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Budgets 101

by Tonya Mason Branch

Budget: an estimate of income and expenditure for a set period of time.

My daughter is in her fourth year of college. Throughout her high school and college years, she has excelled in math, breezing through algebra, geometry, trigonometry, and calculus. But the one course that she has not taken is consumer math. A consumer math course applies basic math skills to real life situations, like shopping, calculating taxes, estimating monthly budget, calculating an interest rate for a loan, etc. It is all about teaching young adults how to responsibly spend and save, preparing them to make better financial decisions.

A budget will help to prepare newly independent young adults manage his or her salary from their first “real” job. It will teach them to avoid the money pitfalls that so many get sucked into. And, it will allow them to enjoy the gratification of achieving financial goals.

Some of the most common motives for creating and sticking to a budget are

  • Finding a way to save more money
  • Avoiding spending money you don't have
  • Getting out of debt
  • Staying on track toward long-term financial goals.

The beginning steps to creating your budget are

  • Keep it simple (at first)
  • Determine your monthly income (after taxes, how much you can spend)
  • Determine your expenses—recurring, frequent, and occasional
  • Estimate monthly expenses
  • Develop a means (Excel spreadsheet) to record income and expenses in a period of time
  • Track your actual expenses.

Encourage the young people in your life to create and adhere to a budget. Benefits of budgeting include

  • Being prepared for emergency expenses
  • Staying out of debt
  • Achieving financial and life goals.

Helpful budget calculators/apps include

  • Quicken.com (free online)
  • Nerd Wallet (free online)
  • Mint (free application download for cellular device or tablet).

A sample budget and an Excel template can be found at https://www.moneyunder30.com/really-simple-budget-worksheet.

Source: PersonalBudgeting.com, Mastering Financial Discipline.



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