How to Prepare Your First Budget
When a student first goes out on his own, it is often hard for him to create an initial budget. This is especially hard when the first budget must be made prior to moving out on his own. Some expenses are hard to predict, such as groceries and electricity. Others are much easier, such as rent or insurance. Through proper budgeting, however, anyone can manage their money in a way that helps them save for the future and pay for all of their expenses today.
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Instructions
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List out all known and expected expenses. If you have not moved out of your parents' house yet, do some basic research by asking your friends who live on their own what their average expenses are each month. Shop local apartment complexes to find the best rent for your budget. Ask the apartment association to give you an idea of how much your additional expenses, such as association fees, electricity, water and gas may run you.
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Compare your current and expected expenses to your income. Subtract income from expenses to see if you are able to afford moving out of your parents' home. If your expenses are more than your income, look at ways to reduce them. Consider finding a cheaper apartment to rent and moving in with a roommate. If you do not need cable TV and Internet, eliminate those expenses.
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Categorize each expense. Create categories such as housing, entertainment, automobile expenses, insurance and groceries. Put a projected number into each category that is an unknown. See if by arranging your expenses in this manner, you can find additional areas to reduce expenses. Remember to include a category for savings and debt reduction, if you have any current debt.
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Monitor your spending for a few months and compare your receipts or bank statement to the budget you created. Were your goals realistic? Are you spending too much in one area? Are you able to save at least a little bit each month? Are you accruing debt to finance your lifestyle? Consider each item and adjust your spending and budget accordingly.
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Tips & Warnings
Use an online budgeting tool, such as Mint.com, to help you quickly see where your funds are going each month. These tools work best if you use a checking account, as opposed to cash.
A budget is not helpful if you do not follow it. Review it monthly to ensure that you are spending within your means. Revamp it as needed if additional income or expenses begin in your financial life.
References
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