The first step to creating a good financial foundation is to know the answers to the following questions:
5 Easy Ways to Budget
Creating a budget is the first step to creating a good financial foundation. Putting in a way to monitor your budget is the next important step. The easiest way to monitor is with personal finance software.
Here is a list of free personal finance software to get you started with monitoring your finances.
Earlier we discussed the importance of developing a budget to know your monthly expenses and then develop a way to monitor those expenses. However, you also need to make sure you are creating spending limitations so that you are not overspending and ignoring your budget.
Here are ways to limit spending:
Accountability - Many of you have probably been placed in a project group for one of your undergraduate courses if not graduate courses. If not, many of you have played a team sport. In both scenerios, you were held accountable for your part of the project or your part of the play. It is not easy to let your teammates down by failing to do your job. The power of accountability can help guide someone to have more success. We encourage students to find someway to hold themselves accountable for keeping to their personal budget.
Envelope Budgeting - For personal finance, the ultimate spending stopper is a cash budget. Although this is becoming ever more difficult and potentially unsafe to implement, a partial implementation might still be possible for discretionary spending. The envelope budgeting system was a popular system when cash was a popular payment method. As is explained by the FDIC:
As mentioned, very few expenses require or easily take cash for payment. However, using cash to place in a discretionary spending envelope might help a student limit their spending on a daily basis. Once the cash has been spent, the student should not continue their discretionary spending on their debit or credit card.
Review credit card at the end of each week - Once you have developed your budget, you should have a good idea how much should be on your credit card from these normal expenses each month. At the end of each week, you should review your credit card balance to make sure that you are still on pace to not overspend for the month. Although this is a simple task, this habit should discourage continuous spending on discrectionary items when you know you may already be overspending.
Online personal financial management mobile apps - More and more students are utilizing their phones to help them monitor their finances. These mobile applications are able to provide up-to-date information as well as notices of when bills are due and if you are overspending. However, the downside is that many of these mobile sites request to maintain login information from your bank, credit cards, and other sites in order to help track the information in real-time and provide a comprehensive financial picture. Visit the app store on your mobile device and search for personal finance applications.