6.3: Start with the Basics - Budgeting (2024)

Last updated
Save as PDF

Page ID: 110119

Harrisburg Area Community College (HACC)

\( \newcommand{\vecs}[1]{\overset { \scriptstyle \rightharpoonup} {\mathbf{#1}}}\) \( \newcommand{\vecd}[1]{\overset{-\!-\!\rightharpoonup}{\vphantom{a}\smash{#1}}} \)\(\newcommand{\id}{\mathrm{id}}\) \( \newcommand{\Span}{\mathrm{span}}\) \( \newcommand{\kernel}{\mathrm{null}\,}\) \( \newcommand{\range}{\mathrm{range}\,}\) \( \newcommand{\RealPart}{\mathrm{Re}}\) \( \newcommand{\ImaginaryPart}{\mathrm{Im}}\) \( \newcommand{\Argument}{\mathrm{Arg}}\) \( \newcommand{\norm}[1]{\| #1 \|}\) \( \newcommand{\inner}[2]{\langle #1, #2 \rangle}\) \( \newcommand{\Span}{\mathrm{span}}\) \(\newcommand{\id}{\mathrm{id}}\) \( \newcommand{\Span}{\mathrm{span}}\) \( \newcommand{\kernel}{\mathrm{null}\,}\) \( \newcommand{\range}{\mathrm{range}\,}\) \( \newcommand{\RealPart}{\mathrm{Re}}\) \( \newcommand{\ImaginaryPart}{\mathrm{Im}}\) \( \newcommand{\Argument}{\mathrm{Arg}}\) \( \newcommand{\norm}[1]{\| #1 \|}\) \( \newcommand{\inner}[2]{\langle #1, #2 \rangle}\) \( \newcommand{\Span}{\mathrm{span}}\)\(\newcommand{\AA}{\unicode[.8,0]{x212B}}\)

Thinking about managing your credit, avoiding or paying down debt and building a solid financial foundation all can feel overwhelming. However, this process doesn’t have to be. The simplest place to start is with the basics – creating and following a good budget.

There are five simple steps that you can follow to put together a budget that will work for you.

Define your goals (refer back to the Goal-setting Chapter and SMART goals) – The first step is to set your financial goals. Most goals you set will have some type of financial impact. Break your goals into the three categories below and allow them to guide the decisions you make about spending and saving.
Short-term goals, which are goals you plan to reach in under a year, like buying new furniture.
Mid-term goals, which are goals you plan to reach in one-to-five years, like saving for a vacation.
Long-term goals, which are goals you plan to reach in more than five years, like buying a house.
Be honest with yourself - The second step is to be honest with yourself about your income and expenses. Take the time to determine your true income after taxes and deductions so that you’re planning to spend only the money you actually have available. Then list out all your financial responsibilities, including everything from rent to gym memberships. Finally, subtract your expenses from your income. Do you have enough?
Reduce your spending – If you end up with a negative number in the step above, you have some work to do, which will start with balancing your budget by cutting expenses. If your income is higher than your expenses, there still may be areas where you can cut back or ways you can save even more. These cuts can range from skipping a cup of coffee out to changing your internet service provider or refinancing a loan.
Save and plan ahead - Having savings lets you rely less on credit and avoid creating additional debt when an unexpected expense crops up. You should treat savings like a bill you pay each month and plan for possible surprises in the short-term, as well as known savings goals, like retirement, in the long-term.
Review and adjust - Once you’ve balanced your budget, it’s important to not just set it and forget it. You should give yourself a trial period to make sure your budget is working and schedule regular times to check back and adjust as needed. Reviewing and adjusting is important as your goals or circ*mstances may change over time. Even something seemingly small, like getting a pet, can cause significant changes to your finances.

If you’re ready to jump into budgeting, but aren’t sure where to start, look for a budgeting template that fits your needs and consider the questions in the image below as you go through each step.

PRO TIP:

A lot of financial aid, especially scholarships, have limited funds and are first come, first served so it's important to meet all the deadlines. The Free Application for Federal Student Aid (FASFA) is the first step in applying for financial aid and is available to complete every year on October 1^st. Making sure to complete it as soon as possible every year will help maximize your financial aid award.

Budgeting Basics

The article discusses the basics of budgeting and provides five simple steps to create a budget that works for you. These steps are:

Define your goals: Set your financial goals and categorize them into short-term goals (under a year), mid-term goals (one-to-five years), and long-term goals (more than five years).
Be honest with yourself: Determine your true income after taxes and deductions, list out all your financial responsibilities, and subtract your expenses from your income.
Reduce your spending: If you have a negative number after subtracting expenses from income, you need to cut expenses. Even if your income is higher than expenses, there may still be areas where you can cut back or save more.
Save and plan ahead: Having savings helps you rely less on credit and avoid additional debt when unexpected expenses arise. Treat savings like a monthly bill and plan for short-term surprises and long-term savings goals.
Review and adjust: Regularly review your budget to ensure it is working for you. Adjust as needed based on changes in goals or circ*mstances.

Importance of Good Money Management

The article emphasizes that good money management is important regardless of age. It mentions that paying bills on time is crucial, and while some aspects of money management remain constant, others may fluctuate. It suggests that free resources are available to help individuals gain the knowledge needed to build and maintain a strong financial foundation.

Resources Available on PSECU Website

The article mentions that the PSECU website (psecu.com) provides access to various resources, including:

Online Learning Center: Offers more than 30 short personal finance lessons covering topics such as protecting oneself from identity theft, building healthy habits, buying a car or home, and more. The lessons take only three to five minutes to complete and are available in both English and Spanish.
Blog: Contains financial tips for every stage of life.
On-demand webinars: Provides webinars that can be accessed at any time and from anywhere.

Pro Tip: Financial Aid Deadlines

The article includes a pro tip regarding financial aid deadlines. It mentions that financial aid, especially scholarships, often have limited funds and are awarded on a first-come, first-served basis. Therefore, it is important to meet all the deadlines. The Free Application for Federal Student Aid (FAFSA) is the first step in applying for financial aid and should be completed as soon as possible every year to maximize financial aid awards.

Please note that the information provided above is based on the content of this article. If you have any specific questions or need further clarification, feel free to ask!