Create a Spending Plan
A budget, or spending plan, is a money-management tool that helps you live within your means. It allows you to allocate income into certain areas so you know how much you can spend each month without going into debt. It can also help you to set aside money for savings, an emergency fund and future expenses (e.g. new car, vacations, holidays, etc.), even when you don’t make a lot. That doesn’t mean you will be making more money to cover all those things; instead, creating and following your spending plan keeps your finances organized while helping you use your resources wisely.
How do I make a spending plan?
The first step is to assess your overall money flow—what’s coming in and what’s being spent. From that information, you can create a plan that will realistically guide you on your spending practices. Start by following the three procedures below.
- Figure out the goal of your plan. Are you trying to pay off a loan? Are you trying to save for an upcoming trip? Or are you simply trying to live comfortably while avoiding debt?
- Calculate your overall income. Consider all the places you get money from each month such as a job, loans, parents, etc.
- List all your monthly expenses. Fixed expenses are those expenditures which remain at the same amount each month. This might be your rent or car payment. Meanwhile, variable expenses are those that fluctuate, like utilities or food.
To help you organize the above information and for additional information please visit the Student Center for Financial Management & Planning website.