How to Make Your First Budget

As a university student, you may in charge of managing your own money for the first time. No matter where your money is coming from – student loans, family support, a job, etc. – you have a responsibility to keep track of what’s going on in your bank account instead of just tapping away and never thinking about it. If you’re looking to avoid the #nightmare of not having the money to pay bills, it might be time for you to put together your first budget. Today I’m going to give you five steps on how to put together a budget that works for you, not one that makes you work to pay off your maxed out credit card.

Record & Categorize Your Spending

Before you make a budget, you actually need to know what you’re spending. Before you tackle making a budget, you can either go back and look at your last three months of spending, or track your spending for the next few months. Once you have your sample spending, split all expenses into different categories – like food, rent, utilities, social activities, health, etc. – and get a sense of how much you spend on each. These categories will come in handy for the next few steps.

Look at your Income vs. Expenses

Next, you’re going to need to know how much money you actually have to spend. To get your income, add up any money coming in, including pay from a job, money from parents, or things like student loans or grants on a monthly basis. If you’re dealing with income coming from money you receive at one time in a huge sum, like student loans or lines of credit, divide the total over how many months you’ll need to live off that money to find how much will go towards your monthly income – the Awards Office has a great budget calculator for this. Then look over to your expenses and see how much money you’re actually spending each month – if you’re spending more money than you have per month, you’re going to need to make some changes when we get to the next step.

Create Your Budget

Now we’re going to actually make a budget! You’ll take the categories you’ve already made and decide how much you need to spend on certain aspects of your life, starting with your required expenses – things like rent, groceries, savings and bills. Once you’ve outlined the things you have to spend money on, put money in other categories based on what you can afford and what you actually spend on these things in a month. Some of my non-mandatory expense categories include beauty supplies, social activities and eating out with budgets based on what I can afford and what I usually spend on these things in a month.

Depending on your income, you may need to limit some expenses. If you can, leave some room for some spending for fun, whatever that means for you, because having a budget doesn’t mean you can’t spend money on things that make you happy. My other tip is other than the categories you obviously need on your budget, like bills and food, add an “Other” category. This gives you a place and a way to chronicle those weird purchases that never seem to fit in a category and also don’t occur on a monthly basis, like printer ink or stuff you only buy once or twice a year.

Pick a Way to Keep Track

Now that you have a budget, you need to keep track of it. I record every purchase I make in an Excel sheet divided into months and years where my categories are colour-coded and do math for me to tell me how much I’ve spent and how much money I have left. This both helps me know where every dollar is going, but also gives me a reference of how much money I have left/am about to spend for when I’m thinking about purchases – do I have enough money to buy this, or does buying this bankrupt any other things I may have wanted this month? While tracking everything in a spreadsheet may be too much commitment for you, there are other ways to keep your spending in line. There are apps like Mint, or other tools you can attach to your bank accounts that can keep track of your spending and let you know if you’re approaching your limit – almost like phone data texts.

Re-Evaluate

Once you’ve spent a few months working with your budget, come back and see if it’s still working for you. Maybe you’ve noticed that you overspend almost every single month on groceries, or something’s changed in your life that’s changed how much money you spend – don’t be afraid to move money around and put it where you need it, or change your budget to make it work for your life. Once you’re feeling steady in your budget, make time every six months or so to check in on it to make any tweaks you need or change any categories that may no longer be relevant or need to be added – your budget should grow with you.

I hope this helped you learn how to make your money work for you. Now, go buy yourself something to celebrate – but only if it fits in your budget!