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Budgeting: Future You Says Thanks!

The idea of setting up and managing a budget can seem daunting, boring or not worth the time – particularly when you’re living as a student.

But it really doesn’t have to be a painful or difficult exercise. At it’s simplest level a budget is really just looking at what money you have coming in, what you have going out, and figuring out the best plan to match expenses with income.

It doesn’t have to be some elaborate spreadsheet – and you can also take advantage of a wide array of online tools that make things easier (including our own MyFinanceTracker).

These few simple steps will help you create a budget that works with you and helps you avoid any unplanned debt.

Step 1 – Figure out where your money is actually going

As a first step in coming up with a budget it’s a great idea to track your spending for a week or two – not trying to make any changes, but just giving you a very clear picture of where your money is going. Keeping your spending to debit or credit card transactions during this period is a very simple way to get an itemized detailing of your spending – alternatively you can easily do this manually in a notebook. Just make sure you capture everything. A budget that isn’t based on your real world spending isn’t going to be realistic or something that you’ll be able to manage successfully. So make sure you capture that daily $4 coffee, or the Uber you had to take because you slept in.

Step 2 - Figure out what money you have coming in

Itemize your income from all the sources you can think of. Sort it into two categories: "sure thing" and "maybe." Be conservative and underestimate it.

Step 3 – Add up all your expenses

List all the expenses you can think of – this is where the list of your spending for a week or two really comes in handy. Sort your expenses into two categories: "must have" (like tuition, books, rent, food) and "want to have" (including entertainment, eating out). Be conservative and overestimate costs. Try to include an amount for savings or a contingency fund – even if it’s a very small amount.

Step 4 - Add it all up and adjust as needed

When you add up the money coming in and compare it to your expenses you'll have one of two results: a deficit, with too many expenses or a surplus, with more than enough income.

If you have a deficit it’s time to consider making adjustments. Start by looking at what you can change to stay out of debt or save money. There are three main ways to adjust:

Budgeting is really just about setting priorities. That means asking questions like, What's really important to me? What can I live without? Can I still have fun with my friends without breaking the bank? Am I comfortable accumulating debt while I'm at school?

Everybody’s answers will be different – the important thing is to come up with a budget plan that is realistic and works for your needs.

Creating a budget - it's easy and worth your time
A budget that isn’t based on your real world spending isn’t going to be realistic or something that you’ll be able to manage successfully. So make sure you capture that daily $4 coffee, or the Uber you had to take because you slept in.