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How to Budget

I am currently a college student studying criminal justice and the laws that are applied to different situations.

This is a budget example written by me.

This is a budget example written by me.

How to Budget

  1. Make a list of ALL of your expenses (week or month depending on pay cycle)
  2. Organize them into categories (i.e. savings, entertainment, food)
  3. Add up the average money spent over a period of time for all expenses
  4. Add up the average money earned over the same period of time (for consistency)
  5. Subtract the average money spent from the average money earned
  6. If the amount is negative, it's time to make some budget cuts (deficits are not the goal). If the amount is positive, try to find some leeway to start saving money (savings can be life-saving)

Breaking Down the Budgeting Process

  1. Make a list of all of your expenses: Start out with your regular bills (i.e. phone bill, cable, insurance) and move on to other expenditures, using the amount you spend on average
  2. Organize them into categories: Grouping your expenses makes them easier to keep track of. Any food purchases including eating out and grocery shopping can be put under food. Any regularly paid expenses can go under bills. Anything involving leisure can be put under entertainment.
  3. Add up the average money spent over a period of time for all expenses: Adding all of your expenses together from all categories will give you the amount of money that you put towards expenses for the desired period of time.
  4. 4. Add up the average money earned over the same period of time (for consistency): To determine the amount of money earned, add up past income earned over the same amount of time money is spent. This is how much money you have to go towards expenses.
  5. Subtract the average money spent from the average money earned
  6. If the amount is negative, it's time to make some budget cuts (deficits are not the goal). If the amount is positive, try to find some leeway to start saving money (savings can be life-saving): The goal of budgeting is to make sure that you are spending within your means. If you are spending more money than you are making, then you need to cut some things out of your budget. Constant overspending will lead to having no money at all, which is the opposite of what you want. If you are spending less than you make, then you are in a good place. With budgeting, you want to make sure you have room for reward like splurging on a really nice pair of shoes or increasing your savings, which increases financial stability.

An Example of Budget Organization

Separating your budget into categories makes it easier to track your spending. Adding the totals from each category will give you your amount spent for the period of time that you decide to budget over (i.e. monthly, weekly, bi-weekly).

FoodEntertainmentOther

Groceries: $40.00

Netflix: $10.00

Car note: $150.00

Eating out: $20.00

Movie theatre: $10.00

Phone bill: $50.00

Total: $60.00

Total: $20.00

Total: $200.00

You've Got This!

Hopefully this helps you on your financial journey. Best of luck!

Hopefully this helps you on your financial journey. Best of luck!

Budgeting Quiz

For each question, choose the best answer. The answer key is below.

  1. What step needs to be taken to fix a money deficit?
    • spend more money
    • ignore it
    • make some budget cuts
  2. What is the best type of budget?
    • user-friendly
    • complex
  3. Why is budgeting important?
    • makes it easier to spend money
    • brings to light where money is coming from and where it goes
    • it is not important and is useless in helping with finances

Answer Key

  1. make some budget cuts
  2. user-friendly
  3. brings to light where money is coming from and where it goes

Interpreting Your Score

If you got 0 correct answers: Don't sweat it! Budgeting can be a hard practice to grasp at first, but it gets easier with exposure.

If you got 1 correct answer: Keep cool! As you budget more and more, it will be easier to understand the concepts and tricks that will help you in the long run.

If you got 2 correct answers: It's all good! Some concepts can be tricky when budgeting, but it gets easier with practice.

If you got 3 correct answers: Great job! Understanding these basic concepts and tips will make your financial journey a lot easier as time goes by.

This Video May Help Make Budgeting a Bit Easier

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2018 Sa'Mya Clark

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