No matter where you are in life, budgeting is an important skill to develop. Budgeting allows you to keep track of your money. Where does it come from? Where does it go? Making a budget will help you understand where you can save or if there’s money that’s better spent elsewhere. Whether you have a monthly spreadsheet for your expenses or your bank account feels like a black hole for money, we have some tips for you!
Expect the unexpected
When preparing a budget, make sure that you set aside a portion of your income for an emergency fund if at all possible. Having a cushion that allows for you to cover unexpected expenses or to cover part of your living costs if your paycheque doesn’t come on time is imperative.
When making your budget, you may be excited to cut out all of your expenses and live a life of extreme minimalism. While that may be well intentioned, having a budget that is realistic and is somewhat flexible will help you stick to it. Past bank statements can serve as a good starting point for creating a realistic budget.
Track your progress
Recording your spending is imperative when trying to actually stick to your budget. If you’re manually updating a spreadsheet, make sure that you’re doing it often as purchases can add up. If you’re looking for an easier option, there are many apps that can connect to your bank account if your bank doesn’t offer an online budget tracker.
Set a reasonable amount for your budget. Break it down by category. A budget isn’t simply saying, “I’m going to spend less on ...”
Put your budget into context
If you’re budgeting $50 for lunch and you typically spend around $10 on average every time you buy food on campus, that’s five lunches a month. Is it realistic to have lunch on campus five times a month? For some, yes. For others, not so much. Make sure that you set a budget that works for you and your schedule.
Another aspect of putting your budget into context is looking at each line in your budget as a percentage. For dining out, $50 may not be a lot if you’re working with a $500 budget with no big ticket expenses, but it may be a hefty chunk of your budget if you’re looking at an allowance of $100.
Revisit your budget
Whether you fail at sticking to your budget or you manage to stay under your budget every month, it’s always a good idea to revisit. Are there areas where you could trim your spendings? Why is it difficult to stick to your budget? Are you overspending in some categories and underspending in others? Could you be saving more? These are all good questions to ask. Creating a budget is not a one-and-done task — rather, it’s something that needs to be revised as circumstances change.