blog Personal Finance | 7min Read
Published on March 31, 2022
The Ultimate Guide to Budgeting and Savings for Students
Let’s start with a simple activity. Define the picture you see when you hear the word ‘budgeting’.
Do you see a person sitting on a table with tons of bills like grocery, household, electricity, wifi & mobile plans, etc., taking a note of the money spent and making a list of it on the paper? Probably then, categorizing it further according to the different expenses categories and calculating the funds available in hand? Is this what you imagined?
Well, it’s not you, it’s everyone!
This same picture flashes in front of everyone on hearing ‘budget’, and that’s the very reason why people refrain from making one for themselves. But, is budgeting that boring? Does it give a hard time to everyone? Let’s dig in and find out.
Do I ‘Really’ Need to Budget
Budgeting does sound like the cornerstone of your personal financial literacy, but the real question is “Do I need to budget?” Before jumping on to what is budgeting and how to create one for yourself, you have to understand your personal finances and see if a budget helps you in the process.
You need to create a budget right away in the following scenarios:
- You are overspending every month on things like food, online shopping, electronic accessories, OTT platform subscriptions, etc., and need extra money other than your monthly allowances.
- You have set financial goals to achieve, but are having a hard time keeping up with them. You are finding it difficult to achieve them and skip them midway.
- You want to save more money every month and keep aside a certain portion for yourself, but are clueless on how to assign money for the expenses.
- You are looking to have true financial freedom and gain complete control over your personal finances to be prepared for the future.
If you find yourself in any of these scenarios, then it’s high time that you understand budgeting is an excellent tool for your financial future and would make your financial journey much easier.
How to Create a Budget and Why is it so Important?
A classic financial budget helps you to spot where your money is going, and where you are spending more than you would have realized. So, it’s advisable to brainstorm for some time, understand your finances well before you pen it down. There’s a four-step approach you need to follow :
Step-1: Gather your allowances/income, and expenses in one place
When you’re starting to create a plan, you first need to get a hold of all your money. This might be the first time you have set out to plan your money. For starters, you can record all the financial activities, expenses for a month or two. Eventually, you can make a note of the major expenditures that are expected in the upcoming months.
Step-2: Create a budget worksheet/plan
Before Step 1, you had negligible visibility on the inflow and outflow of your money. By now, you know a bit about it.
Now, it’s time to get even more precise.
Noting down your expenses and mentioning your plan on a budget worksheet is a good practice. You can simply check every month where you’re spending and how much are you left with at the end of the month. You can also make use of budgeting apps to view everything right on your smartphone.
You can make use of some of the following budget templates when you sit down to create one:
Microsoft My College Budget Worksheet: A budgeting template that is flexible even for high school students to track their expenses and manage personal finances.
Microsoft Savings Estimator: A savings template that helps you set financial goals and visualizes savings plan details for effortless goal tracking.
Microsoft College Expense Estimator: An easy-to-use expense estimator template that calculates the cost of living and other activities while in school.
P.S. Although these templates are more oriented towards college students, you can get hands-on experience on them while in school, and utilize them in the best possible way while in college.
Step-3: Calculate each set of figures
Next, let’s get a holistic idea of your income, expenditure, and savings to be able to decide the future plan. Add your total income/monthly allowance, subtract your monthly expenses from it, and you get a picture of your financial health. Pat your back, if this amount is a good number, as you can use that money for savings or invest it in the right place. And if your expense tab is larger than your income, then don’t press the panic button just yet, but do make some changes in your spending plan.
Step-4: Analyze your expenses
Drill down on your expenses and categorize them into fixed expenses like school supplies, transport, phone/internet bills and variable expenses like fast food, trips with friends, clothing, etc. Look at the opportunities where you can end up saving money for yourself.
How do I Stick to a Budget?
The plan’s ready, now let’s have a look at the implementation part and how to stick to your budget till the end. Keeping a budget is not easy. You can have a bad month, feel discouraged and just give up on it. This is undoubtedly the hardest part of the process, and if you ask the adults in your house about it – you’ll end up getting the same answer. While you can get some useful advice from them too, we would like to add a few more points to that –
- Don’t set an unrealistic budget or a process that you can’t handle currently and is way out of your scope. Take all financial and external factors into consideration before you begin. Because once you go even a little out of the line, you would eventually feel like giving up the entire plan.
- Think twice before making any purchases, ask yourself if it is the need of the hour, and do I need to buy it right away? This would help you to steer clear of large amounts that negatively affect your budget.
- Apprehend the concept of ‘budgeting to zero’, i.e. while creating a budget, your income (allowance) minus expenses should be zero. So, when you budget to zero, all the buffer or extra money altogether contributes to your savings and allows you to take complete control over personal finances. You can make use of investment plans for students to put this extra money to the right use.
The BRG Exclusive Budgeting and Saving Tips
Tip #1: Avoid Unnecessary Purchases
Think twice before you buy things like electronic gadgets, OTT platform subscriptions, expensive food, etc. Ask yourself if the purchase is necessary and would it benefit you? Most times, such big purchases mess up your budget making it difficult to get back on track again. Make use of student discounts wherever and whenever possible to save up some money.
Tip #2: Don’t spend more than what you have in hand
Overspending is certainly not a good habit, and you would end up in debt soon if you continue doing so. If you can’t afford something or don’t have enough money, put it off for next time.
Tip #3: Try a No-Spend Challenge
You can take up this challenge and go on a spending freeze or spend fast for a week, fortnight, or even more. The idea is not to spend money on any unnecessary things and limit yourself to spending very little. To make it more fun you can challenge your friends, and family and see who saved the most in the end.
Tip #4: Connect your spending with your Income/Allowance
You get your monthly/weekly allowances from parents, and similarly, you can also make use of financial crafts to make some money of your own. An important aspect of budgeting is to reframe the way you look at money. So, before spending on anything, take a moment to reflect upon the efforts that you or your parents have undergone to earn that amount of money.
Tip #5: Treat yourself to achieving your goals
Remember, budgeting or personal finances isn’t just about discipline, but it’s an approach to set and reach your financial goals. So, carry along with the fun, reward yourself when you stick to your budget every month, and don’t look at it as a chore, but a fun activity.
With this, now you should have a good idea of how to create a budget for yourself, stick to it, and improve your financial literacy. Budgeting is all about making a plan to bring your financial life on track and putting in efforts to stay committed to it. So, no more worrying about where your money went at the end of the month because now you have your plan to gain financial freedom right in school.
That’s all folks! But if you have any more doubts related to budgeting, savings, or want to explore more about finance, The Big Red Group is right here to lend you a helping hand. Connect with us now.