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Creating a Budget

Now that you’ve thought about your financial goals, it’s time to determine how you’ll get there.  Before you can know how much you can save, you’ll need to know how much you have left over each month. Do you ever feel like you work really hard, but never have money? Or, do you wonder how your whole paycheck from two days ago is already gone? Budgeting may be the answer to these questions. For the second article in the four part series for Financial Literacy Month, we at Powercat Financial Counseling (PFC) will be educating you about the importance of budgeting and how to create a budget.

What is Budgeting?

When I think about what budgeting is I think about a famous quote by John Maxwell that says, “A budget is telling your money where to go instead of wondering where it went.”  Budgeting is tracking your cash inflows and cash outflows. It is a process in which you create a plan of how you want to spend your money. After you create this plan, it allows you to determine the amount of money you will have to accomplish goals you want to achieve. Budgeting is a simple yet complex task:  it takes work and discipline. It is a mindset and an attitude.

Why Budgeting Is Important

Now that we know what budgeting is, let’s discuss the importance of it. Budgeting is important for many reasons. One of the first reasons budgeting is important is due to the fact that it allows you to see whether you are spending more than you are making, or if you are coming out on top. We all want to come out with extra money, right? Budgeting is what helps you come out with extra money or break even at the end of every month. Creating a budget can also help relieve stress when unexpected things happen.  And finally, the budget will help you reach your short and long term goals discussed last week.

Creating a Budget:

If you have never created a budget, or even thought about a budget, don’t worry:  we are here to help. PFC offers an awesome tool called the, “Spending Plan Worksheet.” This worksheet is an excel document that allows you to create your own spending plan for each week, month, semester or year. The amount of time you set your budget for is completely up to you and what would be most beneficial for your situation. Budgeting is typically in the form of a three step process:

  1. First, you will estimate your income and expenses for a monthly period. For a lot of people, this is a major guessing game, because most people don’t know off the top of their head how much they are spending on coffee, eating out, gas, groceries and other expenses each month. After you have estimated the income and expenses, you should go through and decide whether your expenses are needs or wants.  A need can be determined based on what would have a consequence should you not pay it (i.e. rent, groceries to an extent, or tuition) whereas a want is one you can cut back in and deal without month to month (i.e. clothes, eating out, and entertainment).
  2. After your estimation is done, you will then begin the “fun” part, writing down the actual income and expenses. When recording your expenses, don’t forget to add in those “every once in a while” expenses such as getting your oil changed, getting your hair cut, and other activities. When you are calculating these expenses, take the amount you spend in a year on that activity and divide it by 12, since you are using a monthly budget. For example if you are doing oil changes, it costs you $20 every three months, which is $80 per year. Now that we have determined the annual amount, we divided it by 12, which equals $6.67 each month; this is what you should put away so that you are prepared for the expense when it occurs.  There are many ways to track your expenses for a given period (a month in this case). You can use the receipt method, which is where you keep all your receipts and record the transactions. You can also use bank statements, but bank statements don’t account for cash transactions, so you don’t want to forget to include those! You can also use the check register method, which is where you keep a running tab of your checking account. In this process, right after you spend money you write it down (in a register or excel sheet) so that you know exactly what you are spending and why.  You can also use wwwMint.com.  For more information on using Mint, check out our other article on the topic.  These are just a few ways of keeping track of what you are actually spending. Feel free to do what is the easiest and most effective for you. After you have tracked and written down your actual amounts from a month’s time, you will want to go through and prioritize your needs and wants again, to see if it has changed based on what is actually happening, not on what you thought was happening. In this step, most people are shocked because they are spending way more than they thought. For college students, we tend to spend way more eating out than we think we do, or we spend way more on coffee than we really should. The reason we estimate first, and record actuals second is so that you get a good feel for how in tune you are with your spending habits. After you become in tune, you can begin to change your spending habits to better fit your financial needs.
  3. The third step is to start determining what you want to changed, and how to attack those changes. This involves deciding if you want to be spending what you currently are or if you would like to spend more or less in each category.  If you have a deficit, it’s important to address it by increasing your income or decreasing your expenses.  If you have a surplus, you can decide where to put that extra money.  Once you determine where you want to start changing spending habits, you can start to create a spending plan/budget for next month.

