People talk about the dreaded “B” word.
What is a “budget” though? Maintaining a budget does require discipline. It may involve some pain in adjusting to one. Virtually everyone has financial limits; some have higher limits, and some have lower ones.
What a budget does is that it helps people pay attention to their financial in-flows and out-flows, or money coming in and money going out. Maintaining a budget gives you more control over your expenditures, helps you live within means, and should help you better achieve your financial goals.
A budget has to be realistic.
Budgetary inflows may come from student jobs; financial aid (student awards, grants, loans, and / or scholarships); parental or family support; corporate or military financing; work study funds, or other income streams. Dividends from stocks and interest from bank accounts also may be counted in the “in” column. Some of these streams are likely taxable, so the actual amount of moneys coming in (the net income) will be less than the gross sum. Some in-flows may be one-time events, so those should be separate from continuing funding sources.
A student budget may vary depending on what a student pays for, but credit liabilities could include any of the following (and more): tuition, academic fees; health insurance; books and academic supplies; housing (rent); utilities; cable; cell phone; food; gym fees; entertainment; clothing; laundry; transportation; car payments; car insurance; auto repairs; parking; taxes; dependents; group membership fees; furnishings, and others. Payments into an emergency fund should also be listed as an outflow. All the above here involves outflows.
Budgets are usually described on worksheets or tables that show what is coming in and what is going out.
Budgets are also in-flux, with changes to be expected. The budget should be updated continually in order to be accurate. Budgets will change as people’s lifestyles change, too. As students transition to different life circumstances, their inflows and outflows will change.
Wants v. Needs
Budget professionals suggest differentiating between required and desired expenditures. Critical payments should be listed. These would include housing and medical insurance, food, and tuition. Debts should be repaid before the accrual of new debts. These should be listed as priorities. Entertainment, clothing, cable, and other aspects may be discretionary. It will be important to adhere to the standards to ensure that the basic needs are covered.
If more money is going out than is coming in, then the budget is out-of-balance. It will be important to control the “burn rate” of the funds.
Adjusting to a Budget
Balancing a budget means cutting back on expenditures and / or increasing the inflow of moneys.
Besides cutting back on spending, you may wish to spend more wisely through coupon-cutting, shopping for bargains, extending food budgets, and controlling your expenditures.
Getting a handle on spending may involve keeping a spending notebook to see where moneys are going and what is “breaking the budget.” An occasional splurge may be justified, but splurges should not become habit.
Extra surprise moneys should go into paying down debt or into the emergency fund.
If income goes up, that extra should be saved as a hedge against inflation.
Re-evaluating a budget should occur with any sizable changes. Then, spending and savings habits should change to adjust to the new circumstances—with an eye towards maintaining a healthy balance of inflow and outflow.