Creating a Budget

• Gather basic information. First, determine how much money is coming in (from a job, your savings, gifts from relatives, student loans, scholarship dollars, or grants) and when. List all your income sources, making note of how often you receive each type of income (weekly paychecks, quarterly loan payments, one-time gifts) and how much money you can expect each time.
• Determine where your money is going and when. Track your spending for a week or two (or, even better, a full month) by recording every bill you pay and every purchase you make. The kinds of expenses you should consider, like rent/mortgage, utilities, gas, food, or child care, will vary depending on your situation. If you are a nontraditional student who is holding down a job and has a family of your own to support, you will calculate your expenses differently than if you are a full-time college student fresh out of high school. Whatever your situation, keeping track of your expenses and learning about your spending behaviors are important habits to develop.
• Build a plan. Knowing when your money is coming in will help you decide how to structure your budget. For example, if most of your income comes in monthly, you’ll want to create a monthly budget. If you are paid every other week, a biweekly budget might work better. Several tools are available online to help you create a budget, such as easy-to-use spreadsheets or budget wizards that you can download for free. To sample what’s available, visit CashCourse (www.cashcourse.org).
• Identify fixed and variable expenses. A fixed expense is one that will cost you the same amount every time you pay it (like your rent). A variable expense is one that may change (like textbooks, because the number and cost of them will be different each term). Although you will know, more or less, how much your fixed expenses will be during each budget period, you might need to estimate your variable expenses with expected costs. Use past bills, credit card statements, and previous receipts to make informed guesses. When you are in doubt, it is always better to overestimate your expenses to avoid shortfalls at the end of your budget period.
• Do a test run and make adjustments. Use your budget plan for a few weeks and see how things go, recording your actual costs as you pay them. Whatever you do, don’t give up if your bottom line is less than you expected. Budgeting is a lot like dieting; you might slip up and eat a pizza (or spend too much buying one), but all is not lost. If you stay focused and flexible, your budget can lead you to financial stability and independence.