![]() The three-tier approach (see: Manage Expenses) shows you how to identify your basic needs so that you can differentiate them from your wants. ![]() However, creating a budget and sticking to it allows you to save money so that you can allow yourself to buy the things you want in addition to the things you need. Wantsīudgeting can feel drab or stressful at times, but it is necessary if your goal is to avoid debt and save money. Knowing exactly where your money is being spent will help you know what items can be removed or added. Once you have identified all expenses that you cannot avoid, you can compare your income for a given period of time to your expenses that occur during that same time frame to determine how much money you have left over after these bills are paid. These expenses fall into tier two of your expense tracking since they are necessary items that must be purchased, but they can vary in their amounts if adjustments are required. Examples include gas, food, personal expenses (like hygiene products), etc. Step TwoĪfter determining your hard expenses, write down all of your recurring expenses that are not bills. These hard expenses are the first tier of your expense tracking. Your bills are considered "hard" expenses since these cannot be left unpaid and the amounts due typically do not waiver. ![]() Learn the details of each bill you have - what it is for, when it is due, how much is due, and its level of flexibility (Can you set your own due date?). The best way to do this is with a three-tier approach. Tracking expenses is key to avoiding debt and reaching savings goals. However, most cannot do the same when asked about expenses. If asked, most people can tell you where their income comes from, how much they are paid, and how frequently they receive the money. To know where your money goes, you should follow it closely. With a forecasted future income (increased or decreased), you can adjust your current budget in order to prepare. Tracking money that you are receiving can also help you forecast future income. ![]() You only receive this money once at the beginning of the semester, so you will need to budget for the rest of the semester based on the expenses you know you will or may incur. You should apply this method of budgeting if you receive a refund for the semester from your financial aid award. People tend to base their budgets on the frequency of their paychecks, but this doesn't mean you have to if it makes more sense to base it on your expenses for a given time frame. Budgets can be created to track different time periods (daily, monthly, or weekly) or with each paycheck (weekly, bi-weekly, monthly). To build a budget and track income and expenses, you must first know how much money you are receiving, even if it is received inconsistently. By prioritizing your expenses and assigning specific dollar amounts to each item, it becomes easier to identify expenses that you can eliminate so that money spent is not more than money earned. Creating a budget and sticking to it allows you to assign certain amounts of money to your expenses, making it easier to track where your money is going. Generally speaking, people budget their money for two reasons: to reach a savings goal and/or to avoid debt. Program for Students from the City of Richmondĭo you ever find yourself wondering where your paycheck went? If you find that your current budget leaves you with more expenses than money earned, then something needs to change.
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