You may not have had much to do with finances while you were living at home and in high school, but now that college is almost here, they're becoming your responsibility. You've probably heard a lot of financial terms being thrown around, which may or may not be familiar to you. There's one important part of finances you need to start paying attention to, even before you head off to college: the budget.
What Is A Budget?
A budget is a plan for your money. Basically, you take the amount of money that your currently have and divide it into different categories. A few categories that are a good idea to start with would be savings, groceries, gas, and spending money. Once you've made your budget and have determined how much money you're going to spend in each category, stick to your budget. Make sure you do your best not to spend more than you've already decided to on your expenses.
Why Is a Budget Important?
A budget helps you keep track of your finances and keep them in check. Since every dollar you own has a place to be, you won't have to worry about losing track of how much you've spent and end up overspending. If you have a job, especially, it's very important to know how much of your paycheck you will be spending and where.
What If I Don't Have a Job?
Many students assume that if they don't have a job, they can't make a budget. Luckily, this isn't the case! In fact, it's more important to have a budget if you don't have a job, since you don't have a consistent source of income. You can still create a budget with whatever amount of money you have, whether it's money you have from working a former job, or money that you get from your parents.
How Can I Make a Budget?
A good rule of thumb to follow in order to make a budget is what everyone at NextGenVest calls 50/30/20. It means that 50% of your income or your money needs to be spent on primary expenses, like bills, gas or groceries. 30% of your money should be spent on your own personal expenses, like clothes or going out for lunch. The remaining 20% of your money should be put into a savings account.
Want some more details on how to make a budget? Talk to your Money Mentor!