A few weeks back, my wonderful Odyssey editor wrote a piece concerning budgeting. She adeptly summed up the importance of budgeting and inspired the readers to make one.
This article seeks to build on that inspiration and teach you how to build a budget. Don’t worry. Budgeting is not scary or super technical or only for nerds; it is helpful and freeing to everyone. So let’s dive in!
(A quick note: being able to navigate Microsoft Excel or an equivalent program is extremely helpful. So if you need to brush up or learn how to use it, watch some YouTube videos – that’s how we all learn nowadays anyway.)
1. Estimate your gross pay.
This is pretty easy. Estimate the total you'll earn over the entire school year and divide by the number of months you will be in school (usually eight). This number goes in the first row in each month’s budget.
2. Save 10% of your money.
Just do it. Interest is amazing and will compound your money to incredible heights. You will thank yourself later.
3. Give 10% of your money away.
Regardless of religion, find a way to give 10% of your money away. Find a charity to donate to or even splurge on your friends and take them out for a nice dinner. Though counterintuitive, giving money is freeing and reminds us of the purpose of wealth – to positively impact yourself and your community.
4. Determine your take-home pay.
Don’t forget to account for the money taken out for taxes (federal and sate!). You’ve already accounted for savings and giving, so the remaining number is your spending money. This is the most important figure in your budget; it shapes all of your further choices. You HAVE to spend less than this number – no matter what it takes.
5. Determine fixed costs.
Fixed costs are those that do not fluctuate month to month. Examples would be rent, a monthly payment toward college, etc. Often, you cannot adjust these costs, so factor them in first.
6. Allot unfixed costs.
With the remainder of your budget, assign money to unfixed costs. These costs can fluctuate. For example, entertainment costs or food costs can be tightened or expanded as needed. But remember, the sum of your fixed and unfixed costs MUST BE LOWER THAN YOUR TAKE-HOME PAY.
And there you have it, your budget is finished. Not too bad, right? Following is a continuing list on how to manage your budget once it is made.
7. Update once per week.
Choose a day of the week to update your budget and stick to it. Keep all of your receipts from the week and then enter them in on your day. This routine allows you to not obsessively check your budget, but also to keep a good pulse on your finances.
8. Keep your receipts.
When you update your budget, also keep tabs on your credit/debit card. Check your receipts against your card transactions and assure your account is accurate and secure.
9. Do not pay bills late.
Ever. Pay in full; pay on time.
“Those who understand interest earn it; those who don't, pay it." -- Unknown
10. Be dynamic.
Allow yourself to amend your budget as needed. Reassign your unfixed costs until you find the perfect balance for you. Be ready for unexpected costs – they always come up.
11. When in doubt, be generous.
If you have a few extra dollars left for the month, don’t skimp on the restaurant tip. Don’t be afraid to bless someone with your extra cash. Always err on the side of generosity.
12. When there’s extra, save it.
Don’t splurge on an emotion if you have some extra cash. It’s tempting to drain the end of the barrel on something fun, but be disciplined and save it. That foregone dinner and movie could become a full-weekend vacation 20 years down the line.