Although there are only three steps listed, it is important to frequently update and monitor your budget throughout your whole life. By doing this, you are identifying where you may be wasting money, and where you can be putting that money.  This can help you put your money to better use to help you achieve your financial goals.

Be on the lookout in the next few weeks for more helpful tips about personal financial management during Financial Literacy Month.  If you have any questions about creating a budget or general financial management and would like help with any of those questions, please make an appointment and come see us at PFC.  You can make an appointment at our website: www.k-state.edu/pfc.  We provide free and confidential counseling to all K-State students.

Miranda McMahon
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

Thinking About Studying Abroad?

More and more college students from all over the country are choosing to study abroad. Spending a semester or a couple of weeks in a foreign country is both exciting and beneficial to your personal development. A growing number of employers see this as a plus because it can suggest your global perspective and awareness. One might think picking the ideal country to study in is the hardest part, but in the hype of the excitement, many students overlook the costs of financing the trip. Here are a few tips to help you plan accordingly without having to worry about money.

Create a Budget

The first course of action is to determine whether or not studying abroad is feasible months in advance. You’ll need to obtain an estimate of the total costs of your intended countries you may study in (as well as possible excursions you may take while abroad).  This includes, but is not limited to, passport or visa applications, tuition, books, housing, meals, bottled water, plane and train tickets, transit (i.e. metro or taxi), and souvenirs.  Then, you need to figure out how much you currently have to pay for the trip and how much extra you’ll need to save up. The best solution to this task is creating a budget. Start by listing all your monthly sources of income and deducting all your monthly expenses to establish your discretionary balance (the money you have left over). If you are in the red (negative balance), funding this trip might be a difficult task. Don’t fret, though, as there are alternative funding strategies. If you are in the black (positive balance), then you are more likely able to finance the trip.

The next step is to set up a “Study Abroad Fund” and contribute monthly to build up the balance. This fund will be your go-to source of money when abroad. The amount that you can contribute will depend on how much money you have left over to generate on a monthly basis. Being college students, that amount tends to not be significant. Thankfully, there are alternative sources of funding available to students who plan on study abroad and they come in the form of scholarships. Scholarships are free money and you should try to obtain as many as possible. Check with K-State’s Study Abroad Department for more details at http://www.k-state.edu/studyabroad/current-students/funding/scholarships.html. A new and popular way of raising funds comes in the form of crowdfunding. You can set up a campaign on sites like indiegogo, kickstarter, and gofundme and have access to a community of millions of people that can help raise funds toward your trip. You also are eligible to receive student loans during your time abroad if you are enrolled at least half time, which can help with the costs of tuition, room, and board. For more information, you can visit Student Financial Assistance’s page at http://www.k-state.edu/sfa/policies/studyabroad.html.  If you still need more money for your trip, don’t be afraid to speak to your parents and family for assistance.

All these sources of income are better utilized or obtained if you have a thorough budget drafted that illustrates your financial need and capability. You can use PFC’s free spending plan worksheet to help you with this task by going to http://www.k-state.edu/pfc/budgeting.

Does your Debit/Credit card Work in Foreign Countries?

Once you are in the program, have chosen a country to study in, and raised all the funds you’ll need, then you are almost at the finish line of enjoying a financially stress-free trip. What you need to do next is figure out if your debit and/or credit card(s) work in the country you plan on travelling to and if so, if you will incur any fees every time you swipe your card. You can easily check with your bank on this matter and if need be, obtain a card that allows you to do so without any costly fees.  Most banks will charge a flat cost for using international ATMs (i.e. $5) and some will charge a percentage of the withdrawal (i.e. 3%).   Some credit cards won’t have foreign transaction fees, but this only applies to transactions made using the card.  Be aware that many places abroad only accept cash and you won’t be able to use the card with no foreign transaction fees.

