Knowing your monthly expenses is the first step towards smart budgeting and spending. So, how do you get started?
College students often don’t think about developing a budget because most of them are still getting assistance from their parents. Still, even if you anticipate your parents setting you a budget, it’s good practice to create one and follow it on your own.
Not only does this prepare you for post-college life, but it gives you a better sense of the money that’s coming in and out of your bank account — even if that income is only coming from your parents.
So, how do you get started? You figure out your monthly expenses. Here’s how to do that.
Calculating your monthly expenses
There are a few steps in determining your monthly expenses. Let’s go through them.
Gather your financial documents
This includes bank accounts, pay stubs, college tuition statements, and more. These documents will outline everything that’s coming in and out of your account each month. You can see where your money is going and start getting a sense of where you can make changes.
Write down your monthly expenses
Anything recurring, including things like grocery shopping and movie tickets, is included in your budget. There are some great budget calculators on the web to get you started, so you know which expenses to include in your budget.
These include things such as:
- Your monthly income
- Mortgage or Rent
- Tuition Payments
- Car payments
- Insurance payments
- Grocery shopping
- Utility bills
- Student Loan payments
This list can go on and on depending on what bills you have. From there, you move onto the next step.
Reflect on your expenses
Where can you cut back? How can you save more? Take a look at your expenses and see what you can improve upon. Your expenses break down into three categories that you should keep in mind:
- Fixed Expenses – Expenses that remain the same month to month
- Flexible Expenses – Expenses that vary each month but that you have to pay (utilities and groceries)
- Discretionary Expenses – Expenses you spend on things you want and don’t need
It’s discretionary expenses for most people where you have a lot of wiggle room to make some changes. Take a look at yours and see what you can do to funnel more money into savings.
Getting your monthly expenses figured out is the first step in creating a budget. And as we all know, that sets you up for a great financial future!