A budget is a plan to help you live within your means. It provides a track of income and expenditure and, if used wisely, will prevent financial problems now and in the future. Once you learn how to budget effectively you will feel safer, happier and less anxious. We have included an example of a simple but effective student budget to get you started.
There are two obvious facts that are worth stating:
Anyone is able to move from the first situation to the second irrespective of income level. Two things are certain however:
Take one from the other and this gives you a disposable income, which can be spent on everything else. Of course if the payments are higher than the income then you already have a problem, you are in a debt spiral. You need to either decrease your priority payments, or more likely, increase your income.
Money Saving Budget
This is an example of how a student budget might look.
You must now ensure that at worst income = total expenditure.
If you need to raise more income you could try:
Also watch for:
Once or twice through the year you will need to pay an annual bill or pay for a big item such as car insurance. Provided that you know that it is coming up you should spread the cost over the course of the year. If we take car insurance as an example, it might be worth making a ‘car fund’ whereby you budget each month for 1/12 of the annual insurance and road fund license. You can leave this money in your bank account or even open a savings account to deposit the money in. Just make sure that you can get the money back out when you need it with no penalty charges.
If one month you have an unusually high expense in one particular category try to offset it by decreasing you expense in another category. Build in a little flexibility and don’t beat yourself up if you don’t nail it first time!
If you have problems:
Budgeting does work. It takes common sense and discipline but provided you follow the steps outlined above you will manage better and actually feel better for the experience.