It's easy to lose track of where your money goes. Small daily purchases add up quickly, and as you progress into the world and become responsible for larger expenses such as rent, car payments, college tuition, it's important to know exactly how much money you have and create a spending plan. That's where a budget comes in.
A budget can help you track where your money goes and control spending.
- A budget can also help you:
- Know if you're spending too much on certain things.
- Stay out of financial trouble.
- Avoid impulse spending.
- Set and reach financial goals.
- A budget is created in three simple steps:
- Track your income and expenses for one month.
- Subtract your expenses from the income. Think about the result – are there areas where you can cut costs?
- Maintain your budget on a monthly basis. Keep looking for ways to reduce spending or increase income.
Use an in-school budget calculator to figure your budget.
To create your monthly budget:
1. Identity your monthly income
- Do you have a job?
- Do your parents give you an allowance?
- Do you regularly get gifts of money?
2. Keep track of your spending
- Include fixed monthly bills like car payments and insurance.
- Estimate monthly spending on things like clothes and entertainment.
3. Subtract your expenses from your income to find your balance
- Use a budgeting calculator.
4. Look at the result
- If you have a positive result (your income is larger than your expenses):
- Keep up the good work.
- Try to save most of your extra income for the future or an emergency.
- Set goals so you don't spend all your savings at once.
- If you have a negative result (you're spending more than you're making):
- Try to reduce some of your expenses, especially items you don't need.
- Increase your income with more hours at work; filling in with odd jobs.
Learning to live on a budget is a life skill. No matter how much or how little money you make, you need to know how much you can spend and how much you should put away for the future.