So now you’ve figured out how much you want to allocate each month to debt repayment and saving for an emergency fund and financial goals. You should have also figured out your income and what you have been spending for the past few months. Once you have these things down, you are ready to make your budget. You will need to decide how much to want to budget for each expense category. This may be more or less than you were spending before. Just remember that total expenses have to be lower than total income!
A lot of students will ask us to tell them how much they should be spending on each budget category, however this is a very personal decision, and everyone’s budget will be different. However, there are some percentage ranges that we recommend to students:
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We tell students that they should mostly be concerned about the bolded categories- housing, food, and debt repayment. You don’t want any of these categories, or any other category, to be 40%, 50%, or more of your income. If you let one budget category get that high, it is likely that you will not have enough left over to cover everything else. Other than that, you can choose how you want to spend your money. People who have medical conditions might need to budget more for health costs, for example. Or students whose parents live far away from UNL might need to budget more for transportation costs when they make visits back home.
If you are having a hard time trying to decide how much to allocate to each budget category, think about your wants and your needs. Needs are items such as rent/mortgage payment, utilities, food, and other items that are necessary and that you MUST pay for. Wants are items that you don’t need but that would be nice to have, like internet, cable, more clothes, a cell phone, and fast food. You should always start with your income and then take out your needs. Emergency fund savings, financial goals savings, and debt repayments should be taken out next. Lastly, you should prioritize your wants according to their importance and how happy they make you. For example, a cell phone and internet might be more important to you than cable or fast food. Once you know how much you have leftover for wants, you can cover your wants starting from the most important until you run out of money.
If you run out of income to allocate before you have covered all of your wants, you can try to decrease the cost of some of your wants to get all of them covered. Here are some tips:
- Go to the movies on Tuesdays when it is $5 or Thursdays (students only w/ Ncard) when it is $5. Skip the popcorn, candy, and drinks to cut down on the cost and be able to go to the movies more often.
- Cut down the number of times you go out to eat or use coupons so that you can save money to be used for other wants. Skip drinks, appetizers, and desserts to save even more.
- Do you need all of the data you are paying for? See if you can switch to a smaller data plan for your phone.
- Buy clothes when they are on sale or ask for giftcards for birthdays and holidays to save your money to spend on other things.
- Limit the number of concerts you go to each year or cut out some of the smaller concerts so you can save to go to more expensive ones.
- Instead of buying a coffee everyday, brew your own coffee at home and buy flavored creamer.
Stay tuned for our last installment in our “How to Start Budgeting” blog series which will cover ways to track spending and make and stick to your budget.