Arizona State - Budgeting for Students and Graduates
Have you ever seen a toddler who knows what he wants, but has neither the correct words nor the emotional tools to communicate it? He is frustrated, confused, sad, and often angry.
Well, yes, you have witnessed a kid in the throes of his “terrible twos”. But what does that have to do with budgeting? Many people, especially those fresh out of Arizona State, have the need and the desire to become financially independent for the first time.
While paying your own way is an important part of the transition into adulthood, many Arizona State grads do not have the correct tools for managing the newfound financial freedom, and the responsibilities that accompany that freedom can be just as frustrating as communication is for a two-year-old.
The best way to get out of that pit of frustration and confusion is to communicate your plan. You need the right tools to communicate your financial plan, and the tool you need to gain control of your personal finances is a budget. While living in your first Phoenix apartment is exciting and certainly and accomplishment, you will no doubt want to own you own home one day, but without proper restraint, this may never become a reality.
There are three easy ways to set up a personal budget.
Let your computer do the thinking.
The first is to let your computer do the work for you. Several sites on the Internet offer free budget calculators. You enter the information for your income, apartment rent and expenses into a pre-made form, and the program calculates what your approximate budget should be – for you.
Be realistic about what you should be paying for at your income level.
Another way to set up a personal budget is to divide your income by the appropriate percentage for each expense and then calculate the amount of your income than can be allocated to each expense, and then stay as close to those percentages as possible. For example, your apartment costs should fall between 28 percent and 33 percent of your income. The variation is a result of regional differences in housing costs and average incomes, for a Phoenix apartment, budget no more than 30%, so that you can save for your future. Debt payments (including student loans), groceries, and transportation should not exceed 15 percent each of your total income. Include medical costs (insurance premiums, co-payments, prescriptions, etc.), and entertainment. Yes, entertainment – a budget with no room for rest is difficult to continue.
Pass the envelope, please.
A third way to set up your post Arizona State budget is to use what is known in many circles as “the envelope method.” This works really well if you are operating on a cash basis. Put the amount of money you will need for each expense in a labeled envelope. If you decide to spend more on entertainment than the budget allows, or need new tires on your car, the money has to come from another envelope. This forces you to make choices about your personal finances. The envelope method is a visual reminder that there is a finite amount of money, and when it is gone, it is simply gone.
What about savings?
If possible, include about 5 percent of your income in a “savings” category. Set it up with your employer and/or with your bank to have a certain percentage of your check deposited in a passbook savings account. You will never miss those few dollars as they sit and compound dividends. Remember, saving money on your Phoenix apartment can be one of the largest contributors toward your savings.
Are there other automatic services that would help me pay my bills in full and on time?
Most certainly. The best thing to do with your utility bills, if the option is offered, is to sign up for an “average monthly” plan, so that you know exactly how much you will be spending on each utility in even given month. This gives you a steady amount to include in your budget. Also, consider the value of utilities. Many people cut back on cable and internet expense, however, dollar for dollar these ofter provide the largest return for free time entertainment.
Do not stop there, though. Set up an ACH (automatic withdrawal form) for your utilities and your Arizona State student loans to be automatically deducted from your accounts on specific dates. Most utility companies and student loan lenders offer an incentive for on-time payments, as well. Consider paying your apartment rent with a credit card. As long as you are paying your cards on time, you might as well receive the cash back or points offered by your credit card for paying your monthly apartment rent.
While attempting those first unsure steps into the real world may seem daunting for the recent Arizona State graduate, creating and sticking to a budget will make you feel more in control of your own destiny.
