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Personal Budgeting

Budgets are the only practical way to manage your spending and, most importantly, make sure your money is going to the expenses you desire. Taking time to understand your situation and plan for the future is an important step in living like a student.

Why are you developing a budget? If it is to be like a friend or impress your parents, the budget is not likely to be followed. Depending on your goals and situation, your answer could be to reduce loan reliance, get more control over your money, show responsibility with gift funds from parents, or ensure your earnings and aid can cover your expenses.

Developing a Budget Plan

College is likely to either be the first time you formally create a budget or create one as far reaching as you include living expenses in addition to tuition costs. The greater investment you make in the budget planning process will help you be successful in reaching your budget goals. Developing good financial habits now will aid you for many years to come.

Begin by detailing your expenses as well as your income. Simple tools to map out and categorize your budget are readily available on the Web by using "budget worksheet" in a search. You can begin with an overview of your monthly expenses and income.

Don’t set yourself up for failure by creating unreasonably high goals when you start your plan. For instance, don't create a budget based solely around eating macaroni and cheese or cereal unless that is what you do now. A rule like that is almost certain to be broken unless you are truly motivated to make a dramatic change in your lifestyle.

At the same time, think about where reductions can be made. Remember you are a student and should look to live like one now. Students without a job should particularly examine expenses for reduction as they have no real income earnings. Reducing current expenses and reducing your loan reliance will change your future dramatically.

Consider spending no more than 90% of your income as you plan your budget. In doing so, you will have 10% left to save for non-routine expenses, surprises, or big-ticket items. Developing a savings for emergencies or future purchases like a car is another key feature of a good budget plan.

Budgeting Your Refund Check

Your financial aid is primarily aimed toward helping you with the direct billed costs at UC. At the same time, you may have the aid resources that exceed your bill and provide you a refund.

Your refund should not be thought of as extra or income. More often than not, it will be from loan assistance. It is also intended to help you purchase key educational costs such as books and supplies.

Relying on loan refunds to cover living expenses is risky as these expenses will reoccur when you are in repayment on your loans. Therefore, you will be paying rent, gas, and groceries now with loans as well as paying for rent, gas, and groceries out-of-pocket later while also paying out-of-pocket on that loan with interest charges added. Is this going to get you ahead financially?

Just because you can use refund checks from loans to assist with living expenses does not mean it is a sound financial decision. It is up to you to develop a plan that sets you up for financial independence now and in the future.

Tracking Purchases & Revising the Plan

Each month you will want to record your purchases so you can evaluate if you are on plan or if your plan needs revision.

The biggest revision is in moving items that were seen as "needed" when you built your budget to now being a "want." Can you delay buying it, substitute something less expensive, or use something you already own? A yes to any of these questions typically identifies a want. Wants are ultimately discretionary expenses, things you might want but don’t need to live.

Almost every experience and activity is a want, at least when reviewed in degree or amount of your budget devoted to it. Going out with friends, shopping, eating out . . . they are all optional. At the same time, few budgets that exclude all of these items are likely to be realistic. Instead, think about moderation. Periodically review your plan to see if you can reduce some activities in favor of others or reduce some for a month or two to help out the long-range budget or prepare for an upcoming expense. You may be surprised at how much you spend on some activities once you start tracking them more closely.

A coffee for $4, vending snacks at $2, and a visit to a mini-market for $5 can quickly add up. These little expenses can be the breaking point of your budget plan.

If cash withdrawals from the ATM machine evaporate from your pocket without explanation, it's time to keep better records. You need to examine where that cash is going. You also want to avoid going to a convenient ATM only to be charged a fee for withdrawal, because it is not your bank. Eliminating little service fees here and there can go a long way too.

Review and modify your budget routinely. Keeping realistic in your plan and adjusting with your true spending habits will help you make more informed decisions on cutting out some costs to ensure other expenses and your overall plan goals are met.

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Students typically find personal finance software programs can help them efficiently track their spending.

You are likely to more readily keep tabs on your spending if you purchase a program or app, find an online option, or develop an Excel spreadsheet to update and review your expenditures. While the paper and pencil method works, an electronic version will help you efficiently record and reallocate expenses.

Use "creating a personal budget" or "budget planning worksheet" in a Web search to find additional online resources. The better the tools you use work for you, the better you will be at remaining within budget.