The time you’re spending in college is good preparation for your career, but you can use this time to learn something that’s going to be just as important to your financial well-being in the years to come. That something is how to develop and follow a personal budget.
Many people shy away from budgets because they don’t like following rules. Others assume that budgeting is a complicated process. Here’s the good news: budgets don’t have to be rigid or complicated. In fact, it’s a good idea to keep your budget simple.
A budget is like a GPS for your financial future. It tells you where you’re at, where you’re headed, and what the best route is. In simple terms, it tracks the amount of money you have going in and gives you a plan for meeting your needs without spending every penny.
The easiest way to develop a budget is to keep track of everything you spend for a full month. That $30 you just spent on new clothes, the $15 worth of downloaded music, even that $2 cup of coffee — you want to make sure you write everything down. At the end of the month, divide those items into categories, such as meals, personal needs, and entertainment. Total them up and compare them to how much money you have coming in. (If you’re spending more than you’re earning, you’re setting yourself up for trouble.)
Next, write down how much you think you should be spending in each category. Use the number you’ve come up with as a guideline, and keep track of your progress during the month. That’s what budgeting is all about, and it’s a good habit to get into!