Budgeting

Now that you have your own independent account, let's talk about managing that money. Budgeting is a word that seems to draw out fear, but don't be afraid. When you budget your money, you are in control. Living without a budget is the opposite; your money is controlling you.

Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. -Ayn Rand

Four Rules of Budgeting

There is a great resource available called You Need a Budget (YNAB); unfortunately, it costs money, and frankly, you probably don't need to spend money for a budgeting app when you're in college. Luckily, YNAB published their four main rules for budgeting, which we love! Read the summary below (adapted by us for college budgets), and read their full description Links to an external site. on their website.

Rule #1: Give Every Dollar a Job

This is an incredible rule. Not only does it assign each dollar wisely, but it also reframes how we look at money. By giving each dollar a job, we are telling our money what to do instead of it controlling us.

Here's the basic principle. Your paycheck gets deposited into your account, and you have $300 more than you had yesterday. You've been aching for your favorite dish at that somewhat-expensive-for-your-budget restaurant (it will cost you about $30). Do you go? Let's assign each of those three hundred dollars a job first.

  • The first thing you do with every paycheck is to pay yourself a little bit (savings).
    • Dollars assigned: $25
  • Rent isn't due yet, but you save some from each paycheck to pay for it.
    • Dollars assigned: $150
  • Your cell phone bill is on autopay for next Wednesday. You won't have another paycheck before then.
    • Dollars assigned: $45
  • You need to buy groceries for the next two weeks.
    • Dollars assigned: $50

The total number of dollars you've assigned jobs is now $270. You have exactly $30 left to assign. Do you split a pizza with a friend for about $10, or do you splurge on your $30 treat? It's up to you!

Rule #2: Embrace Your True Expenses

You've figured out your monthly expenses (rent, insurance, etc) and assigned your money to cover them, but what about things that only happen occasionally, like trips home, birthday and holiday gifts, or car registration renewal? It's tough when you already have a job assigned to every dollar, but then October rolls around (your car registration month) and you suddenly have a $120 bill that isn't in the budget. What do you do?

The simplest thing is to plan ahead; work these expenses into your monthly budget. That "other" category on the PDF and google sheet below? Maybe that's your plan ahead category. You could also add a line item for anything you'd like to plan for. Putting $20 aside for six months pays for that car registration; putting another $10 aside every month gives you $120 for gas to travel home or buy gifts for a few important people. Doing this can remove the stress of occasional or unexpected expenses, and again, make sure that you stay in charge of your money.

Rule #3: Roll with the Punches

Things change. You got sick and needed to get some cold medicine; there's $10 you didn't anticipate spending. Avocados weren't on sale, so you bought fewer each week, but you still exceeded your grocery budget by $4.50 (if you're rolling your eyes here and saying just don't buy the avocadoes, replace it with something you eat daily!). When you assign a job to every single dollar, this could pose a problem, so how do you handle this?

Really, it's no big deal! You re-distribute. Let's say those two scenarios above did happen, and you're over by $14.50. Take a look at the non-fixed (read: don't pick your cell phone bill) budget items you haven't spent yet. Maybe you've only spent $20 of your $50 budget for going out. There you go! Adjust your spreadsheet so that the going out budget is now $34.50, and add the $10 to other or health and the $4.50 to groceries. Now, you only have $14.50 left to go out this month; STICK TO IT.

Rule #4: Age Your Money

This rule is a bit tougher for all of us, whether we're college students or non-student adults. Data shows that 78% of Americans live paycheck to paycheck Links to an external site., and that is scary. That means that four out of five Americans could not financially handle anything unexpected. Why are we bringing this up when your income is going to be so limited?

Because it is important to try to get ahead, even by just one month. Instead of budgeting August's income to pay August's bills, use that August money to pay for September. In other words, don't use your money until it is 30 days old. If you are starting this budgeting process the summer before going to college, you could be in excellent shape! Imagine setting aside all of the money you'll need for September during the summer. Then, when you start school, that money you'll make during your first month will pay for the following month.

Again, we know this is a big ask. If it simply isn't possible or if it's a huge undertaking, make a goal to use aged money and work toward it. Maybe you can't start right now, but you could save $50 per month your first year of college and use that $600 to start applying the aged money rule your next school year.

Starting Your Budget

Now that you've learned some basic rules from budgeting experts, let's get started creating your own budget. To start off, we created this handy yearly budget spreadsheet Links to an external site. for you. We like google sheets because you can access them from anywhere, making it super easy to keep your budget up to date; if you prefer using excel, no problem. Make a copy of the google sheet onto your own drive (save it as an excel sheet if you prefer). The spreadsheet follows the initial expenses lists on Humboldt State Financial Aid's Download fillable budget PDF

, so if you prefer to start with something simpler, download the PDF as well.

Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like. -Will Rogers
Will Rogers was a "trick roper, Vaudevillian, humorist, Ziegfeld Follies performer, actor, writer, broadcaster and aviator. But before he was famous, he was a Cherokee cowboy in Indian Territory." Click the image above to read more of Native Village's article about Will Rogers.

Here's what the example page of the google sheet looks like:

Example Monthly Budget with Instructions

Add lines to Income and Expenses as needed. Complete the projected column as honestly as possible; if you know you're probably going to spend $40 on a new pair of jeans this month, include that in your budget. As you spend your money, update the actual column. The bottom row shows you how much you are projected to have left ($0.00 because every dollar has a job!), then how much you actually have left (in this example, $10.99, which you can use to start the next month, treat yourself to something, or add to savings).

You can work with your TRiO advisor, school counselor, and/or another trusted adult to help create your first budget. Budgeting is not a perfect science and includes a lot of trial and error, so be honest, flexible, and diligent in delegating your money.

Quick Spreadsheet Tip

If the numbers aren't adding up automatically, make sure the range of the sum contains all the cells you need.

Including cells in sums in google sheets or excel

Resources

 

Click Next to see what you've learned from this Introduction to Adult Finances.