Additionally, it’s very important to put a travel notification on each card you may be using abroad, including ones brought for emergencies only.  This can be done by calling each bank or company and letting them know the dates of travel as well as the countr(ies) you will be in.  Failure to place a notification can result in your card being frozen due to a suspicion of theft.  This can last for days and may only be able to be lifted by a phone call to the bank or company.

Do I Have an Emergency Fund?

Lastly, you need to be prepared for any surprises that can financially impact your study abroad experience. You need to have an emergency fund set up that will only be used if something bad happens. Examples include losing your wallet, pick pockets, travel or lodging mix ups, or a medical emergency. It never hurts to be prepared and you’ll have less things to worry about knowing that you have a back-up plan.

If you need further assistance in planning for your trip, feel free to set up an appointment with PFC by going to www.k-state.edu/pfc/services.

Resources

http://www.forbes.com/sites/alexadavis/2014/07/10/6-ways-to-cut-the-costs-of-your-study-abroad-program/

Gerald Mashange
Peer Counselor II
Powercat Financial Counseling
www.k-state.edu/pfc

The Most Convenient Way to Keep Track of Your Budget

It’s important to keep track of one’s budget for many reasons.

  1. First of all, a budget let’s you decide where your money goes before you spend it, instead of wondering where your money went at the end, or worse in the middle, of the month.
  2. Secondly, by keeping track of your budget you can find categories that you spend a lot of money on. It helps you get an exact picture of your spending and helps you decide whether or not it depicts your priorities. Is spending $30 a month on coffee where you want your money to go? Do you really like TV enough to spend $100 a month on it? What else could you do with that money?
  3. Further, keeping track of your budget allows you to plan your financial future. Saving for emergencies, a trip or retirement and repaying loans is only possible if you have a good grip on your finances.

All the benefits of setting up a budget can empower and motivate you to try and follow everything to a tee to get your finances in great shape. Unfortunately, the reality of tracking all of your spending can be tedious. When you have to keep all your receipts and enter the amounts, one by one, into a spreadsheet or even a notebook, staying on top of your budget can become a pain.

A good and reasonable budget is important and is actually tied to financial success. At PFC, peer counselors use the budgeting process for many different personal financial situations. Budgets uncover spending leaks, show how large an emergency fund needs to be, can give college students an understanding of how much the first job out of college should pay, how much student loans are needed and last, but not certainly not least, to decide where the money should go before it’s spent.

One thing that we have found very helpful and has found much resonance with clients is Mint.com. The website comes with an app for iOS and Android and is the best resource we have found to track spending and manage finances. When a user first opens an account with Mint, he or she is prompted to enter access information to all checking, savings, and investment accounts, credit cards, and even loans. There is also an option to enter property, such as cars and a home, to the account. This approach allows the user to examine his or her entire financial situation.  Mint has a triple layered security system to protect this sensitive information, which one can read more about on their site before creating an account.

The main function of the site, however, is tracking spending and budgeting. By entering credit card and bank account information, the user allows the website to track all transactions. Mint automatically places the expenditures into categories. So a purchase at a supermarket, such as Dillon’s, will automatically be placed under “Groceries”, and a transaction with Chipotle will automatically go into the “Restaurant” category. There are a problems with misplacement, especially with one-stop shops such as Wal-Mart, however the website allows one to change the category of a particular purchase and to split the transaction into multiple categories.  If you spend cash, there is also the option to manually input transactions.

Spending in each category fills up a bar graph representing the budgets the user sets on the budget tab. Mint will come up with an estimate of an appropriate budget based on past spending and US spending averages, but they can also be manually adjusted by the user. The Website will send alerts via email when spending approaches budgeted limits, keeping the user on track. Besides setting budgets, users also have the opportunity to set goals, such as for a spring break trip, paying down debt, or saving for a down payment. Mint has preset goals that walk the user through the process, while custom goals are also an option.

