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Top 10 Things to Know About Budgeting
TOP 10 THINGS TO KNOW ABOUT BUDGETING
1. Budgets are a necessary evil
Budgets are the only practical way to get a grip on your spending - and to make sure your money is being used the way you want it to be used. If you have never successfully used a budget, don’t set yourself up for failure by creating unreasonably high goals when you start. For instance, a person who normally spends a hundred dollars a month on coffee should not suddenly set their budget to only allow for five dollars a month. A rule like that is almost certain to be broken.
2. Know why you budget
Motivation is an important key to successful budgeting. If you are simply keeping a budget because a friend said it was “a good idea”, you are not likely to keep budgeting for long. Before you start budgeting, answer the important question: “Why?” Depending on your situation, the answer could be to pay off debt, save for retirement, or get more control over your money.
3. Use software to save grief
If you use a personal-finance program such as Quicken, Microsoft Money, or an online program, the built-in budget-making tools can create your budget for you and help keep you on track. As a college student, you are much more likely to update or check a budget that is computer based over a paper version.
4. Budget your financial aid for the academic year
Many students receive financial aid refunds after their direct costs to UNI have been paid. This refund should not be thought of as “fun money.” It is intended to help students purchase textbooks, class supplies, and cover any remaining living expenses and should be thought of as income for the semester.
5. Understand wants vs. needs
An item is probably a "want" if it is possible to delay buying an item, substitute something less expensive, or to use something you already own. Wants are discretionary expenses — things you might want but don’t need to live. Almost every experience and activity, from going out with friends to shopping is a want. On the other hand, if the purchase is for something necessary to survive, like food or rent, it’s likely a “need.” Before you buy something, ask yourself, “Do I need this item, or do I just want it?” You may be surprised at how many things are actually “wants.”
6. Watch the little things
Two dollars for candy, three for a snack, and you will soon be faced with a budget collapse. Beware of the little expenses that are not included in your budget!
7. Do not budget more than 90% of income
Aim to spend no more than 90% of your income. That way, you'll have the other 10% left to save for your big-picture items. These big-picture items can be short term (like textbooks) or long term (like saving for a car after graduation).
8. Watch out for cash leakage
If withdrawals from the ATM machine evaporate from your pocket without apparent explanation, it's time to keep better records. In general, if you find yourself returning to the ATM more than once a week or so, you need to examine where that cash is going.
9. Don't count on windfalls
When projecting the amount of money you can live on, don't include dollars that you can't be sure you'll receive, such as year-end bonuses, tax refunds or investment gains.
10. Revisit your budget
Don’t hesitate to review and modify your budget. There is nothing wrong with making changes, but only make a few small changes at a time.