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Budgeting and spending

A budget is an itemized list of income and expenses within a set period of time. It can be used as a personal guide on what money you have coming in and where it goes when it is spent. Because a budget shows the ebb and flow of your money, it can also help inform changes you would like to make to your spending habits in order to meet financial goals. No matter how much money you make, a budget can help you manage your spending and reach financial goals.

If you’d like to meet with a financial wellness counselor in One Stop Student Services to talk about budgeting specific to your needs, schedule an appointment.


A budget is often created and managed in a spreadsheet, but there are many ways to do it. It’s all about finding a system that works for you. The way you keep your budget should be feasible for everyday life, manageable enough for you to want to keep up with it, and fluid enough that it can accurately reflect your income and expenses on a daily basis.

Before you start to do the hard work of tracking your income and expenses to create a budget, determine what style of budgeting will work for you. This may take some research or experimentation. Even if you decide today to budget one way, you can always change your plan later.  Here are some common methods of budgeting:

  • Paper and pen: collect receipts and record expenses.
  • Excel sheet: track expenses using columns and rows in a way that works for you.
  • Online budget sites/apps: do a Google search to see what’s out there. Many sites have matching apps that work for budgeting on the go.
  • Envelope method: have an envelope for each of your expenses and insert cash in each envelope to track how much money you have for each expense.

The basic principles of budgeting remain the same no matter what budgeting method you choose:

  1. Develop your financial goals.
  2. Calculate your income.
  3. Calculate your expenses.
  4. Analyze your income and expenses against your financial goals to make spending decisions.

1. Develop your financial goals. 

What financial goals are important to you? Do you want to minimize your school debt? Do you want to save for a car or vacation? Putting money aside can be hard, but determining your financial goals can make it easier. When setting a goal, use the SMART method; you want goals that are Specific, Measurable, Achievable, Relevant, and Time-based.

For example, imagine that you have used public transportation on campus and enjoyed saving money by not owning a car. But things will change, and you know you want to buy a car after you graduate. After doing some research, you decide you would like at least $2,500 for a down payment on a loan for a car. You have 36 months to save for your goal before you graduate, so that means you need to save $70 a month to meet your goal. Here is the breakdown of this scenario as a SMART goal:

  • Specific: Buy a car after you graduate.
  • Measurable: Have at least $2,500 for a down payment.
  • Achievable: Save $70 a month.
  • Relevant: You are passionate about the goal because you want to enjoy the freedom of a car for transportation.
  • Time-based: Reach your goal in 36 months, or three years.

2. Calculate your income. 

Income is money that you receive, whether it is earned, gifted, or loaned to you. Income may arrive in a lump sum, such as from a financial aid refund, or it may come to you regularly through a job or allowance.

You may already know how much money you receive and when, but it is conventional to think of income on a monthly basis. If, for example, you receive a financial aid refund at the beginning of the semester that you want to last through the end of the semester, divide the lump sum by the number of months to determine how much monthly income it provides you. If you receive a refund of $1,200 and you want it to use it over a three-month period, it provides $400 per month. Determine what your income is on a month-to-month basis.

3. Calculate your expenses.

An expense is the cost of something. Your expenses are the money you spend, both on items expected and not expected such as rent, bills, subscriptions, groceries, clothes, fun money, gifts, etc. Even savings or financial goals are expenses, even though the actual spending is slightly more delayed in time. Think of your expenses as existing in three different categories:

  • Fixed needs: necessary expenses that stay the same each month (i.e. rent, phone bill, loan repayment)
  • Variable needs: necessary expenses that vary from month to month (i.e. food, clothes, transportation)
  • Wants: nonessential expenses (i.e. dining out, entertainment, coffee)

The best way to start tracking and categorizing your expenses is to check your previous bank statements. You can also start tracking your receipts to build a list of expenses if you do not have your own bank account. How you track your expenses should be driven by your method of budgeting.

4. Analyze your income and expenses against your financial goals to make spending decisions.

As you map out your income and expenses, you’ll start to get an idea of how your financial goals are affected. You may want to make decisions about spending in order to prioritize a financial goal, or to start building savings, create an expense category in your budget for it.

If you find that you have a surplus of income, determine how you want to spend that money. If your expenses are greater than your income, find items in your budget that are nonessential. You can cut out certain expenses until you reach a savings goal, or set fixed limits for yourself in certain categories.

Be easy on yourself as you begin living by a budget and changing your spending habits. Ultimately, a budget can empower you and give you control over your money. Training your brain to practice financial wellness will benefit you now and well into the future.

Disclaimer: The University of Minnesota does not endorse, support, share a point of view or personal or political opinion, or have any involvement in the business, activity, movement, or program of third-party websites, tools, apps, or resources listed on this page.

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