Noah Esper

Staff Writer

nle5099@psu.edu

Hello, my name is Noah. This is the second installment of my series of advice columns dedicated to helping you better manage your money. This week I would like to go into some more specific techniques for better managing your finances, this week’s topic is budgeting.

I know, I know, please contain your excitement reader. I know you are just as thrilled as I am to learn about this exciting topic, but all kidding aside, budgeting is one of the most important basic techniques needed for good financial management. Proper budgeting can mean the difference between you having money or eating nothing but ramen.

So where do we start? Well, obviously the first step is making a budget, but how do you go about doing that?

Now there’s plenty of budgeting software available ranging in different prices and while I am not going to make any recommendations, if you do want to get serious about budgeting you may want to consider downloading some dedicated budgeting software. However, you don’t even need budgeting software as you can also manage a budget using programs like Excel or even just  old-fashioned pen and paper. The important part is that you have a dedicated place where you can keep track of your expenses and your current account balance. So, after you’ve chosen your budget, the next part is to calculate your income and expenses.

Now for those of you currently unemployed you may not have a traditional source of income, but if you’re still receiving any money from relatives, scholarship stipends, etc. you’ll want to include that in your income. Now I am assuming everyone who’s reading this at least has a checking account that they use for most transactions.

Oftentimes when you’re just using a card, especially if it’s a credit card, transactions start to blur together and you can find yourself not paying attention to how much you are actually spending. And that is exactly what your account providers want, because that’s how they get their money, so if you want to beat them you will have to play smart. It may be annoying, but I would recommend keeping records of every transaction in your budget. Now this isn’t actually that hard to do if you are using a bank which has a mobile app or online account because you can easily check your withdrawals on the app without going through the hassle of keeping physical receipts. Which you may still want to do in the case of cash transactions.

Now that you know how to track your expenses it is best to start by writing down any reoccurring or planned expenses you know you have, and the date when you’ll need to pay them off. In the future these can be things like your utilities bill, car payments, mortgage payments, etc. But even now, if any of you have a subscription to a streaming service that would be an example of a recurring expense. It’s important to keep track of these expenses and when they need payment, so you are not caught off guard. The best thing to do to manage these expenses is to calculate the total amount and then set that amount aside into a separate account that you have easy access to so that way you do not end up accidentally spending the money needed for these payments, and getting hit with bills while you are unable to pay.

This leads into another good technique for budgeting which is to set personal limits as to how much you are willing to spend on certain necessities and luxuries. For example, let’s say you are budgeting for one week and you have a current balance of $1,000. For starters, if you know that you have some planned expenses totaling around $200 you should set that amount aside leaving you with.$800 to work with. Now you have to eat, so we should set aside an amount for purchasing food, now this can of course range depending on the individual but let’s just assume $100.

That means you have budgeted $100 for food that week and should try to stay within that number so as not to go over budget. After that you’re left with $700 to do whatever you want with…now hold on before you start thinking of ways to burn through that money within a day. Let’s remember that one of the keys to having a financially stable future is putting money aside for that future.

Before spending that $700 on video games, new clothes, or junk food you should put at least a quarter of it into a savings account for later investment, or simply in case of emergencies as it is always a good idea to have a rainy-day fund. But after that the money is yours and you are free to do whatever you want with what remains, just remember that the government also wants their cut and you better be able to pay when Tax Day comes.