting Tools

If tracking your money with a pen and paper feels a little archaic, there are plenty of free Web-based tools, smartphone and tablet apps, and downloadable software to help you develop and maintain a budget. One of the most popular of these is Mint.com, which gets glowing reviews from both students and professionals. After you sign up for this free service, Mint pulls together information from your bank accounts, credit cards, insurance policies, etc., and automatically organizes your spending into categories. Easy-to-read charts and graphs provide a visual representation of your spending habits, and the Mint mobile app allows you to view details of your budget wherever you are. You can also create savings goals and bill reminders to stay on track.

If you’d rather keep all of your information on your hard drive, programs such as Quicken® may be right for you. There are also downloadable open-source budgeting programs. Like Mint.com, these allow you to allocate your spending in various categories and then view charts and graphs of where your money is going.

Savings

If you want to increase the amount of money you have set aside for big purchases or future plans (such as travel), gear your spending habits toward saving 10 percent of your earnings each month.

To get on track, make reasonable estimates of how much less you could spend and use these to draft a new budget. Write your lower spending goals down in each category. To ensure that you save, transfer money to a separate savings account and consider it “off limits.”

In addition to budgeting, Teresa R.’s parents taught her about savings accounts at a young age. “My parents opened an account for each of us when we were born and put birthday and Christmas money into it, as well as a portion of the money we made from [working]. There was no amount too small to set aside for savings. It was this savings account that allowed me to fund my community college education,” she says.

Budget-Conscious Fun

Just because you are living within a budget does not mean you can’t have fun. Find inexpensive ways to enjoy yourself: second-run movie theaters or half-price matinees, student concerts, and pot-luck meals with friends.

Many students turn to coupon Web sites to find discounts on items such as clothes, services, restaurant food, and other discretionary purchases. Plus, many communities offer plenty of free programs and schools often have discount service arrangements with local businesses. Stop by your campus activities office or community center to find out what’s available. Museums, Amtrak, clothing stores, and many other companies also offer discounts for students with an I.D. Just ask!

If all of this is feeling a bit overwhelming, it can help to remember that budgets are not written in stone. Be realistic when evaluating your spending habits and revise your budget as needed. Keep detailed records of your earnings and expenses, and review your budget every few months to gauge whether your spending and saving goals make sense.

With time, sticking with a budget will feel like a healthy habit that helps you do what you need to do while also saving for those things you want.

Take Action!

  • Keep a record of incoming and existing funds.
  • Track your spending for fixed expenses, such as rent, loans, insurance, and tuition.
  • Assess what you spend on discretionary purchases, such as clothing, food, and entertainment.
  • Work toward a balanced budget that makes room for unexpected expenses.
  • Aim to save 10% of your funds for future spending, such as on travel.
  • Explore the many budget-conscious ways to relax and have fun.

A personal budget helps you in these ways:

  • Understand and track how much money you earn or have.
  • Avoid running out of money.
  • Figure out exactly how you are spending.
  • Set aside funds for books, bills, group memberships, and fun activities.
  • Set goals for spending, saving, and allocating your money.

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