What is budgeting/creating a spending plan?
Sometimes the terms "budget" and "spending plan" are used synonymously. However, there are slight differences between these two tools that are useful in helping you to achieve both sort term and long term financial goals.
A spending plan provides the framework for where you want your money to go now and into the future. An example of a spending plan might be: "I want to set aside $100 each paycheck to save for a spring break getaway next year."
A budget is the details of your income and expenses and is used to ensure that you remain on track and in line with your spending plan. Budgets are used to get a better understanding of what money is coming in, where that money is going, and how to manage the money you have leftover after expenses. This tool is helps you to ensure you are meeting your regular financial obligations (cell phone bill, rent, car insurance, etc.) but also helps you plan how you may want to use your discretionary income.
Why are spending plans and budgets important?
Typically having a plan for something works out much more favorable then flying by the seat of your pants. The same holds true when it comes to your finances. By taking the time to outline your financial goals and needs vs. wants, you begin taking steps in the right direction.
Sometimes college students tend to live paycheck to paycheck. Getting a grip on your spending can help eliminate unnecessary costs and allow you to save money for the future. In addition, setting a budget can help you get out of debt, pay your bills on time, and relieve the stress of financial insecurity.