Budgeting

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A number of college students and new graduates react to their new sense of independence by increasing their spending on frivolous items. Creating and following a realistic budget not only helps prevent you from making purchases you can’t afford - it also helps you avoid missing payments and defaulting on your loans, moves that can hurt your credit and therefore your ability to borrow, purchase a home, or even get a job. To create your personal budget, follow the three simple steps below and use our calculator for assistance. Once you have established a budget, remember to keep records of your spending and adjust it accordingly.

Step 1: Calculate your monthly income.

Include any salary you earn from a job, allowance, or other income after taxes.

Step 2: Estimate your monthly expenses.

• Living expenses (rent/mortgage, utilities, internet/cable, groceries, entertainment)
• Transportation (car maintenance, gas, bus/train fare, parking costs) 
• Debts (auto loans, student loans, credit cards) Calculate your monthly loan payments
• Insurance (auto, health, dental, vision, etc.) 
• Health care (prescriptions, OTC medicines, doctors visits)
• Other (gifts, personal expenses, child care, clothes) 
• Savings & investments (savings accounts, retirement plans, stocks & bonds)

Step 3: Figure out the difference and make adjustments.

If your monthly income exceeds your expenses, consider increasing your savings for the future. If your expenses exceed your income, determine where you can cut back, where you are overspending, and whether you need to consider options for increasing your income such as obtaining part-time work. In most cases, it is much easier to adjust your spending than it is to increase your income.