On the trends tab, users will find statistics about their spending, income, debts and assets. This tab, among other things, can be useful in determining what the biggest spending categories are and give users a visualization of net income. While most investors find this information with their brokers, Mint’s investments tab can be useful by having all the information in one place. Lastly, the “Ways to Save” tab gives suggestions for savings and checking accounts, loans and credit cards, as well as investments and insurance. If a user is actually in the market for any of these items, this tab can be a great place to start researching, however it should not be the only place to look or and should not encourage one to take on new, unneeded credit.

Overall, Mint is one of the easiest money management and budgeting tools out there and a gold mine for anyone who struggles to keep up with tracking, no pun intended.  Mint is one of the best websites/apps to help track spending, because it’s able to integrate with users’ bank accounts. Mint currently collaborates with more than 7,500 financial institutions, more than any other budgeting website (Rapacon*). Transactions are updated and put into categories automatically which makes it the easiest to use application out there.  Try it out today by going to http://www.mint.com.

*Source:  Rapacon, Stacy. “The Six Best Budgeting Sites.”  Kiplinger.com.

Lara Blomberg
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

Save a Bundle Every Time You Shop!

Shopping at the grocery store can be a daunting task for anyone. From the amount of time it takes to purchase your food items to the bill that you receive when you check out, it can be difficult to enjoy a trip to the grocery store. However, there are many tools available to make your shopping trip run smoothly and to make sure you do not overspend while you are there. It takes planning and discipline, but over time you will find that shopping with a plan will make your grocery store shopping experience much better overall. Here are just a few ways that you can save money while you are at the grocery store:

Sign Up for Weekly Advertisements

Every grocery store has an option to sign up for weekly ads to be sent to you via e-mail. This is a great way to be able to comparison shop right from the comfort of your own home. Create a list of things you need and then go through the weekly ads and see what the stores in your area are offering. You can often times find very good deals on things on your shopping list by shopping this way. Be careful though!  Sometimes advertisements can sway you to buy things you never intended to. If you are purchasing more than you can use to get a special deal, then it is probably not a good deal for you at all. Be aware of “10 for $10” or “Buy 3 get one free” type of advertisements. While these may seem like good deals, the average college student probably does not need everything that the sale is offering. Make a detailed list of your needs and stick to it.

Shop With a Plan

There are few things more dangerous than shopping at the grocery store with no clear idea of what you really need. Grocery stores thrive on customers who mindlessly buy products they don’t really need. The best way to combat overspending and mindless spending is to go in with a plan. The best way to plan is by making a list of everything you need before you go to the grocery store. Make a plan of all of the meals that you will eat for the week and buy only what you need to make those meals. Go through your fridge and pantry and make sure you are not buying things you already have. When you go into the store, stick to your list and avoid putting things in your cart that you did not write down. Another way to combat overspending at the grocery store is to simply stick with cash. By only bringing in a set amount of cash with, you will never be able to overspend. Only having cash forces you to keep track of what you are putting in your cart and what your total will be. No more mindless spending!

Buy Your Produce in Season

One of the best ways to save money at the grocery store is by purchasing produce only when it is in season. Buying produce during its harvesting season will ensure that you don’t overpay while buying fresh fruits and vegetables. The best way to know what is in season is to download a chart or table for your area that lists all of the produce typically sold in your local grocery store.

How much could you save from buying produce in season? Take asparagus for example. Currently, at the supermarket, asparagus is selling anywhere from $3.99-$4.99 a pound. Compare this to prices in April when asparagus can be found for around a $1.50-2.50 a pound. That’s 50% cheaper just by buying it during its growing season. Use this method for all of your fresh fruits and vegetables to save big while shopping.

