What is a Spending Plan?
A spending plan is a method for distributing your income among the mix of things you want and need. Creating a spending plan ahead of time will allow you to effectively manage your finances and determine where to best spend your money.
Here are the steps you should follow to create your spending plan:
Decide on a time frame
If you receive financial aid, you may receive most of your income per semester. However, most of the time your bills will be paid monthly. Deciding on a time frame will make it easier to for you to calculate your funds and track your expenses accordingly, whether per semester or per month.
List all of your income
It is important to understand where your money will be coming from, so reviewing all of your sources of income will give you a better understanding of your budget.
Anticipate your expenses
Now look at where your money will be spent. This will allow you to better control your spending as you pay off your direct and indirect costs as a student at UC Berkeley.
Evaluate your plan
Subtract your total expenses from your total income to determine whether it will be necessary for you to find additional sources of income to cover any leftover expenses.
Tracking Your Income/Expenses
To make sure your current spending is aligned with your spending plan, it is important to track your spending plan over the course of the specified time frame.
There are various online tools designed to give you a simple way to create a spending plan, keep track of your spending, and help you stay on top of your finances. There are many tools available to choose from, but here are some examples of free apps and websites: Mint, Good Budget, Level Money, and Budgetpulse.
You can also use an Excel spreadsheet to create and track your spending plan. You can create your own or you can download our spending plan template. Please keep in mind that if you change the formulas in the spreadsheet, we cannot guarantee the accuracy of your results.
Fixed Expenses vs. Flexible Expenses
Fixed expenses include those that will need to be included in your spending plan monthly and generally won’t change unless you move or change your plan. These expenses may include: housing, tuition, insurance, etc.
Flexible expenses, on the other hand, cover other necessities such as food and transportation, but also include any additional expenses spent on things like entertainment. Understanding this difference and maintaining a good balance between the two will let you stay on top of your spending plan and effectively manage your finances.
Reduce Your Spending
A good way to make sure you are meeting the requirements of your spending plan is by reducing your spending where possible. Certain categories, such as clothes, transportation, and food are relatively flexible expenses that can be modified to lower your spending. By actively seeking more affordable substitutes, you can ensure that you will meet the financial goals you have set for yourself.