Page 315 - Keys To Community College Success

How can you find out the difference between what you spend and what you earn?
Track your spending and earning, and create a budget that balances both. Torian was BUDGET
fortunate to develop an understanding of budgeting as a teenager, enabling him to A plan to coordinate resources
look at his finances in that context as a college student. Because many expenses are and expenditures; a set of
billed monthly, most people use a month as a unit of time. Creating a budget involves goals regarding money.
several steps:
1. Gather information about what you earn (money flowing in).
2. Figure out your expenditures (money flowing out).
3. Analyze the difference between earnings and expenditures.
4. Come up with creative ideas about how you can make changes.
5. Take practical action to adjust spending or earning so you come out even or ahead.
Your biggest expense right now is probably tuition. However, if you have taken
out student loans that you don’t begin to pay until after you earn your degree, that
expense may not hit you fully until after you finish school. (Financial aid options
will be explored later in the chapter.) For now, as you consider your budget, include
only the part of the cost of your education you are paying for while you are still
in school.

Figure Out What You Earn

To determine what is available to you on a monthly basis, start with the money you
earn in a month’s time at any regular job. Then, if you have savings set aside for your
education or any other source of income, determine how much of it you can spend each
month and add that amount. For example, if you have a grant for the entire year, divide
it by 12 (or by how many months you are in school over the course of a year) to see
how much you can use each month.

Figure Out What You Spend

First, note regular monthly expenses like rent, phone, and cable (look at past checks
and electronic debits to estimate what the month’s bills will be). Some expenses, like
automobile and health insurance, may be billed only once or twice a year. In these
cases, divide the yearly cost by 12 to see how much you spend every month. Then,
over a month’s time, keep a spending log in a small notebook to record each day’s Managing Money
cash or debit card expenditures. Be sure to count smaller purchases if they are fre-
quent (for example, one or two pricey coffees a day add up over time). By the end of
the month, you will have a good idea of where your dollars go.
Key 11.3 lists common sources of income as well as expenses for students. Use the
total of all your monthly expenses as a baseline for other months, realizing that spending
will vary depending on events in your life or factors such as seasons. For example, if you
pay for heating, that cost will be far greater in cold weather.
Personal finance software programs, such as Quicken, can help you track spending
and saving and categorize expenses. With software, you can create reports about how
much you spend on groceries in a one-month period or how much you earned from
work in a year’s time. Also, if you manage bank and credit accounts online, you can eas-
ily access information about what you are earning and spending over a period of time.

Evaluate the Difference

Once you know what you earn and what you spend, calculate the difference: Subtract
your monthly expenses from your monthly income. Ideally, you have money left over
to save or spend. However, if you are spending more than you take in, examine these
areas of your budget.

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