Get the Most Out of Your Loyalty Card
A grocery store loyalty card is a great way to save money while you shop. By using the card in the store, you can save on many items just by scanning your card. Best of all, many of these cards offer rewards such as discounts on gas and exclusive coupons. Keep your eyes open for deals that these cards offer. These loyalty cards are completely free and are a great way to save several dollars on food and gas every time you shop!

Use Apps Created by your Grocery Store

A great way to save money and stay focused on your shopping trip is to download an app for the store you are shopping at. A few grocery stores in Manhattan offer this convenience. Usually the app will have a copy of your store rewards card so that you never forget it! These apps also have the weekly advertisement available so that you can check for savings while you shop. Many manufacturers will post their digital coupons on these apps to allow you to download them. Saving money has never been so easy! Another great feature is the ability to create a list right in the app. This will ensure that you buy only the things you need. These grocery store apps provide a “one stop shop” for all of your grocery store savings needs.

While these are just a few tips to save money while at the grocery store, there are still many more that can be used while shopping. Do you have any tips or trick that you use at the grocery store? Feel free to share them with us; we would love to hear from you! At Powercat Financial Counseling, we strive to provide tips to students at K-State to help them save money in their everyday lives. Have a question about saving, budgeting, or anything else related to your personal finances? Powercat Financial is here to help. Set up an appointment with us today and we can help you create a spending plan that works for you!

Tyler Pemble
Peer Counselor II
Powercat Financial Counseling
www.k-state.edu/pfc

How To Save Money As A College Student

1.    Create a Budget

Before you start saving money, make sure you have enough to save. Start by creating a budget and see where your money is going. This will help you cut on unnecessary spending and allow you to contribute more to your savings.  Details on the process and a downloadable spending plan worksheet can found on our site at http://www.k-state.edu/pfc/budgeting/.

2.    Utilize Student Discounts

Take advantage of the perks of being a college student. When you go out to Carmike Seth Childs’ to watch a movie with your friends, show your student ID.  If you would like to save a lot more, be a little patient and wait for the new movie you really want to watch to be shown at the by UPC in the Union.

Use the CampusSpecial coupon book that’s being distributed to students, you’ll save plenty over the semester when you go out to eat.  Many restaurants offer perks for showing your student ID – just ask!

3.    Avoid ATM Fees

Brick and mortar banks are facing stiff competition from online banks. If your bank is only located in your home town and there isn’t a single ATM in Manhattan, then you may be paying annoying ATM fees when you have to withdraw money. Well, there’s a solution out there! Most online banks do not charge ATM fees and if you do get charged by the ATM you withdraw from your online bank will fully reimburse you! Some brick and mortar banks charge monthly maintenance fees and this isn’t the case for most online banks. They are growing in popularity and if you would like to save on ATM fees and account charges this might be something to consider. Remember to make sure that the online bank you choose is FDIC insured!

ATM fees can also be avoided by getting cash back with your debit card at the store.  Simply run it as debit and respond to the question with how much cash back you would like.

4.    Grow Your Savings Further

If you have money left over after taking care of all your expenses, then you can consider building your wealth.  Choosing the type of account depends on the individual and the financial goals in mind. Below are a few accounts to consider. 

Basic Savings Account

Offers low interest rates and allows a limited number of free withdrawals a month depending on the bank. It is very easy to access, especially if you use your current bank. The interest that you could earn ranges from 0.01-0.9%. In other words, this is an account to put money aside for rainy days and emergencies, not your entire life savings! 

Certificate of Deposit (CD)

You can earn a little more money by putting your money away for a set amount of time ranging from a month to 5 years. The certificate entitles you to receive a fixed amount in interest payments. Interest on CDs range from 0.15-2.35% depending on the length of time and amount of deposit.  They can easily be set up at any commercial bank.  Be aware that there are fees for withdrawing the money prior to the agreed upon time.

