Making a monthly budget is not as difficult as it sounds and certainly does not require any financial knowledge.
But it does require about 2 hours of your time, if you are doing this for the first time. So my little tip, within a blog full of tips, is to schedule a time in your calendar, when you will embark on this journey.
For students in Denmark, a monthly income usually consists of:
- Salary from a part time job.
- SU grant
- In some cases SU loan.
- Extra pocket money from your parents
My strategy when looking at my budget, is to divide costs into two separate tables (see screenshots below). I like to divide my costs into two categories:
- Fixed costs
- Variable costs
Fixed costs are the things I cannot avoid, in order to live and breathe in my country of residence (which happens to be Denmark). In this table, I put things such as rent, car insurance, gym membership, this website etc., things whose price I simply cannot influence.
On the other side (or above, in case of my screenshot) are the variable costs. These are costs that I can directly influence. This includes gas money, travel budget, clothing, groceries or restaurants.
I can decide to eat pasta with ketchup for a whole month, cycle instead of driving, spend a whole month at home and never eat at a restaurant.
Not a glorious life, but life nonetheless…
But that is not the point. The point is to understand (and see) the breakdown of your spending over a month.
Pro tip: You can export your bank data to a .csv format and look at the exact figures instead of copying data into your tables.
I was surprised, when I made this budget for the first time, about how much money I was spending on subscriptions. I was paying for services I was not using for months.
Another thing that surprised me, was to see (based on my banking data) how much I was spending at restaurants. Nearly 1.000 DKK every month. With my life costs being about 4.000 a month, I could simply not eat out for 4 months, and not worry about working for a month of my life.
But I did not stop, because I was stupid and wondering why am I always broke. Don’t do that mistake!
Take a look at an example below:
This is the step number one in determining your monthly budget - getting a full blood scan of your finances.
This is where you get to be honest with yourself and practice a little bit of financial masochism - look at where you spend most of your money.
You might be surprised about some categories and if you do this for a couple of months, you might start seeing some trends that you can avoid.
Let’s move to step 2: budgeting tips.
7 Tips For Better Budgeting while studying
1. Use Excel or Apple Numbers
It might take a bit of time to set up a layout in the beginning, but then you can reuse your template. Having a visually pleasing way of looking at your budget will help you to come back to it often - I know it helped me in the past.
I’ve tried making my budget on scraps of paper, that I would, of course, loose or crumble after no time. This was very demotivating!
Also, do not trust your banking app to give you an accurate representation of your finances - making your own spreadsheet ensures that you take the necessary time to judge the individual items within it.
This is my budget from last semester. I am currently working on a more elaborate one, because I am myself having struggles with following everything that I prescribe to myself.
(If you’re wondering why this Excel table looks so nice, it’s because it was not made in Excel, but rather in Apple Numbers).
I am too having months when my spending gets out of hand. These are the times when it’s important to evaluate what went wrong and go back to the drawing board.
It is not a reason to bring yourself down; quite the contrary. Life is a lifelong learning journey, learn to embrace it!
This is step number two because you first need to determine how much you are spending. Once you know that, you can start putting some constraints.
Firstly, you need to be critical about your fixed costs. Just because you HAVE to pay it, does not mean it is a good idea.
Also, consider switching to yearly subscriptions for things that you MUST use for extended periods of time fx. Adobe Creative Cloud or Google Drive.
2. Look retrospectively
Once you have a few months of experience using your budget, it gets easier to make predictions and to understand and correct your spending habits.
When you are making your first budget, look retrospectively and get some data about your spendings. It will be easier than blindly guessing how much you are spending every month.
3. Export banking data into a .csv file by logging in to your online bank
This is not only helpful in the budgeting example, but if you are a bit into statistics (like me), you can have a little bit of fun too.
If you can feed 2-3 years of your banking data into a model, you might be able to answer the following questions: Am I spending particularly more on fast food on Fridays? If so, cooking an extra meal on Thursday might save you a bunch of money - and you can even calculate this.
Or Do I spend money on online shopping during particular times of a day? Maybe it could be a good idea then, to schedule a gym class at 19:30-21:30, in order not to fall into my temptations.
If you’d be interested in a tutorial of how to do this kind of analysis, write me an email at firstname.lastname@example.org and I’ll look into it in the coming blogs.
4. Include pleasure/entertainment spending predictions into your budget
After all you are also entitled to have some fun; put aside, for example, 500 DKK every month for traveling - if you don’t happen to travel that particular month, no worries, simply put it in a savings pocket called Travels and next time around, you get 1000 DKK to spend. You can turn this into a little game called ‘Spoiling my future self’ where you get to save up now, to enjoy more later.
5. Revisit your budget often
But at least once a month, in order to stay on track with your earlier budget estimations.
If you see that you are off in, for example, restaurant spending, you should make a note for yourself and include it in your future calculations. Go back to earlier steps and evaluate what is the reasoning for the increased spending
6. Distinguish between fixed and variable costs
Like mentioned earlier some future expenses you already know and can predict , while others require you to “estimate your best”. Furthermore, some expenses will sit in your ‘pending payments’ row, while the cost of others is entirely up to you to influence.
7. Set up automatic payments, to avoid stupid fees
Stupid fees are the fees that you pay solely for one reason - being stupid. These are, more often than not, mainly late fees, when you forget to pay an invoice or bill on time.
These things can add up and over a course of 3 years, you can be spending hundreds of dollars on simply forgetting.
Set up automatic billing for these things, it takes only a couple of minutes.
You can set up automatic payment either directly through your service provider or by using Betalings Service (available in Denmark).
Conclusion from Budgeting
If you are able to follow these rules, you should be looking at improved financial health in a couple of months. Budgeting serves as a bandage for your bleeding personal finance - it’s the first step.
After that, comes the actual healing.
In our case, this will be in form of savings.
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