Setting a budget

I realized that my recent post about getting out of credit card debt isn't that useful to someone who doesn't have a budget. I'll admit that when I was a student I didn't stick to a budget for most of my time in college... and that got me into trouble a couple of times with late charges, overdraft fees, and bounced checks.

In the hopes that you out there don't find yourselves in the same types of messes I did, here are some tips to setting a budget as a first generation or low income college student:

Do your research. Before you can set a budget, you have to understand your spending habits. To figure this out, save receipts for everything you buy for a week and estimate how much you spend in a month. Collect as many bank receipts and credit card statements as you can and look them over to see how much you are spending each month.

Where's it coming from? Think about all the money you have coming in like grants, jobs, gifts, financial aid, and scholarships. Also, consider how reliable your sources of income are and how often they come in. When you're making a monthly budget, but you only get financial aid once a semester, divide the total amount by the number of months in the semester.

Categorize things. Be realistic as you consider all of the types of things you spend your money on and group them into categories, like rent, utilities, car expenses, clothes, savings, groceries, donations, books, and so forth. Make sure you are specific and include a rainy day or "other" budget for the unexpected.

Document the plan. With your categories, decide how much you can spend on that item each month, using your research above as a guide and making adjustments when you are spending too much. It can be very handy to note this in a spreadsheet like the one below. As you spend money, update your spreadsheet.

Destroy the evidence. Keep good notes about your expenses, but shred any documents and receipts with your information on it. You don't want to be a victim of identity theft, now do you?

Be flexible. Leave yourself some wiggle room to adjust your budget month to month, especially if things change like you start working less hours or earn a new scholarship. Make sure you plan for special events, gifts, and holidays, as they come up.

Here are a few online resources to help with your budget setting:

• www.practicalmoneyskills.com
• www.bankrate.com (to calculate credit card payments)
• www.youngmoney.com/money_management/budgeting
• www.dacomp.com/budget1.html

Managing your money with a budget is your first step to financial peace of mind. Good luck.

Got questions? Please feel free to ask The Advisor about it.