Make Sure to Balance your Budget, Even if You’re on a Limited Paycheck
Budget. Budget. Budget.
It’s tempting when you’re not making a whole lot of money to forgo creating a budget. It’s easy to be dismissive of your pitiful paycheck. I’ve heard some students say that since they are living paycheck-to-paycheck, there’s no reason to go through the trouble of creating a budget.
A budget tells you where your money is going and how much you’re spending in each category of expenses. Even if you know your money is going to be gone by the end of the week, maybe only lasting until Friday, you still need to see how much of your money is going where. And there are several reasons for that.
1. You need to see where your money is going.
It’s easy to say that you don’t have enough money to save. If you don’t see exactly where your money is going, you have no idea where to tighten up the budget. Let’s say you spend about $250 in groceries and you also have to put $100 towards your gas. If you need to head out of town to see family, you can spend less on groceries for the week and spend $200 on gas. You might save even more on groceries if mom lets you take some leftovers home.
2. Habits are easy to form but difficult to break.
If you start budgeting now while your paycheck is small, then it becomes easier to apply budgeting to a larger paycheck. Not because you have more money to work with, but you already have the skills in seeing where your money goes, keeping track of where it is going, and using it effectively. More money to invest in that Roth IRA.
3. It makes it easier to justify a raise or a promotion.
After college, it might be possible for you to ask for a higher salary or hourly wage based on previous experience. By looking over your budget you can justify what would be a fair raise. It also gives you room to negotiate your rate. If you know exactly what your cost of living is compared to what you are making now, you have a firm rate of comparison.
It’s tempting to just check your direct deposits and see how are you much you are paid, but you don’t really know how much you make unless you can compare it to your cost of living. The cost of living varies from state to state. You have to see for yourself what the cost of living truly is for you. The act of crunching the numbers makes it real. Once you have a solid idea of where you are financially, then you will be able to project where you want to be in the future.
TL;DR: Keep track of your money.