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Income is what you receive/earn either in a job, investing, selling, or other funding sources which increases your wealth. You may receive income with a job, internship, selling a product/service, family support, scholarships.
Expenses are costs incurred that reduce your available funds/decrease your wealth. Expenses can be credit card payments, utility bills, food, rent, medical, etc.
Fixed Expenses are costs that cannot be changed and are necessary. For a regular person this can be your monthly rent, car payment, and utility bill. They are necessary expenses that remain constant.
Variable Expenses change month to month depending on how often or costly they were. For example if you went grocery shopping the total is most likely different than the month prior. This can also pertain to gas, entertainment, personal, etc.
Budgeting Rule
Creating and maintaining a budget can often feel like a challenging task, but with the right approach and mindset, it becomes much more manageable. Here are some practical tips to help you stay on track and manage your finances more effectively.
50/30/20 Rule
The 50/30/20 rule is aimed to provide guidance and a framework to create a budget. By following this rule, you can maintain a balanced approach to spending and saving, making it easier to stay financially healthy.
The 50% represents how much of youe spending should be on needs such as food, rent, insurance, and utilities. These are non-negotiables that are required for your day to day life.
The 30% is for wants, which include non-essential items like dining out, entertainment, shopping, and travel. While these are not necessities, they contribute to your quality of life and personal happiness.
The 20% is dedicated to savings and debt repayment, ensuring that you’re building a financial safety net and working toward long-term financial goals.
Our Top 10 Tips
These tips can help you manage your budget and stay on track!
1. Track Your Spending: No matter how small create a spreadsheet, write on your notes how much you spend whether it is. Useful apps: YNAB and Mint
2. Prioritize Needs Over Wants: Before spending money on concerts or headphones consider how much you need for food and rent and allocate it
3. Keep Credit Card Spending Low: Use 30% or less of your credit card limit and pay more than the minimum
4. Cook at Home: Buy groceries for the week instead of ordering take out to save money
5. Look for Student Discounts: A lot of companies offer discounts for their college students. Useful app: Student Beans
6. Limit Spending on Apps: Uber and DoorDash and convenient but costly apps, try using public transportation or ask a friend
7. Open a Compound Savings Account: A type of account where the interest you earn is added to your original deposit. This means you earn interest on both your deposit and the interest that’s already been added
8. Apply for Scholarships: This not only saves you from taking out loans but you could even receive a refund
9. Buy Used: This can apply to thrifting, buying used textbooks, or buying a used car. This will save you money while gaining something valuable
10.Set Short and Long Term Goals:Break down your financial or personal objectives into short-term goals (like saving for a vacation or paying off a small debt) and long-term goals (such as buying a house or retirement savings). This keeps you focused and motivated, while helping you track progress and adjust.