Building Your Monthly Budget
Before you begin thinking about the mechanics of budgeting, take a moment to identify why you want to budget and set a SMART financial goal. Setting a goal will give you a benchmark to work toward; something to help measure your progress.
Keep this goal in mind as you create your budget. You should frequently ask yourself if your financial habits and plans align with the goals you've set. If they don't, try to identify what changes you can make to better work toward your goal.
Track your income and expenses for about a month in order to identify your current financial habits. You could use an app or a spreadsheet to do this.
Compare your current habits with your financial goals. Identify what you're doing well and what could possibly change moving forward.
Organize your expenses into categories in order to track and adjust your spending habits as needed. Here is a list of suggested categories:
- Student Bill
- Housing & Utilities
- Food (Restaurants & Groceries)
- Books & School Supplies
- Local Transportation
- Travel (Away from Penn)
- Personal Care
Make a list of all the forms of income you receive, how much you receive, and how often you receive them. This may include earned income, family allowances, student account refunds, and interest or rewards you receive.
Make a list of your fixed expenses and variable expenses, how much they are, and how often they occur.
It's likely that you'll have a harder time identifying your variable expenses than your fixed ones. To identify how much your variable expenses are, you can estimate or review your expenses from your tracked month. Use those amounts as a starting point. You can always adjust later.
By this step, you should have a better understanding of your financial habits. Are you comfortable with them?
If yes, great! Keep up the great work and re-assess your habits periodically to make sure you're still comfortable.
If no, consider setting limits and smaller goals in order to track your progress toward your main financial goal. Take time to identify maintainable ways to change your behaviors. Be patient and realistic with yourself. Don't expect a radical overnight change. You can surely reach your goals with a little bit of time and effort.
Track your income and expenses with the intent of spending less than you earn. If you’re spending more money than you have, you’re going to have to make some changes. Here are some options to consider:
Adjust your spending habits in the categories that constantly fluctuate, whether classified as needs or wants. This may involve purchasing cheaper groceries or opting to take SEPTA instead of Uber for transportation. These numbers can always change depending on your choices.
Reduce fixed expenses.
If reducing your variable expenses doesn’t cut it, determine if you can eliminate any of your fixed expenses, whether classified as needs or wants. See if you can split your Netflix cost with a few friends or switch to a cheaper phone plan.
If you cannot adjust your expenses further, look for ways to increase your income. Start by talking with a counselor in Student Financial Services. They can help you understand your financial aid options, including small loans for your education expenses. Increasing your income might also involve picking up more hours at work or looking for a higher-paying job. It could also include signing up for Wharton Behavioral Labs or Experiments @ Penn.