[nabs-l] Budgeting

[Arielle Silverman]

Hi all,
I think keeping a monthly budget is a good skill for all students to
learn. I will describe the method I use for my own budget. You don't
have to do it this way, but I do think it is important to have some
formal way of tracking how much money you have and how much you can
afford to spend on a weekly or monthly basis. I think this is
especially critical for those of us on fixed incomes. Once you have a
budget, you will be able to tell not only when you need to cut back on
your spending, but also when you are "ahead of the game" and can
afford to spend a little more.

Before creating your budget, I suggest looking at your past three bank
statements and noting a few things. First, note exactly how much money
you get per month, from all regular sources such as wages from a job,
SSI, checks from family, scholarship funds, etc. Also, note all
expenses you have that are mandatory or non-negotiable that come up
every month, such as rent and bills.
I keep my budget as an Excel spreadsheet and when I used to have a
Braille Note, I kept it on that. First create an entry titled "income"
and enter your total monthly income into that cell. If for example,
you earn $500 each month from wages, and an additional $500 from
Social Security, and this happens every single month, you would put
1000 into the income box.
Below that make an entry called "fixed expenses" and add up all of
your bills and other non-negotiable expenses you have to pay every
month. Examples might include: rent, utilities, Internet charges, cell
phone bill, doctor and pharmacy bills, etc. Note I don't count
groceries as a fixed expense because even though buying groceries is
required for survival, the actual amount you spend on groceries is
flexible and can be changed from month to month, whereas the amount
you spend on your cell phone bill is generally the same from month to
month. You might want to designate a minimum grocery payment as a
fixed expense to make sure you've set aside some money for groceries,
and then allow yourself to spend more than that minimum on groceries
if you have extra discretionary money (see below). For our
hypothetical example of the person getting $1000 per month, suppose
that person pays $400 monthly rent, $50 utilities, a $75 cell phone
bill, $50 Internet bill and $25 to refill a prescription medication.
That person has a total of $600 in fixed expenses per month.
Once you have carefully added up all your fixed expenses, subtract the
fixed expense total from your total income. What you have left is
"discretionary money" which you can spend on anything you want. Our
hypothetical person has $400 per month in discretionary money that
he/she can spend on whatever. You might choose to further divide your
discretionary money into more categories, for example, giving yourself
$100 to spend on clothes, $100 for groceries, $100 for transportation
and $100 for other stuff. It is really up to you and only you know
what kinds of things you like to spend your money on. The big key is
just to make sure that in a month you don't spend more than what you
have available for discretionary spending, so this person should not
spend more than $400 per month on optional or discretionary things.
Now, this next part is really important. Once you have your budget and
know how much leftover money you have for discretionary expenses,
every time you buy something, even if it's just a $5 lunch, go back to
your budget and subtract that amount from what you have designated as
discretionary money. That way, you will be able to see right away if
your funds are getting low and can make a decision not to buy that new
party outfit, etc. If, however, it's almost the end of the month and
you still have quite a bit of discretionary money left over, you can
treat yourself to something nice without feeling guilty, because you
will know that you will still have enough money left to get through
the rest of the month.
If I have discretionary money left over at the end of the month, I
will put that extra money into a category called "savings". Once my
savings adds up, I can use it for bigger expenses, like taking a trip.
If you have money saved from previous months, you won't have to dip
into your discretionary fund for the current month when an occasional
big expense, like a trip, comes up.
The budget is also really helpful for making decisions, like whether
to move out of one's family home or whether to move to a cheaper
place. If you are putting lots of extra money into savings each month,
then you can probably afford to pay more rent, but if you are
perpetually running out of discretionary funds before the end of the
month, then it might be time to cut back either on the discretionary
expenses (i.e. not buying a coffee every day) or on the fixed expenses
(i.e. by moving to a cheaper apartment or cutting back on the cell
phone plan).
In order to make the budget work, it is important to be good about
setting it up on the first day of each month (or whenever your payday
is) and then recording each and every time you spend money. Keeping
regular tabs on your checking account and any credit cards you have
will ensure you don't miss an expense.
I know this sounds complicated, so I'd be happy to talk more off-list
or by phone. I do think it is a worthwhile thing to do in spite of the
minor hassle.
Best,
Arielle