As Americans, we have normalized the idea of living paycheck to paycheck. The origin of this problem may be arguable, but the current state is what we have to work with. The truth is that we have been consumed by consumerism. We’re marketed to 24/7 to spend money. We’re led to believe that we won’t be happy without the luxury cars, expensive houses, brunches with friends, and late nights on 6th street. This is a short-sighted view of reality. Fact is, 78% of us live paycheck to paycheck. Many of us fail to think about possible long-term repercussions of living in a false reality and the “turn up” lifestyle. “SO YOU’RE SAYING I CAN’T DO ANYTHING FUN?!” Not at all! The trick is to find a balance between your financial reality and having fun with a simple tool the personal finance professionals like to call… a budget!
With… a budget, you have a clearer picture of how much money you have and, exactly where it’s going. Budgeting is not about living on a Top Ramen diet. It allows you to create a spending plan for your money and it ensures that you have enough money for the things you need and those things that are important to you. When you have a plan, you don’t have to guess whether or not you’ll have enough money to pay your bills, and make it to the end of the semester.
The very first step in creating a budget is knowing all of your income and all of your expenses. Now, let’s focus on income. Income isn’t just money from a paycheck, it’s ALL the money that COMES IN to your possession as a college student, including the possibilities listed below:
- Grants/Scholarships
- Tax returns
- Money from family
- Change that you found in the parking lot at HEB
Maybe don’t count on that last one, but you know what we mean. Expenses should be broken up into three subcategories: fixed, periodic and flexible. Here’s how they work:
- Fixed expenses are always the same every month. Rent and car payments fall under this category.
- Periodic expenses are similar, but come up once maybe twice per year. Think tuition and holiday spending. Car insurance may fall under this category if you choose to pay it all at once.
- Flexible expenses vary month to month. This category includes gas, food, entertainment, and whatever else you spend your money on, including vices (let’s be honest). Flexible expenses can be cut or modified.
After everything’s gathered up and labeled, you can see clearly. And as we learned last week during our Peer Money Mentor meeting, when you’re honest about your expenses and account for ALL income, your budget will not lie to you.
Now that you understand how to handle your income and expenses, let’s put everything together. There are many budgeting tools out there. If you’re not a fan of the good old fashioned pen and paper, or excel spreadsheets, you might try apps like Mint or YNAB. These apps allow you to track and categorize all of your purchases. Mint is free! The downside for college students is that most of these apps work on a monthly budget. A smarter idea while in school is to budget for an entire semester. With the help of the Student Money Management Office and its semester-budgeting tool, you can get assistance with creating a budget that covers the entire semester. Schoolwork might keep you up late at night, but worrying about finances shouldn’t.
Monitoring and reevaluating are huge components to budgeting. Don’t just create your budget and stick it in a drawer to collect dust. Your budget should be looked at as this living and breathing thing. So, evaluate all purchases; the necessities and the nonessentials. And if you’re over your budget, figure out what caused it. Then, make your modifications. Let’s say you still have funds allocated in the flexible expenses category for entertainment or eating out. If not, what about your groceries? Which area has the most potential for finding a good amount of money? Welp if it’s groceries, this time, you can’t get those delicious Chocolate Milano cookies or any other guilty pleasure items on your list. Think essentials only when shopping for your groceries. Finally, when you’re in a tough financial spot, side hustles like Uber and Lyft or getting paid to test apps are great ways to boost your income.
BE WARNED: budgeting takes practice like anything in life that you want to master! So, don’t be discouraged. If you’re an ACC student and need help with creating a budget, schedule an appointment with ACC’s Student Money Management Office.