A budget details the revenue you generate and the money you will spend over a set period of time to help you stay out of debt, afford your expenses, and reach your financial goals.
Recognize your current spending habits
Track your spending to identify key spending areas. To help you track these habits try using a spreadsheet or app such as NerdWallet or Mint.
Determine your income after taxes or deductions.
Create a timeline
Draw up a weekly or monthly timeline based on your pay day schedule or major recurring expenses (such as rent).
Determine your fixed expenses
Understand what you spend on necessities such as food, rent, insurance, living expenses, and mortgages.
Fixed Expenses: Savings: Fun
We recommend 50:20:30 or 70:20:10 depending on how much of your income can cover your fixed expenses.
You don’t need to know every detail but consider where you might live, how you want to spend your time, and how you want to make money.
Set long and short-term goals to help you remember why you need to budget and save.
Don’t panic, you got this! There is always a way to shift your goals around to make them work for you, so focus on being consistent in your savings, investing, and budgeting rather than hoping for a miracle.
Have a good understanding of your needs versus your wants. You have to prioritize necessary expenses over your wants.
Once you’ve identified the areas you are overspending in, make a plan to improve your habits.
For example, if you're overspending on restaurants, spend time learning to cook and create meal plans. If you are overspending on Ubers, try learning more about the public transportation options in your area.
Why?
We are often met with unexpected challenges in our lives, and it is the same for our finances.
Using a budget to save up for an emergency fund will give you peace of mind in the event that any financial troubles might arise.
When?
As you start working full time, try to establish an emergency fund to cover about three months of living expenses.
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