Page 319 - Keys to College Success

KEY 11.2 Put your wallet away today to save money for tomorrow.

DAY-TO-DAY EXPENSE APPROXIMATE COST POTENTIAL SAVINGS

Gourmet coffee $4 per day, 5 days a week, totals $80 per month; $960 for the year. Invested in a 5% interest account for
$20 per week a year, would amount to over $1,000.

Alcohol Two drinks plus tip total about $20 per $160 per month; $1,920 for the year. Invested in a 5% interest account
night, two nights per week amounts to for a year, would amount to over $2000.
$40 per week

Ordering in meals $15 per meal, twice per week, totals $120 per month; $1,440 for the year. Invested in a 5% interest account
$30 per week for a year, would amount to nearly $1,550.

term financial advantage. In 2009, households headed by people with a college degree
earned 101% more than less-educated households. Opportunity cost refers to what
4
you give up to get something. For most students, the opportunity cost of going to
college is worth it.
With more of an idea of what values and perspectives lie behind the financial deci-
sions you make, you will be more able to choose and take productive risks that move
you toward meaningful financial goals. Start with creating a budget.

Personal Budgeting

Everything you will read about money management in this chapter falls under the
“umbrella” of one central concept: Live below your means, or in other words, spend
less than you earn—whenever possible. When money in is more than money out, you
BUDGET
will have extra to save or spend. To find out the difference between what you spend
A plan to coordinate and what you earn, track spending and earning and create a budget that balances both.
resources and
expenditures; a set of Because many expenses are billed monthly, most people use a month as a unit of time.
Creating a budget involves several steps:
11 goals regarding money. 1. Gather information about what you earn (money flowing in).
CHAPTER 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 the cost of your education, including
tuition and perhaps room and board. However, your family may be covering part of
this cost, and your responsibility may not kick in until after you graduate and begin to
repay any student loans you may have taken out. (Financial aid will be explored later
in the chapter.) For now, as you consider your budget, include only what you are paying
for now, while you are 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 on the job, if you have one. Then, if you have savings set aside
for your education or receive spending money from your parents, 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).

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