The 4 steps to create and maintain a personal budget

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College students are poor. Paying for tuition, obscenely expensive textbooks, rent and food can be painful. Many college students wonder how they will be able to financially survive four-plus years of little income and seemingly insurmountable costs.

The short answer is budgeting.

Karsen Yack, a senior accounting major, experienced his first financial concerns during the 2013 school year when he quit his job at the MTC to focus on schoolwork. Yack had held a job since he was 16 years old, always enjoying the comfort of a steady income, as well as the luxury of partying on the weekends and splurging on clothes simply because he had the money to spend.

With money no longer coming in, Yack had to understand and apply the principles of budgeting and financial planning to make sure he could keep afloat.

“Right now is where I’ve been the tightest on money throughout my whole college life, because I’ve always worked up until now when I had to quit for school,” Yack said. “So I don’t have an income coming in, and because of that the money that I had saved up all the time I was working became my lifeline. I’m living off of it.”

The knowledge of budgeting’s importance is only the first step in a long, arduous process, and without the other crucial steps, budgeting falls flat and leads only to financial turmoil and unrest. If one can master the principles of sound financial planning and the discipline necessary to reign in one’s desires, creating and maintaining a personal budget becomes a supportive foothold in the process of eventual financial success.

Money closeup (WikiCommons Photo)

1. Awareness of current financial state

The first step in knowing one’s financial future is understanding one’s financial present.

Bryn Marley, a regional operations manager in the retail business, said the first step in building a budget is the same for large corporations as it is for small families or an individual budget.

“The way I always start first and foremost is to look at income,” Marley said. “That’s something you’ve got to understand: What you have available. The second thing is what are your net costs you have that you can’t get away from?”

Joel Christensen, BYU’s senior budgeting analyst, explained the notion that every dollar must have a job.

“I start with saying, ‘Here’s my income side, and here’s my expense side,’” Christensen said. “I try to say that every dollar that comes in has got to have an assignment. Whether it’s to an expense side or to a savings side. My goal is to make sure my expenses aren’t greater than my income.”

Sound simple enough? Even the financial experts agree it is not nearly as easy as it sounds.

2. Creating a realistic, but strict budget

Keeping track of expenses forces the person to become wary of expenses and to adopt a thrifty attitude. Marley said the principle of stretching yourself to a tight budget and remaining realistic is an important principle in financial self-reliance.

“When you’re talking budgeting, it’s very easy to become unrealistic,” Marley said. “The worst thing that can happen to you is to go out with some projections that are unrealistic. … It’s always better to stretch and live within your means and be self-sustaining — that way you’re in control and you’ll feel better about your situation.”

This principle may tough for college students who watch people around them going to parties or doing fun things that are out of their current price range.

“Sometimes, it’s really hard, because everyone around you is doing stuff,” Yack said. “They’re going out to eat, they’re going to parties, they’re going to things that cost a lot of money. Finding that balance is the hard part.”

3. Discipline

Even if a budget is created with the goal of becoming financially stable, if the crucial principle of discipline isn’t there, it will all fall apart. The ability to turn away from an enticing movie or bag of chips can go a long way in creating the correct financial attitude.

Discipline is a change of attitude, a change of perspective and sometimes a complete change of the way one lives.

But discipline is rarely an attribute people are born with. It must be tried, and even failed a time or two, before a person can find his or her financial way.

“I think you learn from trial and error a little bit,” Yack said. “You have to be aware of, ‘How much do I have and how much can I spend?’ Then you have to reevaluate. I don’t know if there’s necessarily a way you can just sit down and do it right the first time.”

4. Re-evaluation

Worthwhile pursuits were never meant to be easy, which is where the final principle of re-evaluation and adjustment comes into play.

Adjustments will need to be made from month-to-month based on unexpected costs, as well as an overall change based on past successes and failures.

“You can modify that budget from month to month,” Christensen said. “It may take a couple of months of experience before you can do it. Things may come up, or there may be one time a year things where you want to adjust your budget just in that month. I’d say it’s at least a monthly review process.”

In a world overrun with technology, the tools to create and maintain a budget are literally within a finger’s reach. Marley said, with the emphasis on technology, budgeting becomes much easier and more accessible than ever.

“Many years ago, you would have to go out and buy a ledger sheet,” Marley said. “But with technology, budgeting is at the tip of our fingers. It’s on apps, it’s on the Internet, you can download things, it’s automated. It’s so readily available now that there’s really no excuse that we’re not taking advantage of it.”

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