Setting A Budget For The New Year

By Danielle Wirsansky on January 25, 2022

This article is brought to you by GradGuard. We protect college students and their families from the financial risks of college life, like providing a refund for tuition or replacing a stolen backpack when your school may not. When the unexpected happens, GradGuard’s tuition insurance and renters insurance can help you get back on track.

There are many memes floating on the internet about how schools often do not teach their students important life skills, like how to do their taxes, change a car tire, or create a budget. And that is true. Many college students are woefully uneducated about how to maintain their finances. Creating a budget is really important, especially when you are in control of your own finances for the first time at college. You definitely do not want to spend more money than you can afford to and dig yourself into debt. And now that the new year has arrived, it is the perfect time to figure out how to set a budget for yourself and what factors to consider. Read on to learn about setting a budget for the new year!

Figure Out Your Income

The first step to creating a budget is figuring out how much income you have, or rather, how much money is coming into your account every month. A monthly budget is usually the best increment to start with. If you have a job and support yourself, figure out how much you make on a monthly basis, and then you will know how much income you have. On the other hand, if you do not have a job (or at least not a full-time job) and are supported by your family or some outside source, figure out how much you are provided each month on average.

Knowing how much money is coming in tells you how much money can go out, meaning how much you can spend without overspending and overextending. Depending on your income source, the number might not be the same every month so you want to give yourself some wiggle room in case you are paid via tips, which are unpredictable, or if you work hourly but have to miss a day or two of work for being sick so that you never find yourself without any money if possible.

Isolate the Non-Negotiables

The next step is to figure out the expenses that you have to pay every month and that are non-negotiable. These are things like paying rent, electricity, water, internet, car insurance, and more. For some people, health insurance is a non-negotiable while for others the cell phone bill is. Decide for yourself what expenses you absolutely must have each month to get by and which cannot be negotiated. Once you have isolated the non-negotiables, you can calculate how much you have to spend and compare it to your income.

If when only paying the non-negotiables you find yourself over the income you make, you might need to make some changes like finding a place to live with more affordable rent or taking on a roommate. If there is nothing you can tweak or find a better price for, then you need to consider getting a job if you do not have one already, asking for a raise if you do, finding a higher paying job, or taking out a student loan to help keep you afloat.

What You Spend Versus What You Should Spend

The final step is to look at the more negotiable categories of your spending and see what you can tweak, especially if you are having a hard time spending less than your income. If you have room in your budget for savings or extra things (like eating out or subscriptions), you can see where your spending is going and adjust it as needed. For example, do you really need a Netflix, Hulu, HBOgo, and Disney+ subscription? Or is there one or two you can cut from the roster or share with a friend? As a college student, check and make sure that you are paying the student prices for these subscription services as well. Hulu for one offers student pricing that can really make a difference in a tight budget.

Check how often you eat out versus cook at home. How often do you get takeout or Starbucks? Are there any ways to eat at home more often or pack a meal from home to eat with you on campus or at work? Check out your shopping expenses too. Do you shop a lot or not at all? And when you shop, where do you get your stuff from? Do you find bargains from thrift stores or do you shop full-price at somewhat expensive shops? What grocery store do you shop at, a neighborhood market or one that is more high-end? Little things add up and while you want to treat yourself, you might not have the budget to. Trim the fat and make sure you do not spend more than you make!

Photo by Karolina Grabowska from Pexels

Only you know your circumstances and what will make an appropriate budget for you. The golden rule is to spend less than what you make so just keep that in mind when you make your budget this year!

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