Money management may be a real problem for some people, yet others always seem to have plenty of cash. It isn't that those who always seem to have money make more; it is that they are better money managers. If you took two families and gave them the same income, one family may end up always running short at the end of the month, while the other family always has money left over. The reason is probably because the second family has a budget. A budget is a tool that can help you see where every penny is spent. It serves as a roadmap, telling you when you need to spend money and how much. Without it, it's like you are lost on an unfamiliar road.
Why Budget?
Budgeting is something that you should learn early on in life. Creating and managing a college student budget will help you be in better control of your limited income. However, a budget can do even more if you make it a regular part of your financial planning.
- Get rid of debt. If you have a budget, you can set up payments so that you are able to pay off debt more easily. A budget will help you see how to make the best use of the money you have.
- Save money. If you don't know what you're going to spend your money on, you will likely spend on something you don't really need. You'd be better off putting it into a savings account. Having a budget will help you develop a regular savings plan.
- Eliminate stress. By knowing where your money is going, you can feel a lot better about your personal finances. When you are guessing every month, you may begin to feel stress and anxiety over missed bills. By having a budget, you can pay all of your bills on time, and never miss making a payment.
- Retirement planning. With a well-thought out budget, you can actually make plans to retire. As you pay off debts and begin saving, you can also begin creating wealth. By having wealth, you can do those things you've always wanted to do in life. Retirement can be a joyful experience.
- Help your family. If you have all of your debts paid and you have created a sizable savings and investment portfolio, you can extend help to family members who have unexpected needs. Of course, you can also help them by teaching them how to set up a budget as well.
Setting up a Budget
If you don't know how to make a budget plan, there are some simple steps you can take that will help you put one together.
- Gather bills and statements. Locate every possible bill, credit card statement, bank statement, and receipts. Review all of them so that you know what you have.
- List monthly expenses. Once you know what you owe, make a list so that you can see every single item.
- List income. If you have only one source of income, then this part is easy. If you have several, make a list, just like you did for expenses.
- Find the differences. Subtract all of your expenses from your income and see what you have left over. If you don't have any money left over, you may need to take a closer look at your expenses. Make adjustments where you can.
- Cut excess spending. If you're short on money for paying all of your bills, you may need to look at ways to reduce your recurring debts. You may find doing this difficult, but it's important to stay current on your expenses.
Checking Your Credit Score
While you are creating your budget, you should also take a look at your credit score. Checking your credit score is rather simple. You just need to contact one of the national credit bureaus to see what your credit report looks like. You may want to check all three, just to be sure that they are reporting the same information. You can order credit reports as often as you like. You should check your credit report at least once each year, but you may find that you want to review your credit each month when you are working on your budget.
Your budget is important. Even if you are just a college student, now is the time to set up a budget and track how you spend your money. By continuing to keep a budget, you will soon see that you are actually able to save money and stay out of debt. Checking your credit report on a regular basis can help you stay abreast of how other people see your use of credit.
