Dollars and Sense

Starting Your Budget
Budgeting is more than simply adding your expenses for the month and subtracting from
your income. It’s about learning how to prepare and plan for the future.
Start your budget today!
Step 1: Start your budget by reviewing your past spending. If you have a checking account,
use your checking account register to analyze your income and expenses for the past six months.
If you do not have a checking account, begin tracking your expenses and income.
Step 2: Collect all sources of income. Include all sources of income: job wages, financial aid
funds, work-study funds, parental contributions. This is your monthly income.
Step 3: Collect expense information. Gather all expenses: receipts, bills, and credit card
statements. You may want to separate them into variable and fixed expenses. Fixed expenses
are expenses that do not change from month to month (ex. rent, car payment); variable expenses
are expenses that can differ from month to month (ex. fuel, groceries). Next, list the types of
expenses under each category but avoid grouping similar items together. For example, separate
your groceries from the cost of dining out. List your power and phone bills separately, don’t use
a broad heading such as utilities.
Step 4: Subtract your monthly expenses from your monthly income. What did you notice
about the result? Do you have a budget deficit (not enough money) or a budget surplus (extra
money)?
Once you have taken a look at your past spending habits, you can begin to plan for the future.
If you’ve been coming out ahead each month, excellent! How is your savings account?
Experts recommend 10% of your monthly gross income be deposited in your savings
account. This is one important piece of the budgeting process that tends to be ignored.
Not having a savings account is the fastest way to ruin even the best budget! If you are
unprepared for the unexpected, you may quickly find yourself facing financial trouble.
Having money in a savings account may assist in preparing you for situations such as car
trouble or unexpected medical emergencies.
If you are having trouble covering your expenses or are covering your expenses but have
nothing in savings, it’s time to examine where your money is going. How can you cut back
or adjust your spending? Sometimes, it is a matter of identifying and monitoring small daily
habits to find ways to save money.
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