Financial Foundations

Budgeting is the process of creating a plan for how to spend and save your money. It’s a powerful financial tool that helps you track your income (money coming in) and expenses (money going out) to ensure you’re making informed decisions about your finances. Think of a budget as a roadmap for your money—it gives you control and helps you reach your financial goals, whether that’s saving for a big purchase, paying off debt, or simply making it through the month without stress.

Budgeting Myths

• “I don’t make enough money to budget.”
  Everyone can benefit from budgeting, regardless of income—it’s about maximizing what you have.
• “Budgeting is too restrictive.”
  A budget gives you freedom to spend on what truly matters by cutting wasteful expenses.

1. Achieving Financial Goals: A budget helps you prioritize your spending to align with your short- and long-term goals.
2. Avoiding Debt: By tracking expenses, you can prevent overspending and manage your credit wisely.
3. Building Savings: Budgeting allows you to allocate money toward savings, creating an emergency fund or saving for future investments.
4. Reducing Stress: Knowing where your money is going helps alleviate financial anxiety.

1. Income: Includes wages, financial aid, scholarships, side hustles, or any other money you earn.
2. Fixed Expenses: Regular costs such as rent, utilities, and subscriptions that stay the same each month.
3. Variable Expenses: Costs that fluctuate, such as groceries, gas, and entertainment.
4. Savings and Debt Payments: Money set aside for emergencies, goals, and paying down debt.
5. Discretionary Spending: Non-essential expenses like dining out, hobbies, or shopping.

1. Track Your Spending: Review your expenses over the past month to understand where your money is going.
2. Set Goals: Identify your priorities—whether it’s saving for school, paying off a credit card, or building an emergency fund.
3. Choose a Budgeting Method:
   • 50/30/20 Rule: Allocate 50% to needs, 30% to wants, and 20% to savings/debt.
   • Zero-Based Budgeting: Assign every dollar a purpose until you reach $0 left unallocated.
   • Envelope Method: Use cash envelopes for specific categories to avoid overspending.
4. Use Tools: Consider apps like Mint or YNAB to make tracking and adjusting easier.
5. Review Regularly: Revisit your budget monthly to make adjustments based on changes in income or expenses.