Student Investment Expert’s Tip of the Month – March

I understand your frustration when it comes to making a budget. Making a new budget for myself the other day seemed like a huge pain. A budget is such a constraining term; instead, think of a budget as a financial guide to wealth and prosperity. Budgeting will significantly help you track your money. It is amazing how quickly small purchases can add up to large expenses. Constantly buying lunch out can add up to a few hundred dollars every month. Once you make a budget, you can find out where to cut expenses so that you can save for your future while still living a comfortable life.

Small expenses here and there add up pretty quickly. While $3 on coffee in the morning may not seem like a lot, adding that to a take out lunch and a couple of trips to the driving range really can hurt your pocket if you don’t check and control your spending. Below is a chart and the yearly cost for the expense to show just how much you could be saving if you cut back a little.

Daily Cup of Coffee @ $2 -$4: $520 – $1040/year
Daily Take out Lunch @ $5 – $10: $1300 – $2600/year
Weekly pack of Cigarettes @ $5/pack: $260/year
3 trips to the driving range/week @ $5 – $12: $780 – $1872

Total: $2860 – $5772

The idea of budgeting is to be aware of where your money is going, and therefore have a better idea of how to save your money. While everyone may have some similar areas in their budget, everyone’s budget will ultimately be different. Everyone has a mortgage or rent, grocery and utility bills to pay, but if you have to have your daily Starbucks, smoke, or like golfing, then you have to adjust your budget to your routine. The key to any successful budget is to make categories specific to you.

After you have come up with your categories, you need to know how much you are making each year. Find out how much your average monthly pay or stipend is.

To get a more detailed idea of where you are spending your money, you should also try to collect as many receipts as you can over the last few months. While your categories should be specific to yourself, they should also remain fairly general. Separate your lunches from your grocery bill in the Food category but don’t start breaking down your grocery category into specific sub-categories such as produce, cereal, and candy.

If you find out at the end of the day that you are simply spending more money than you are making, then you need to start cutting back. Start with categories such as your daily cup of coffee or your daily lunches. Maybe start taking lunches from home. Take one or two fewer trips to the mall every month or quit smoking. Everything adds up.

Most importantly, don’t view budgets as punishment meant to cut out all of the fun. Instead, when deciding on where to make cuts, ask yourself, what is most important? If you really enjoy getting coffee every morning but don’t mind bringing a lunch from home, then cut down on the number of outside lunches you eat. Budgets are not meant to be punishing because then you will never follow them. View budgets as a way to plug the leak on things that you are spending money on but are not important to you. You may not think small cutbacks are important, but everything adds up!

~ Monte Malhotra, Student Investment Expert, Campus Calm

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