Basic steps to making a budget
Gather all the information you have regarding sources of income and expense. Statements, bills, student loan assessments and even the money you got from your grandma for your birthday. You need to know what is going out of your pocket and what is coming in. The key for this process is to create a monthly average so the more information you can dig up the better.
Whether you are self-employed or not, receive loans, bursaries, grants, scholarships or have any outside sources of income be sure to record these as well. If your income is in the form of a regular paycheck where taxes are automatically deducted then using the net income, or take home pay amount is fine. Record this total income as a monthly amount.
Write down a list of all the expected expenses you plan on incurring over the course of a month. School fees are not only what you pay for your tuition, but all of the fees you incur so that you can attend school. This includes a rent, transportation, insurance, groceries, junk food, utilities, entertainment, clothes, books, supplies, internet, photocopying, laundry: essentially everything you spend money on.
- Fixed expenses tend to stay the same (or close to the same) from month to month. They include bills such as your rent or mortgage, cable, Internet, utilities, fixed loan repayments and so on. These expenses for the most part are essential yet not likely to change in the budget.
- Variable expenses change from month to month. They include things like gas, groceries, your daily coffee, eating out and entertainment to name a few. Variable expenses also include Occasional expenses – These expenses come up from time to time, such as clothing, gifts and vacations. This category will be important when you need to make adjustments to you spending habits.
If your end result shows more income than expenses you are off to a good start. If you are showing a higher expense column than income it means some changes will have to be made.
If you have correctly identified and listed all of your expenses then what you should be aiming for is to have your income and expense columns to be equal. This means all of your income is accounted for and budgeted for each of your expense.
If you are in a situation where your expenses are higher than the money you are bringing in, you will have to look at your variable expenses to find areas where you can make cuts to your spending. Since these expenses are typically not essential, it should be easier to trim a few dollars to bring your expenses closer to matching your income.
It is important to review your budget on a regular basis to make sure you are staying on track. After the first month take a minute to sit down and compare the actual expenses versus what you had created in the budget. Use reasonable estimates to create your first budget. Then, track your spending over the next few months. Jot down every purchase in a notebook, keep receipts for everything or create a spreadsheet. After tracking your spending for a few months, go back to your budget and adjust it if you need to. This will show you where you did well and where you may need to improve.
If you are new to budgeting, your budget may not balance the first time you try. You might have to look for places where you can spend less and make adjustments along the way.
If you have some money left over in your budget after you have paid the bills, add to your savings. Build an emergency fund for unexpected bills that come up (like a lost bus pass or a computer that breaks in January). The more you save, the sooner you’ll reach your financial goals.
Don't forget to also include room in your budget for expenses that come up from time to time, such as clothing, gifts and vacations.
Contact us for advice
Do you still have questions? Feel free to contact the Financial Aid and Awards Office. We can help you build a budget that can work for you.