Money Market Account

MMAs offer a higher interest rate (0.05-1.02%) than a savings account and you can write checks against your deposit. However, you have to maintain a higher minimum balance compared to a savings account, hence the higher interest rate. Again, if you decide to open up this account, make sure the account is FDIC insured. 

Mutual Funds

If you would like to earn greater returns on the money you have left over after putting some aside in a safe savings account or MMA, then this is another vehicle to consider. Most of us don’t have millions of dollars to invest like Warren Buffett or Carl Icahn, but this fund allows the ordinary individual to be able to afford and hold a piece of the same fund that a billionaire is invested in. It is a pool of funds invested in stocks, bonds and other money market instruments. Their purpose is to beat the market and manage volatility by pooling money and diversifying investments. They are more risky compared to savings accounts, CDs and MMAs and they are more expensive since they are actively managed, but they have the potential for a higher yield.

Online Brokerage Account

If you would like to build your wealth, then you should have a long-term strategy – a brokerage account is one way to get there. You can create your own portfolio and allocate your funds into stocks, bonds and other funds however you please. The allocation depends upon your risk tolerance. When you are young, you can afford to lose more money, so it’s okay to have an aggressive portfolio (invested in more equities than bonds) as long as you understand the risks. When you reach your thirties, it’s recommended to reallocate your portfolio and lower the amount you have invested in equities and when you are close to retirement, you should have more in bonds than equities since bonds are safer and offer fixed, stable payments to the bondholder. Setting up an account is simple, but make sure to shop around first. Some accounts don’t require minimum deposits and others offer cheap trading costs. Learn about investing strategies before you put your money in the market!  Visit finance pages such as Google Finance, Yahoo Finance, Morning Star, Bank Rate, and Investopedia.

Gerald Mashange
Peer Counselor II
Powercat Financial Counseling
www.k-state.edu/pfc

Preparing Your Budget for Spring Break

In case you missed PFC’s “It’s Spring Break NOT Spring Broke” event yesterday, here are some tips to help you stick to your budget during spring break. Start planning what you will do, how you will get there, what it will cost, and any additional spending money you will need for it.

Compare flight prices in an incognito browser (aka private browser). An incognito browser won’t release your IP address to the site, which can prevent sites from raising prices on a second visit in order to pressure customers into buying too quickly or without further research. In Chrome, click the menu button on the top right. In Firefox, click on the drop down menu in the top left. On Safari, click on Safari in the top task bar. And in Internet Explorer, click on the safety tab on the menu. Some sites to look at for comparing travel prices are:

  • http://www.kayak.com/
  • http://www.expedia.com/
  • http://www.priceline.com/
  • http://www.amtrak.com/
  • http://www.greyhound.com/
  • http://us.megabus.com/ (though there’s no stations in Kansas, it can help with a connecting trip)

Oftentimes, taking a bus, train, or driving will be largely cheaper than taking a flight, but will take longer. Consider cutting costs by sacrificing a little time. Also keep in mind that prices tend to go up as the date of the trip gets closer. Getting a jump on buying tickets can save you a lot of money.

Compare hotel prices. Most of the travel sites listed above also offer hotel comparisons and discounts. Make sure to research the cost it would be to buy them separately before assuming that the bundle is cheaper. http://www.hotels.com/ is a good site to compare prices. They have deals every now and then for certain hotels and offer a punch card system for booking through their site where you get a free stay after ten nights booked. Since a hotel can sometimes just be a place to sleep at night, consider booking a lower-cost hotel instead of one that has a lot of amenities.

Make SMART goals to save up for the trip. They should be Specific, Measurable, Attainable, Realistic, and Timely. Determine how much you will need for the trip and set a specific amount of money to put away for a specific period of time (each month, each paycheck, etc…), that can fit in your budget and get you the amount needed in time. This will require a good budget to know how much you can afford to set aside each month. Consider stashing away any holiday or birthday money towards it as well.

Christyne Stephenson
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc