Students entering college begin a new phase of life they have never experienced before. They experience new things such as living in a new town, meeting new friends and trying to get involved in the hundreds of clubs around campus. One thing that many students don’t realize is that they are embarking on a brand new financial journey as well.
Entering freshman year many students have paid little to no expenses while living under their parents’ roof. When going off to college a lot of this will change. Starting to pay for rent, utilities, groceries as well as fun events with friends – the list can seem endless and can be overwhelming. However, the thought of trying to track all of these expenses into a budget can seem daunting and timely to many individuals. Many ask why a budget is even necessary. Creating a budget helps create financial ease and stability, as well as helping you reach your financial goals. Below is an easy step by step guide to help you begin your budgeting journey and reach your financial goals!
Step 1: Identify all of your Income and Expenses
The first step to creating a successful budget is to figure out your monthly income and expenses. There are a few helpful apps that you can download on your smartphones that assist with this task. The first one I would like to mention is Mint. Mint is a free budgeting app that syncs to your bank accounts, credit cards, and debit cards to track every single transaction made. This can be a very helpful tool to use if you are a first time budgeter. Here at Powercat Financial we also have a helpful budgeting spreadsheet that we call our Spending Plan Worksheet. In the first column of this spreadsheet you can go through and enter your estimations for your monthly income and expenses. Under the expenses column there is over 50+ categories, to help you better sort through your expenses as well. After doing the estimations in the spreadsheet we like to then see based on your estimates if you are in a deficit or a surplus of cash. If you are in a deficit, we then need to go back through your expenses and categorize them as a Need or Want. If the expenses is a Want, then you should try and decrease the amount spent within this category to help you breakeven. After going through your Needs and Wants hopefully you either have broken even or have a surplus of cash, which then leads us onto step 2 of our process.
Step 2: Set Realistic Financial Goals
Setting financial goals could arguably be the most important step in creating your budget. Many individuals aren’t motivated to budget and track their expenses if they aren’t working towards a financial goal in mind. It is important to have both short-term and long-term financial goals in mind. In order to do this it is helpful to set SMART (Specific, Measurable, Attainable, Relevant, Time-based) goals for both. Some examples of short-term financial goals could be: paying off your credit card debt, saving up for a trip over spring break or creating an emergency fund. Creating a budget could even be an example of a short-term goal. Long-term goals should take place anywhere over 1 year depending on your goal. Examples of long-term goals could be: saving up for a down payment on a house, paying off your student loans, and saving for retirement. Whether you are saving toward a short-term or long-term financial goal any surplus cash leftover from step one can be used to help reach these goals.
Step 3: Adjust your Spending and Review your Budget Regularly
We all know that life is full of unknowns and unexpected events. Some of these unexpected events can take a toll on your budget. This is why it is very important to have an emergency fund set up in case of these emergencies. It is also important to periodically go through, review and adjust your spending. What does this look like? As I mentioned in step one if you are constantly overspending the first category you should look through is your Wants. If you have went through your Wants and are still in a deficit, it may be time to adjust some of your fixed expenses. For instance, could you move in with a roommate to cut down on rent and utility costs? Or could lower your grocery bill by buying more off-brand goods? A lot of these decisions come with trade-offs so it is important to weigh your options before doing so. Lastly, it is important to regularly check up on your budget to make sure you are staying on track and so you have the opportunity to make these changes, to help benefit your financial future.
Stop by Powercat Financial on the third floor of the student union and we can help get you started on creating your first budget to allow you to achieve your financial goals!
Kolby Stein
Peer Counselor II
Powercat Financial
www.k-state.edu/powercatfinancial
