Spending Money Wisely
Figure out your budget
Making a budget can seem like a time-consuming thing to do, but it is one of the most important steps in order to ensure that you are financially organized. Creating a budget is going to allow you to track your spending, so you know exactly what you are spending your money on, and from there, you are going to be able to become more successful when it comes to achieving your financial goals. The 3 keys to creating a successful budget are tracking your spending, paying off major bills first, and then creating a spending plan.
There are many easy ways to start creating your budget, including
- An Excel Spreadsheet
- CashCourse Budget Wizard
- Mint: Personal Finance & Money (In the App Store)
- Template on the Office of Student Financial Success website
What creating a budget is going to do is help you see if you are overspending (spending>income) or if you are underspending (spending<income). If you figure out that you are overspending, then you need to decide to either reduce your spending or find an additional source of income to ensure that you are not going over budget.
Decide what is a need and what is a want
Deciding between a need and a want is an extremely important task when it comes to saving money, especially as a college student where the money is often limited. It can be very hard to decide between the two, especially when something like the new iPhone comes out or one of your friends asks you to go out to eat. However, figuring out what is a need or a want is the key to spending money wisely and sticking to your budget.
What are examples of Needs?
- Housing, Mortgage Payments, and Utilities
- Loan Payments
- University Fees
- Food (Groceries)
What are examples of Wants?
- Sources of Entertainment
- Brand New Clothes
- Dining Out/Drinking at the bars
- New Electronics
The needs and wants may differ between people depending on certain aspects of their life. While cutting out wants is important to maintaining a successful budget, it does not mean that you should cut out all the wants completely. One thing that is recommended when it comes to keeping track of needs and wants is to use the 50/30/20 rule. This means that 50% of your income should be devoted to paying for needs, 30% of your income can go to buying your wants, and the last 20% should be added to your savings.
Plug the leaks in your spending
Small spendings can add up and end up having a huge impact on the success of your budget and can often lead to you thinking, “where did all of my money go.” Stopping these leaks in your spending will ensure that you meet the goals that you set in your budget and that you are spending your money wisely.
Some of the ways to plug these spending leaks include
- Carry around a reusable water bottle to cut out needless spending on things to drink
- When going shopping, make a list and stick to it—no impulse buying.
- Carry cash instead of credit cards to ensure that you are only spending what you can afford
- Get rid of subscriptions that you don’t use anymore or are just unnecessary.
- Pack snacks from home to avoid higher prices at vending machines or gas stations
- Use subscriptions to streaming services such as Netflix or Hulu instead of paying for cable.
Limiting the amount of impulse buying and needless spending is going to help you stick to your budget and meet your goals. It will also allow you to have a better understanding of where your money is going and not leave you with that “where did all that money go” feeling. From plugging these leaks, you are going to end up spending less money and be able to save more.