Adjusting a budget
Your situation at school can change rapidly. You might decide to get a part-time job in the middle of the semester, or you might leave a job. Maybe your landlord increases the rent without notice or you have major car trouble. Or maybe, with changes in the economy, your parents can’t afford to help you out as much. Any of these events will affect your financial condition.
How do you adjust your budget as your money situation changes?
If you take on a part-time job or gain reliable new income through other sources, two healthy budget adjustment decisions to consider include:
- Increase savings account deposits: Adding just $100 to your savings account each month will build an additional reserve of about $400 over the semester. If you do not have a savings account, now is the perfect time to open one. Visit Banking Your Money to learn more.
- Make larger credit card payments: How much faster will your balance shrink if you double your payment? Set an account balance reduction target for the semester and call your credit card company. A representative can inform you what your lower monthly interest payment will be based on the reduced balance.
Losing a job or suffering any other loss in income forces you to control your spending—particularly the purchase of nonessential goods and services. Here's an approach that can help you adjust your budget so you don't have to cut out entire spending categories:
- List the areas in your monthly spending plan that are not vital to your living situation, such as snacks, entertainment, and clothing.
- Figure out how much money you need to decrease from your expenses.
- Divide the amount of your monthly income reduction by the number of spending categories you selected. In this case, there are three. If, for example, your monthly income reduction is $150, you would divide that amount by 3 for a spending reduction target of $50 for each category.
- Subtract your targeted reduction from the existing “budgeted amount” column in each spending category.
- Find ways to decrease expenses in the categories you choose:
- Get an additional roommate to help share rent
- Downgrade or eliminate cable service
- Eat at home more often, and pack a lunch and snacks for class
- Instead of buying books, borrow them from a library or share with a friend
- Only buy essential clothes; shop sales and consignment shops
- For more tips on decreasing unnecessary expenses, visit Plugging spending leaks