Money Smart: How to stop overspending this year

At the start of every school year, I always make a list of what I am going to do differently. On my list this year: go to the gym more often, stop complaining about commuting as much, make healthier food choices, and stay on budget. This last one is one we can all work on.

According to a poll last month by CIBC, last year 51 per cent of us had to ask our parents for money because we ran out of cash. Not only is this embarrassing for us, it’s putting a financial strain on our parents. Another CIBC poll released this month reported that of our parents who do support us financially, 66 per cent say it is eating away at their savings, forcing them to delay their retirement and interfering with their ability to spend and save.

Part of this isn’t our fault. It’s a real challenge to keep up with dramatic increases in tuition fees and rising living costs, even after working a part-time job all summer, leaving some of us no choice but to ask our parents to help cover our expenses. But asking our parents to help us out, and begging them for more money because we went over budget, are two different things.

It’s time we start taking responsibility for managing our expenses. This year, let’s not just make a budget. Let’s stick to it.

Track your spending for a month. If you use your debit card for the majority of your purchases, look at your purchase history online.

Make a chart on Excel to record your expenses, making sure to group your expenses into different categories — food, transit, school, beauty, clothing, entertainment, coffee, etc. This will make it easier to figure out where you need to cut back.

At the end of the month, total your expenses in each category and then add all of those sums to find your total expenses. Shocked by how much you’re overspending on partying, clothes, and coffee? Don’t worry. You’re not alone. I had a minor heart attack when I tracked my spending the first time.

Now you’re ready to create a budget. Here’s a how-to:

  1. Add your income (money from part-time job, money from parents, loans, and scholarships)
  2. Subtract your expenses from your income. If you end up with a negative number that means you are spending more than you make and you need to cut back.
  3. Allocate an amount of your income every month to each category. Start by allotting money to the necessities like transit, school, food, clothing, and toiletries. Divide whatever is left to wants like partying, coffee, and entertainment.
  4. Sit down with your parents and have a realistic chat about how much money you are going to need every month.

Note: You should only be spending what you make and, if possible, you should have some money left over every month to put in
to savings.

But the work doesn’t end there. Now you need to monitor your spending so you don’t go over your budget. If you were like me the first time I made a budget, you’re going need to make some changes, like starting to shop at thrift stores, taking the last subway home after a night of partying instead of a cab, and the hardest of all: limiting your Starbucks intake to one pumpkin spice latte a week.

Full disclosure: in the beginning, limiting your spending will suck. But at the end of the month when you add up all of the money you saved, it’ll be worth it. Even better: knowing you aren’t going to run out of money at the end of the month will be a relief. You can do it.

Katie’s Tips for Staying on Budget

  • If you stayed on budget the first month, reward yourself with a beer (only one). Keeping in the lines of a budget isn’t easy.
  • Don’t make your budget too tight. If you allow yourself a treat every so often, you will be less likely to slip up.
  • Milk your student status for all it’s worth. Take advantage of freebies and student discounts.
  • Realize you’re not alone. All of your friends need to be just as tight with money as you are. Delight in sharing your frugal tips.

Featured image by GotCredit / CC BY