By Michaela Patafio
Developing a personal budget serves as a useful way to manage money, allowing for more responsible spending and investing strategies while securing financial freedom for the future.
A personal budget opens the door for more financial opportunities. It helps consumers prioritize their spending so that they can ensure funding for the things that are most important. Budgeting also provides the opportunity to reach financial goals, reduce or avoid debt, or meet a specific savings plan.
Kenneth White, an assistant professor at the University of Georgia specializing in financial planning, teaches effective budgeting methods to students in his classes in the Financial, Housing and Consumer Economics department. He stresses the importance of budgeting when it comes to financial literacy and success, while also highlighting the differences in the ways people seek budgeting help.
There are many methods for developing a personal budget, and in today’s advancing technological market, it is both common and efficient to manage money online. Automatic budgeting software, online spreadsheets, and smartphone applications that allow for personalized budgeting have all risen to the forefront of online banking.
Madison McDoulett, a third-year marketing major at UGA and an aspiring entrepreneur, started to teach herself about online banking after her first year of college
“Describing myself as ‘financially clueless’ three years ago is actually an understatement,” said McDoulett. “Freshman year, I would just receive a monthly allowance from my parents, spend it as long as there was something to spend, and then either wait for the next month or beg for more if there was an emergency. But there was never a budget.”
Since her first year of college, McDoulett has dreamed of starting her own business. She realized her fear of dealing with the finances of a business was holding her back, and she decided to do something about it.
“I would begin brainstorming an idea for a business and get so excited, only to realize that I could never figure out how to fund my idea or manage the money,” said McDoulett. “It was that summer that I decided to sit down with my family and learn about online budgeting.”
She quickly learned how much an effective budget could change her life. When she came back to college as a sophomore, she found a personal finance application called “Mint” that automated much of the budgeting process for her.
In her first month of active budgeting, she reduced her spending, which allowed her to put more money in her savings account for her future business. Within one year, she had reprioritized and reorganized her money so much that she nearly doubled the amount of money in her savings account while still having room in her budget for dinners out with friends.
According to Business Insider, another successful method for developing a personal budget includes implementing the “50/30/20” rule. This budget breaks down a consumer’s income into three distinct groups: 50 percent of funds cover general expenses such as rent, insurance and groceries, 30 percent covers more optional costs like travel, eating out or entertainment, while 20 percent should go toward an emergency fund or any debt.
“For me, an app was the answer, because it’s always there to check on when I need to make a decision about a possible expense or just see my progress,” said McDoulett. “But I think however you budget your money, on an app or otherwise, managing it in general gives a feeling of control.”
Michaela Patio is a student at the University of Georgia.