Popular Budget Models: Prep Work
Discover how to lay the groundwork for a successful budget with this essential prep video. Before diving into a budgeting model, learn how to analyze your spending habits, identify patterns, and group your expenses into meaningful categories. You’ll explore how to calculate averages, plan for recurring and irregular costs, and choose a budgeting time frame that matches your financial rhythms.
Transcript
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budgets are tools that help guide your
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financial choices and improve your
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ability to think strategically about
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money They support you to minimize
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spending waste and maximize progress
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towards your goals The value and
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strength of your budget framework is
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enhanced by the amount of work you put
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into planning it creating it and using
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it So where do you begin using this
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tool planning a budget is both as simple
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and more nuanced than it sounds Before
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you ever sit down to map out your budget
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you should complete some essential
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pre-work research and analyze your
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existing spending behaviors As a student
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things change quickly and it's important
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to review as much information as
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possible to get a sense of your typical
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behaviors Look at your transactions both
1:03
money in and money out and group them
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into similar
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categories Some categories that
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regularly come up are things like
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paycheck or takeout or maybe more
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generally food fun personal care Think
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toothpaste shampoo or pain meds Your
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categories can be as broad or as narrow
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as make sense to you Use your identified
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categories to come up with some income
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and spending averages For example on
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average what income can you expect in a
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month on average how much are you
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currently spending to go out with
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friends in a week make note of things
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that are recurring and predictable like
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maybe a streaming bill or a phone bill
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But also make note of things that are
1:50
unique or periodic that you should plan
1:53
for like financial aid refunds or buying
1:55
books at the beginning of a term And
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finally think about the cycles of your
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financial behavior Do things tend to
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repeat on a weekly or a bi-weekly or a
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monthly basis this will help you decide
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the best time frame for your budget to
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cover Once the pre-work is done it's
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time to craft your budget
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Broadly speaking budgets fall into one
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of two categories: prescriptive planning
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and reactive planning Both strategies
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are valuable and can result in
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incredibly effective budget plans but
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they emphasize different values in the
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budgeting process As we go through some
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of these strategies and some of the
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popular budget models associated with
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them think about how they'd work for you
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and what makes the most sense at this
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point in your financial life
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Which strategy will you choose