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What are budgets, and why are they helpful?

A budget can be an incredibly important resource in building stable financial habits. It can help you determine your financial resources by helping you pay attention to your monthly income and to decide ahead of time how you will spend it.

Creating a budget can help you reduce or eliminate unnecessary expenditures as you keep track of all of your expenses. This will allow you to determine the lifestyle that is most appropriate for you. Budgets are helpful for everyone, regardless of age or income. They allow you to achieve your financial goals and know exactly where you stand in terms of your finances.

Creating a Realistic Budget

The first step in creating a realistic budget is to take an honest look at monthly expenses. Keep a small notepad in your pocket and keep track of all your expenditures for one month, or figure out another easy way for you to track your money. Once you do this, it is important to examine the difference between "needs" and "wants." Identifying "need" spending versus "want" spending will allow you to see areas where you can cut spending and save money. The more detailed your budget is, the better you will be at estimating your expenses and your future savings.

Knowing the Bank

There are many ways to purchase goods and services. You can use cash, debit or ATM cards, checks, credit cards, and loans. It is a good idea to know exactly how using any of these methods will affect your financial situation.

Credit Cards

Credit cards are not funded by a bank account; they are a form of borrowed money, supplied by credit card companies. As a college student, you are a prime target for credit card companies. It is important to understand all of the costs of having a credit card. There are many extra fees and possible high interest rates.

Major Purchases

In the future, it will be important to have a good understanding of your budget in order to plan for major purchases. Buying a car, purchasing a home, or taking out a loan requires you to know if you can afford the payments each month. By working on your budgeting skills now, you will know exactly what you can afford in the future.