Personal Budgeting

Have you ever said to yourself…

 “Where does all of my money go?”
 Budgeting will allow you to know where your hard earned money goes.
 “When will I be able to pay off my loans?”
 Budgeting is a first step in making future financial plans.
 “How am I going to be able to afford ______?”
 Budgeting helps you limit unnecessary spending so that you can afford things you need.
 “Thinking about money makes me nervous!”
 Budgeting helps limit financial anxiety.
 “I’m not a math person. I can’t figure out how to budget!”
 Budgeting only requires simple +, -, x, and ÷, but mostly just + and -.
 “I’m afraid to know how much I spend on ______!”
 Budgeting gives you permission to only spend up to a certain amount.
 “My spending is out of control!”
 Budgeting helps promote good habits.
Budgeting = Habit Formation
 Habit that takes the guesswork out of financial decisions in each stage of life
 Meet expenses and limit/avoid debt as a student.
 Prepare for marriage, children, and homeownership as a young adult.
 Save for retirement and generosity in older adulthood.
 Live as a retiree without being a financial burden on family or the government.
 Setting up systems and using tools to help you meet both short-term and long-term goals
 Set monthly and annual goals (in conjunction with spouse if applicable).
 Track expenses throughout month using a spreadsheet or app.
 Review monthly and annually to see if you’ve met goals and how you can improve.
 Paying with cash, avoiding unnecessary debt
 Being prepared for the unexpected, because the unexpected will happen!
 Learning to be content with your life
Money coming in… Money going out…
 Does your income stay the same or does  Make a list of everything that you spend
it vary from paycheck to paycheck? money on and break it into categories.
 If it varies, decide on a very conservative  Analyze each category based on two
estimate of what you will likely earn questions:
during a period of time.  Is it a need or a want?
 Is the amount I spend on this category the
same every month or does it vary?
 Focus on your “take home pay” (i.e.,
what you get to keep after taxes, union
dues, benefit payments, etc. are withheld
by your employer), not gross pay.
 Especially important if self-employed or a
business owner since you are responsible
for tax payments throughout the year in
some cases.
Expenses: Need or want?
 Needs receive top priority.
 The first things that should be considered in your budget
 Examine wants to see if you actually need them.
 Practice postponing buying “wants” as a lot of the time you will realize you are just
fine without them.
 Think about other costs beyond purchase price associated with “wants.”
 Upkeep cost
 Complementary purchase costs
 Opportunity costs
Expenses: Fixed or Variable?
 Fixed expenses remain the same for a period of time, typically month to month.

 Fixed expenses are often contract based.

 Shop for better prices when the contract is about to expire.

 Variable expenses change based on some factor, typically usage.

 Find a way to treat variable expenses as if they were fixed expenses (e.g., I will
not spend more than $__ on vehicle fuel this month).
Income Category Examples
 Keep track for each individual income source.

 Gross income
 Withheld* taxes and fees (*typically)
 Federal, state, local income taxes
 Social security and Medicare
 Union dues (if applicable)
 Employer sponsored benefits (e.g., medical, vision, dental, retirement, disability)
 Take-home pay

Remember: Take-home pay serves as the foundation for your budget!

Expense Category Examples
 Food  Shelter
 Groceries  Rent/Mortgage
 Regular Eating Out  Water
 Special Eating Out  Electric
 Gas

 Clothing
 Trash

 Clothes
 Rental/Homeowner’s Insurance

 Shoes
 Property Taxes
 Furniture/Decoration Allowance
 Maintenance/Tools/Cleaning Supplies
Expense Category Examples
 Health  Transportation
 Insurance premiums (if not withheld by  Insurance premiums
employer)  Fuel
 Rx/OTC medicines, vitamins  Tires/brakes
 Office visits  Car wash
 Testing  Tolls
 Health/Beauty/First Aid Supplies  Oil change and tire rotation
 Dental  Minor car maintenance/parts
 Vision  Registration Renewal
 Fitness Equipment/Gym Fees  State Inspection
 Haircuts  Taxes
 Parking (non-entertainment related)
 Uber/Lyft/Taxi fees
Expense Category Examples
 School  Entertainment
 Tuition and fees  Tickets, concessions, parking
 Loan payments (if applicable)  Cell phone
 Books  Internet access
 Technology (e.g., computer)  Streaming services and/or cable
 Conferences, professional development, etc.  Pocket money for impulse buys

 Giving  Investment
 Family and friend gifts and cards (e.g.,  Emergency Fund for unexpected expenses
birthday and holidays)
 Retirement/IRA
 Special occasion gifts (e.g., wedding, baby)
 Life insurance (if applicable)
 Religious and/or charitable giving
 Giving to help family and friends in need
Expense Category Examples
 Travel  Other/Misc.
 Entertainment (tickets, admissions, etc.)  Tax preparation
 Vehicle Fuel, Uber/Lyft/Taxi fees  Stamps/postage
 Flights  Taxes not withheld by employer (e.g.,
estimated taxes, use tax, certain local
 Rental Car
taxes)
 Eating Out  Non-categorizable expenses
 Lodging
 Tolls
 Parking
 Misc. travel expenses
Expense Category Budgeting Tips
 Food
 Eat in as much as possible, but if you do eat out save
by getting water instead of soft drinks (or alcohol).
 Clothing
 Focus on buying interchangeable staple clothing and
footwear items that are timeless and will last as
opposed to being trendy.
 Shelter
 Live at home or get a roommate (or two or three) so
that you can share expenses. Avoid spending more
than 25% of take-home pay on shelter.
 Health
 Find a way to get insurance. Engage in healthy
activities now (e.g., eating, exercise) to save on your
health bills later in life.
 Transportation
 Buy a newer used car as opposed to a brand new one.
Only buy what you can afford in cash since vehicles
only go down in value.
 School
 Find ways to limit costs (e.g., be an RA, do work study,
hunt for scholarships, become a graduate assistant) and
avoid debt. Do not be swayed by the brand of the
school, focus on cost. Find an employer that offers
tuition reimbursement.
 Giving
 Find a way to be generous with your money, even if just
a little.
 Entertainment
 Prioritize what you enjoy most; eliminate or limit the
rest. How many streaming services do you actually
need?
 Investment
 Start now, even if small. Look into an IRA.
 Travel
 Find ways to share costs with family/friends. Take
shorter trips within driving distance as opposed to
paying to fly somewhere. Stay at budget hotels. Do not
be swayed by Instagram or others.
Dave Ramsey’s Baby Step Method
Once you’ve mastered
budgeting in the short-term,
you can start to think about
the long-term. While the later
steps might not apply to you
for a few years, they will be
easier to achieve in the future
if you master budgeting now.
Source: The Total Money Makeover by Dave
Ramsey, Daveramsey.com, and/or The Dave
Ramsey Show Podcast
1. Save $1,000 for your starter
emergency fund.
2. Pay off all debt (except your house)
by paying off debts from smallest
to largest (i.e., the debt snowball).
3. Save 3-6 months of expenses in a
fully funded emergency fund.
4. Invest 15% of your household
income in retirement.
5. Save for your children’s college
fund.
6. Pay off your home early.
7. Build wealth and give.
Resources
 WLU’s FIN 131: Financial Literacy course (available as a general studies course
for most majors)
 Daveramsey.com (and all other Dave Ramsey resources)
 NerdWallet.com
 Debt.org
 Microsoft Excel (build your own budget or use a template)
 Building your own budget in a spreadsheet gives you the most control
 Your online bank account (if you prefer a debit card to carrying cash) might have
a budgeting tool
 Google search “budgeting for college students”