Have you ever gotten to the end of the month, only to realize that you had less money than you thought you had? Ever bought something on impulse, and then realized that it may not have been the smartest decision? Ever worried about money, without even knowing exactly how deep of a hole you were in?
If any of these situations apply to you, you may want to make a budget because budgeting is all about getting informed and taking control of your finances.
Start by watching this video to get the basics of budgeting, like income, and fixed and variable expenses.
To make a budget, you need to analyze your income and expenses.
First, record all of your income. Your income might come from things like:
- Free money: grants and scholarships or gifts
You can just write down your income, or use a spreadsheet.
Then, track your expenses.
When you track your expenses, make sure to write down every single little thing that you spend money on, whether it's a stick of gum or a birthday present for your friend. It can be hard to remember all of your expenses, especially because some expenses happen regularly every month (like rent or your phone bill), while other expenses are one-time (like fixing your car, or paying student fees).
You can use this expense tracker to write down all your expenses.
Add up all your income and all your expenses. If your income is larger than your expenses, that's great! You are saving money already. Ideally, your income should be larger than your expenses. But if you are spending more than your income, it’s time to look at where you can spend less and make some goals.
In order to make your goals, think about which of your expenses are fixed and which are variable? In other words, which categories could you spend less in if you tried? For example, you probably can't pay less for tuition or rent, but maybe you could spend less on groceries or entertainment.
Now it's finally time to make your budget! You can this spreadsheet to set your goals and keep track of how you are doing. Or try one of these budgeting apps that link directly to your bank account:
- LearnVest links directly to your bank account to tell you how much you've spent in a particular category. It also tracks your spending goals.
- Mint is similar to LearnVest, but also sends you texts warning when you are close to overspending in any particular category.
Once you make your budget, pay attention and adjust as needed. It won't be easy, and you will most likely be tempted to splurge "just this once," but if you can stick to it, your budget will guide you to better financial health.
Talking to your mentee about finances
It's not always easy to talk about money, but it's an important conversation to have!
Here are some ideas for questions or conversations starters you can use to talk to your mentee about money, budgeting, and payment plans.
What [college] expenses have you already started to run into? What other expenses do you see coming down the road? How are you covering these expenses?
Do you have a system system to keep track of your budget and expenses?
Where are you planning to live next year? Do you think it will have a big effect on your expenses?
How will you be getting to and from school? Have you factored this into your finance plan?
On a scale of 1-10, how worried do you feel about paying all these bills?
What kind of health care coverage do you have now? What health insurance plan will you have in college?
- I would love to work with you to do some budgeting. Is that something you would like to do together?