This is a series of articles brought to you by the executive board of the Boston College chapter of Smart Woman Securities (SWS). Â SWS is a national investment education organization for undergraduate women. Â Through instructive seminars, mentoring initiatives, and meetings with successful investors, SWS provides resources upon which women can build greater knowledge of personal finance topics and the financial markets. Â For more information visit us online, follow us on Twitter, or send us an email.
As collegiettes™ we put a lot of effort into keeping our bodies in shape, but how much effort do we put into keeping our personal finances in shape?  The answer: not enough.  Through our blog series, we will help you hone your money management skills by bringing you a series of articles highlighting personal finance topics that we feel all undergraduate women should have a solid understanding of.  We’ll begin by teaching you how to use the most basic yet essential money management tool there is: the budget. Â
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A budget will help you:
- Identify and be more aware of your financial resources
- Reduce or eliminate unnecessary expenditures
- Achieve your financial goals
- Spend less than you make and allow you to save for the future
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Track your expenses
Before you can create a realistic budget, you need a firm grasp not only on how much money you spend every month, but also what you are spending your money on.  How many times have you gone to the ATM on a Thursday evening, taken out $60, and realized by Saturday that it has all magically disappeared from your wallet?  Better yet, who hasn’t been shocked at least once to see an astronomically high balance on their credit card statement or a shockingly low remainder in their bank account?  It’s easy to ignore or underestimate how much we’re actually spending unless we make an effort to keep track of every single purchase we make, no matter how small.  Figure out a method that works for you; here are some that we recommend:
- Carry around a notepad (or use the notepad app on your iPhone) to mark down every purchase you make
- Use your debit card as often as possible so that all of your purchases are automatically cataloged in an online statement
- If you don’t already, save ALL of your receipts and keep them in one place for easy access
- Sit down at the end of each day or week to compile your expenses in a Word or Excel document
Once you know what your typical monthly expenses are, you can divide them into the categories of “needs” and “wants.”  Laundry, textbooks, and groceries are examples of “needs.”  A new pair of heels, a poster for your dorm, and concert tickets are examples of “wants.”  Making this distinction will help when you sit down to construct your budget.
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Identify your sources of income
So you know where all of your money is going, but do you know where that money came from and where you’ll get more once it runs out?  The next step in the budgeting process is compiling a list of your income sources.  Here are some possible sources you might consider:
- Income from employment (Note: always use your net pay- after taxes- as opposed to your gross pay- before taxes)
- Student Loans
- Checking/Savings Accounts
- Money from family
- Summer employment income (divide it out by however many months you’ll be living off of it)
Remember, you should only include income that you can count on, since there’s no point in budgeting money you might not ever have.
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Create a budget that works for you
After taking an honest look at your expenses and income sources, you are ready to create your budget.  A budget can take many different forms, so it’s important that you find a format that you’re comfortable with.  Excel and Google Docs both offer a variety of budget templates that you can adapt for your personal use.  Here are some more helpful budgeting tips:
- Divide your expenses into categories (e.g. transportation, clothing, entertainment, credit obligations) that correspond with the way you spend money. Â Not all categories apply to everyone.
- If you find you’re in a deficit (your expenses are greater than your income), look for ways to increase your income or cut down on expenses.
- Your budget is never set in stone.  If your budget doesn’t seem to be working for you after one month, feel free to alter it!
- Set realistic budgeting goals that reflect your true financial picture.
Now that you have a handle on how much money you’re earning and spending, it’s time to start saving for the rainy day.  Think you’re too young to start?  In our next blog installment, we’ll show you the importance of getting into the habit of saving early on and often, and ways that you can incorporate saving into your newly created budget!
Photo Source:
http://theprosperityproject.blogspot.com/2010/05/simple-money-chants.html