Establishing A Budget And Sticking To It

Since you've all eliminated the credit card blues, it's now time to take control of your finances. The first thing you need to do is establish a budget and stick to it. Many college students think they don't need to establish a budget because they only work part time and don't make a lot of money. But, if you get in the habit of budgeting your money now, it'll be easier for you to keep budgeting it when you finish school and start working full time. You'll also feel more in control of your finances and have a better attitude.

You might be thinking, "Oh, I can put it off until later." The longer you procrastinate, the harder it will be to get the situation under control. It's like waiting until the last minute to study for an exam. If you wait until the last minute, you'll become stressed, irritable, physically drained, and unable to cram enough to pass. Well, the same thing happens when you don't plan for your future. By living from payday to payday, you put a tremendous amount of unnecessary stress on yourself.

You might think you don't have the willpower to establish a budget. Remember, with the right mental attitude, you can establish a budget and stick to it or do anything your heart desires.

When I was an undergraduate, I never thought about establishing a budget. During my freshman and sophomore year, I worked one part time job and managed to save a little money. But, during my junior and senior year, I worked two part time jobs to save money for law school and I wasn't able to save as much as I had when I only worked one job. Although my hours had doubled, and I made more money, I had less left over at the end of the month and more bills. It was crazy and I had no one to blame but myself. The problem was that although I had more money, I spent it more frivolously and didn't budget it properly.

It wasn't until I sat down and took a good look at my fixed and controllable expenses that I realized there was a problem. In this article, I'm going to discuss a simple, step-by-step plan to help you budget your money and take control of your life.

1. The first step is to identify all sources of income. Income includes: allowance, loan refunds, salary (paycheck), bonuses, overtime pay, money earned from hobbies and sale of possessions, monetary gifts, tax refunds, and whatever other income that you may have. Once you've done this, you'll have a clear idea of how much money you have to work with every month.
    
2. The second step is to look at each source of income and write down the exact date when you receive it. By doing this, you can determine which days of the month you have the most money and which ones you have the least. It makes no sense to splurge on your payday and then skimp the rest of the pay period.
    
3. The third step is to pay you. The important thing to remember is that it's not how much money you make every month, but what you do with it once you get it. By setting aside a certain amount of money for yourself, you'll be protected against any unexpected events that might occur, not to mention it gives you a good feeling to know you're working for your own benefit.
    
4. The fourth step is to identify your fixed expenses, which are those expenses that you have no control over. Some common fixed expenses are: tuition, rent, utilities, phone (calling card), car insurance, and student loans.
    
5. The fifth step is to list the due dates of your bills and get a total of how much money you owe every month. By doing this, you can arrange to pay your bills when you get paid. For example, if you receive your paycheck every two weeks (on the 1st and 15th), then you should pay the bills that coincide with that paycheck. To do this, divide your total fixed expenses by two. For instance, if your monthly income is $500, and you're paid twice a month, you should divide your total fixed expenses by two. In this case, we'll say that $300 will be your fixed expenses. So, by taking $300 (fixed expenses) and dividing them by two pay periods: you'll pay $150 worth of bills out of each check.
    
6. The sixth step is to change the due dates on your bills if they conflict with your payment plan. For example, let's say that you've decided to pay your car insurance, student loan and phone bill on the 1st. If the student loan's and car insurance's due date are both on the 9th, you don't have to change their due dates. Because, you'll receive your first paycheck on the 1st and still be able to pay the bills and mail them before the due date. But, if your phone bill is due on the 28th, you should call the company and tell them that you get paid on the 1st and ask them if you can change your due date from the 28th to the 10th. I find most companies will be accommodating. By doing this, you'll be able to stick to your payment plan and the phone company will receive their payment in a prompt and timely manner.
    
7. The seventh step is to only pay your bills when you get paid. By sticking to your payment schedule, you'll have consistency in your life. You won't be stressed out in between pay periods because your bills will be paid on time, and you'll have the same amount of money to spend out of each paycheck.
    
8. The eighth step is to examine the amount of money you have after you've determined your income, paid yourself, and taken control of fixed expenses. The good news is that now you know how much money you have to spend. The bad news is, if you don't have that much left over, you will really have to budget the remaining money or find additional income.
    
9. The ninth step is to look at the remaining money and determine how much you can afford to donate to controllable expenses. Controllable expenses are those expenses that you control. The most common controllable expenses are: food, credit cards, house maintenance, transportation, entertainment charge cards, and childcare. A good way to examine how much you typically spend on controllable expenses is to look at last month's check register. By seeing how much you paid to each controllable expense last month, you can decide if you need to eliminate or cut back on any of them this month.
    
10. The tenth step is to stop spending more money than you have. You must stick to your budget. If you only have $25 after you pay yourself, and your fixed and controllable expenses, then that's all the money you have. Don't spend $50 on something special for yourself. It doesn't matter how much you want it. Even if it's the cutest purple, green, and yellow hat in the world, don't buy it. You must resist temptation. Instead, put that extra $25 in a safe place and then next month, when you have 25 more dollars, go on and buy it.
     
11. The eleventh step is to remember that you can take control of your finances by budgeting your money. You don't have to be a tightwad but you must be disciplined and willing to make the necessary sacrifices to gain financial security.

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