Managing your own money for the first time can be exciting and liberating. Suddenly, it is your decision about where and how much to spend. At the same time, it can be a little daunting. Here are some tips to sharpen your money management skills.
Build a Budget
The adage “what gets measured, gets managed” is not just for Fortune 500 companies. It may be time to sit down and make a budget. Set aside some quiet time, mute your phone, and open a new Excel spreadsheet.
First, on the left-hand column, list your monthly expenses, one item per row. Include “necessity” items, such as text books, class supplies, food outside your meal plan, laundry, transportation, personal hygiene supplies, and haircuts. Also include more “discretionary” items, such as food and drinks outside your meal plan, entertainment, or weekend trips.
Next, estimate how much monthly income you have, perhaps from a part-time job or allowance.
Finally, add your “Opening cash” (the cash balance you have now), add monthly income, subtract monthly expenses, and you get your “closing balance” (the cash balance at the end of the month.
If you don’t like what you see, go back through the list to challenge yourself to save – not necessarily by cutting items out (although that works too), but also by buying smarter.
The secret to successful budgeting is not to get too caught up on “exactness” of the budget. Guessing at an expense is better than leaving it out. Also, keep it simple and go back to it every couple of months or so.
The discipline of measuring your monthly income and expenses builds a foundation for a lifetime of good financial habits.