The basics of budgeting are simple: track your income, your expenses, and what’s left over—and then see what you can learn from the pattern.
How to budget
Keeping a close eye on where your money has gone helps you make wiser choices about where it should go.
We’ve created a tool to help you make your own budget and figure out how much it might cost for a year at MIT.
Use our budgeting worksheet tool→
Identify your resources
- How much (if any) income will you be receiving from family or caregivers? Is it a fixed amount?
- If you receive financial aid, will you receive a refund that you can apply to other expenses?
- Do you have a job or jobs? What is the minimum income each job will provide after taxes and other withholdings? Never budget on the maximum.
Identify your expenses
- What are your fixed expenses—ones which do not change month to month? Include all housing costs not covered by financial aid, as well as utility and credit card bills, and other monthly payments.
- What are your flexible spending expenses? These include food not covered by a dining plan, clothing, and leisure activities.
- While monthly fixed expenses come with bills and reminders, flexible spending does not, so it’s up to you to keep track. Download a budgeting app, keep a tracking document on your laptop, or carry a notebook.
Don’t forget savings
If you have any resources left after all your expenses are paid, it’s easy to think of the extra as just more spending money. But the best thing you can do financially is to save a little every single month. The amount you put away doesn’t matter; it all adds up. Saving offers an added sense of financial security and stability, while creating a lifelong habit.
Know the difference between needs and wants
A good starting point for creating a budget is to designate needs vs. wants.Needs obviously get priority, and every budget should cover those first.
- Needs are things required for daily life—food, clothing, housing, and unavoidable costs associated with being a student.
- Wants are things that you could do without if you had to.
Track your success
Every month or two, measure how well your income is balancing against your expenses. Did you stay on track? Was there a shortfall? Are there adjustments that need to be made going forward?
If your expenses outpace your resources, you need to rethink your strategy. But if your monthly balance leaves you in the black—or better still, with income left over—keep up the good work! You’ll be glad you did.
Tips for budgeting
- Overestimate your expenses. You can’t predict every expense that arises.
- Underestimate your income. You might end up with a surplus!
- If your fixed expenses are high, reconsider your expenses. Do you need to subscribe to both Netflix and Hulu?
- Once you’ve paid off your debt, transfer that same monthly amount into a savings account for a future goal.
- Consider a separate bank account for fixed costs and automatic payment plans, so your casual spending won’t leave you short for must-pay bills.
- Don’t forget the little expenses that add up: clothing, ATM fees, dinner out, data overages, etc.
- Choose a record-keeping system: Whether it’s a notebook or an app, decide where your budget information will live and stick to it.
- Make money management a routine: Review your spending patterns and records each week or bi-weekly at a set time.
