Many students find that there are always many large purchases that need to be budgeted for at the same time. That could be an upcoming trip, saving for holiday gifts, a new laptop, saving for your rent or maybe even a down payment on a home. Whatever the upcoming event or need that you are saving for, it is always good to create a simple strategy to ensure that all your needs and want are budgeted for! Follow this step by step guide to create great budgeting strategies and reach your goals.
- Organize each category with relevant information:
The best way to organize each budgeting category is to sit down and start thinking about any large/upcoming purchases or saving needs you have. Create a list with different categories and within each category write down any important and relevant information about that goal. This could be details about when you need the money by, how much money you need, if there is any payment plans or divided payments you can make on that goal, etc. Once you have listed all important information, it is time to prioritize.
Example: In this example, the student wants to save for 3 different goals, and they listed the relevant information below.
Trip to Europe: They need the money by summer 2023, total needed $4,000 in 14 months.
Investing: They want to open their Roth IRA account in 2023 and want to make the maximum contribution of $6,000 in December of 2023, which would be 20 months from now.
School Tuition: They need to cover their last semester of tuition, which is spring of 2023, the total will be $4,000 and they need it in 8 months.
- Prioritize which categories are most important:
After you have taken the time or organize your goals, it is time to prioritize which ones are most important. While of course it is best to try and accomplish all your goals, make sure that you understand if money is short and you cannot contribute to every goal, you know which ones are the most important and timely.
Example: After the student has listed their 3 goals, they listed the goals in order of most to least important. Keep in mind that this can be personal preference and may not be the same for everyone.
Most important: School Tuition – They know they need to finish college first and foremost so this goal will come first.
Second most important: Trip to Europe – They have already planned many of the details and other friends are counting on them to go, they know that this must be a saving priority for them.
Third most important: Investing – Although they know they need to start investing soon, this ranks third because of the two other financial obligations they have.
- Set a month-by-month plan to save the desired amount each month:
After you have listed each goal in order of importance, it is time to start saving and budgeting for each goal. To do this, take the total amount you need to save for this goal and divide it by the number of months you have left to save. After you have come up with your monthly number to save, start thinking about how you will achieve these goals.
Example:
School Tuition: $4,000/8 months is $500 per month starting in May 2022
Trip to Europe: $4,000/14 months is $285 per month starting in May 2022
Investing: $6,000/20 months is $300 per month starting in May 2022
This means for the rest of 2022, they need to save $1,085 per month for all 3 goals than once their school tuition is paid for, they will only need to save $585 in 2023.
- Adjust as needed:
If you come up with a number that is too large to save for you can either reduce your number of goals, add more time to save for each goal, or reduce the amount of money needed to save. If you cannot do any of those options, start looking into how many extra hours you may need to work each month to save for those goals. To create extra income, you could look towards side hustles like babysitting, selling clothes you no longer wear, or picking up an extra job for the weekends. Continue to revisit these goals and evaluate if you are on the right track to accomplish your goal!
Example: The student realized they only have $900 to save each month and will come up $185 short. The student decides to pick up 1 babysitting job each week to cover these extra saving expenses and is able to meet their goal.
- Continue to set new goals: Once you have reached your goal, celebrate yourself and think of other upcoming goals you may want to add now that one has been completed. Always make sure your goals are SMART, by creating specific and reasonable goals, this will help to not feel overwhelmed by them.
Whatever your goals are know that budgeting is one of the best way to create healthy financial habits to know how your money is coming in and where it is going. By creating healthy budgeting habits early on, you will be prepared for larger purchases later in life.
Cameron Jones
Peer Counselor II
Power Financial
302 K-State Student Union, Third Floor
918 N. 17th Street
Manhattan, KS 66506-2800
785.532.2889
www.k-state.edu/powercatfinancial
PowercatFinancial@k-state.edu
