6 Step Flexible Budget

The college years can be some of the best of your life.  They’re filled with learning, friends, travel- what more could a girl want?  College can be tricky, though, because while you’re an “adult,” you’re not yet living with the responsibilities that are bound to come later in life. 

Take your “job,” for example.  Your main job is going to class.  We all know that college classes are generally challenging, but the schedule is certainly not bad!  A couple of hours of classes per day and the rest of the day to study and have fun?  It’s a schedule that feels like a vacation to a 40+ hour/week employee!  Let’s now look at housing.  You’re likely living in a dorm or a house off campus, filled with excitement at every turn (if you’re the type to look for it).  If you’re lucky, your parents may be footing with the bill, but even if they’re not, you’re not likely to see a monthly bill or get any surprise bills for maintenance while you’re in school.  And there’s the food.  What pleasure it is to go to the dining hall or order in using your student card whenever you want to.  No trips to the grocery store are required in college, unless you like to go (you know, like for the supplies for your next party).  

And this is not to say that college kids have it too good.  The college years are the last years before what I consider to be true adulthood.  You should be using the time to explore, grow, and figure out who you want to be (although, if you’re like me, this process will continue far beyond the early 20’s!).  That being said, I believe it IS fair to say that most college kids (not all) often leave college not knowing a whole lot about financial responsibilities and budgeting.

If I’m being perfectly honest, I had few bills before I got my first “real” job and moved to my own apartment.  Before I moved, if I wanted to try a new restaurant that was a little pricey, it was no problem.  Buy the newest makeup?  Great.  Order the same shoes in 3 colors because I can’t decide?  My closet was the better for it.  

But all of that changed after I moved. Yes, I knew I’d have to pay rent and buy groceries.  But did I realize I had to pay renter’s insurance?  What about an extra fee for parking or for my dog?  Did I know how much a role of tin foil costs?  The answers were no, but lucky for me I have a wise (and money-savvy father who works in finance) who realized my budgeting skills were essentially non-existent and offered to help me get organized.

Realizing that bills, activities, and life responsibilities change per month, he suggested that I use a flexible budget.  While he can’t claim this was his original idea, the way he described it to me was easy to understand and implement.  Even today, over a decade out of college, I still use the budgeting tools he offered me early on.

So what is a flexible budget?  It’s a budget that you set given your monthly salary, and you break down your total income into categories.  Six easy steps are involved: 

• First, you create your categories.  These categories can include, but are not limited to: housing, utilities (e.g. heat, electric), medical, car (e.g. payment, insurance, gas), student loans, cell phone, cable and internet, food, gym, and fun. 
• Second, you allot how much money you think is needed on average per month in each category.  
• Third, you total the amounts in each category.  They should add up to less than your monthly income, and the rest goes to savings (sadly not the fun budget).  
• Fourth, as the month progresses, you write everything you spend in the proper categories.  I recommend doing this every day if you can because it will only take two minutes.  You can do it right before bed, or even the next morning while you’re drinking your coffee (that you can happily afford because you’re budgeting!).  If you only write in your spending once a week, you’re looking at a much bigger time commitment.  
• Fifth, at the end of the month, total how much you spent in each category.  Now, this probably just sounds like a regular old budget at this point.  But the beauty is that it allows for flexibility (hence, the name!).  Here comes the most important step:
• Sixth, add/subtract money to/from the next month’s category based on what you spent in total.  

This is most easily illustrated with examples.  Let’s say that you allotted yourself $150 in gas for the month.  At the end of the month, you realize that you’re over budget by $40 because you took a trip to the beach with your friends and that was gas money you didn’t anticipate spending.  While the trip was totally worth it, now your budget is out of whack.  Well, no need to fret.  Just take this $40 out of the gas budget for next month (if you want to go to the beach again, someone else can drive).  This way, you’re maintaining your overall budget without skipping things that you want to do. This also works the opposite way.  Let’s say you allotted yourself $500 for food per month, but this month was your birthday a lot of people took you out to eat to celebrate at different times (e.g. family, friends, co-workers).  At the end of the month, you happily find that you only spent $400 on food this month.  Now, you can take that extra $100 and add it to your next month’s allotment (and now you can try that new restaurant if you want to!). 

As you can see, this budget is easy to understand and set-up, it allows for flexibility, and it only takes a little time to keep up with if done right.  So, while life may not be as easy as it was in college, I hope this helps adulthood become just a little easier.  Good luck!

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MEGAN ANDERSON

Megan holds a BA from The College of the Holy Cross, a certificate from New York University, and a MS from Southern Connecticut State University. She took the windy road to finding her dream job and worked in everything from financial reporting to book publishing before happily settling in healthcare. She lives in CT with her husband, and while she can't promise to answer any financial questions, she can be reached at megan.anderson1217@gmail.com.