A realistic budget is probably the best money management tool you can have. It's essential for helping you control your personal cash flow. Your budget will also help you understand how your available money relates to your expenses, and it enables you to keep expenses in line with your priorities.
TIP: Keep your budget and cash flow in perspective, and be realistic. Even if your starting salary after you first graduate seems ample, you'll probably need a few years to establish yourself.
Budget Fundamentals
Expenses like rent, food, utilities, credit cards, and student loans place a lot of demands on your money. And the choices you make impact your budget. Think of your expenses as falling into one of these three categories:
- Fixed - costs that are the same every month and don't go away - for example, rent.
- Variable - expenses vary to the extent you use them; however, you can't eliminate them altogether. For example, you can keep the heat down to lower your gas bill, but you'll still receive a bill from the gas company. The same goes with your food expenses. You can clip coupons and buy items on sale, but you'll incur some kind of food expense each month.
- Discretionary - items that are completely in your control. Think of these as the "I wants" vs. the "I needs" - clothing, entertainment, shopping, restaurants, and gifts. This is where your self-discipline and priorities come into play. When factoring these expenses into your budget, think of where you want to be in 20 years, and what you'll need to do to get there.
TIP: The first step in controlling your money is understanding where it goes.
Keep track of every dollar for at least a few months so you really know where you're spending it.
Calculating Cash Flow
Keeping fixed, variable, and discretionary expenses in mind, use the following calculators to help you get a sense of what your cash flow may be. To start sorting through your anticipated expenses, click on the area that's appropriate for your current situation.
Getting Organized
Here are some other ideas to keep your cash flowing smoothly and your budget on track:
- Establish a monthly routine for bill paying and record keeping. Set a time and a place aside for this function as you do for studying.
- Set up a filing system. Even if it's just an accordion file or a batch of envelopes, you'll need to start keeping track of what you're paying to whom and when. Keep your student loan paperwork carefully filed as well.
- Re-evaluate your income and expenses on a regular basis so you can stay in control of your finances before any problems develop.
- Balance your checkbook, write down ATM and debit charges, and file your bank statements once you've reviewed them for accuracy.
TIP: Buy a calculator if you don't already have one.
It's handy to have a standalone calculator even if there's one on your computer.
