Budgeting basics can eliminate money woes


Kristi Cutts, Guest Columnist

Do you know where your money goes each month? How well do you understand your spending habits?

If questions like these stress you out, you’re not alone. Especially when you’re a college student, taking the time to set up a budget can seem like just another thing to worry about. But budgets shouldn’t be stressful. In fact, creating a simple budget can help you to have a better understanding of your cash flow, which can ultimately help to relieve and eliminate the stress that comes with not knowing whether you’ll have enough money to make it until the end of the month. 

As the saying goes, knowledge is power – so let’s equip you with the knowledge you need to better understand your personal cash flow. 

Keep it simple

Creating a budget  may sound overwhelming. But our advice if you’re just starting out with budgeting is to keep it simple. Even a basic understanding of your monthly income and expenses is better than nothing – and tools like mobile banking apps that track purchases and income can make the process a breeze. 

While it’s entirely possible to go into extreme detail with a budget, it’s also possible to lay things out in a simple way in just a few minutes. Evaluate your personal situation and choose the level of detail is best for you – but don’t let a fear of getting bogged down in details prevent you from getting started at all. 

First steps

The first step to creating a budget is to track your monthly income. A good rule of thumb is to track this over a period of about 60 days to account for any variations in pay days or hours you may have worked at a job. Include money you earn from work, any regular gifts you can rely on (received monthly), and Social Security and child support payments if applicable. Refer to pay stubs or direct deposit information to get an accurate picture of your situation. 

Next, track your expenses. Certain items, such as rent, loan payments and cell phone bills are likely to be “fixed,” meaning that you can count on them being for the same amount due on the same day of each month. Other expenses are considered “variable” and are less predictable – think food, gas for the car or electric bills.

Variable expenses can be averaged over a period of time, and that average can serve as an indicator of what you can plan to spend each month. Simply add the total expenses for each category over the past few months, then divide that total by the total number of months you tracked. For example, if over the past three months you spent $75, $80 and $78 on your electric bill, your average bill works out to be $77.67. You can guess that your next electric bill will be somewhere around that amount.

Be sure to include in your budget money spent on shopping, subscriptions and entertainment. Should you need to cut back, these categories are likely to be good places to start.

Once you’ve tallied your income and expenses, subtract your total expenses from your total income. If you still have money left over, you’re in great shape. If that’s not the case, don’t stress! There are steps you can take to reduce your spending and get yourself back on track.

Boosting income and reducing spending

If your budget needs a boost, consider finding ways to increase your income. 

If you don’t already have one, a part-time job is a great place to start if you’re looking to raise your income. Picking up a shift at a bookstore or doing some tutoring work will allow you to make some extra cash. Student-focused jobs that won’t place unreasonable demands on your time are best – that way you’ll still have time to study (and to socialize).

Alternatively, you can cut back on some of those variable expenses to slow the outward flow of money and make your income go further each month. 

Spending too much on late-night pizza delivery or your morning cold brew at the coffee shop? Consider buying a few frozen pizzas and making your own coffee at home. Is a stagnant subscription or gym membership sapping your account? Canceling those in favor of free alternatives such as  the library or outdoor exercise can help make your money go further each month. 

It may be possible to save yourself a few bucks just by asking others to chip in their fair share. If you live with roommates and share one streaming service account, for instance, consider splitting the cost. This way, no one roommate bears the burden of paying for something everyone in the household benefits from – and you may be able to avoid cutbacks because of it.

Sticking to it

Once you have your budget laid out, try to stick to it. Again, mobile banking apps can be useful here – many offer the ability to track your spending across categories, so you can check-in regularly to see how well you’re staying on track. 

If you found during the budgeting process that you have a bit of money left over at the end of each month, consider setting some aside as an emergency fund. This way if your budget varies a bit, or you have an unexpected expense, you can have something to draw on that won’t throw your budget completely out of whack. 

Don’t forget to allow for some fun. If your budget allows it, give yourself some discretionary spending money to treat yourself every now and then. This may seem counterintuitive, but giving yourself that flexibility for frivolity can help you stick to your budget in the long run by staving off the urge to splurge.

Finally, as your circumstances change, remember to update your budget to reflect those changes. An ongoing approach to budgeting will allow you to continue to benefit from a budget without having to start from scratch.

Ultimately, a budget is a tool. If you take the time to build and use it, it can help you achieve whatever financial goals you might have. 

Note: The Financial Corner is a direct response to student requests for more information on navigating money matters. The tips are provided by Kristi Cutts, branch manager of UW Credit Union’s UW Oshkosh branch.