When Traditional Budgeting Fails Us

I have spend a great deal of time researching the various methods of setting up a budget. One thing, that I have found in common between all of them, is they are all based around strict percentages. Although this may function flawlessly for the majority of the population that have a consistent cashflow, I believe that this method completely fails us undergrads.

Most of us do not have a steady job that provides a consistent paycheck. Speaking for myself, my paycheck runs anywhere between $200 and $399 every two-weeks. If I was to use a traditional budgeting template, which is based on percentages, I would many times not have enough money to survive until the next paycheck, which is two weeks away. Is there a solution?

I have constructed a new type of budgeting method! This method will include some of the traits of traditional budgeting, but new ideas will be introduced, to help cater towards inconsistent life of the college-aged population. Continue reading for the explanation and methodogy behind my "invention."

1. Realize how much you spend, on day-to-day purchases and spending. (for recreational purposes)
2. Realize what is the bare minimum amount of money you will need to sustain yourself until the next paycheck.
3. Realize how much money will be required to pay bills this pay period

Once these are complete, implementation of my budget tactic will then begin.

1. Open an ING Direct account
2. Once opened, create 2 more sub-accounts. The first should be an electric orange checking named Bills, the second should be an account named savings, and the third account shall be named Investment.

With all of this set in place, you just have to wait until you get paid. When you get paid, follow these steps in strict order.

1. Pay off any bills/debt that have accrued first.
2. Fund your "spending account," and once funded, realize that this is your only source of "fun" money until your next paycheck.
3. with the remaining balance from your check, deposit it equally between a savings account and an investment account.

For step#3, I recommend depositing all of the remaining money into a savings account until you have enough in their sustain yourself for 2-months should anything prevent you from working. Once you hit that mark, begin to divide it equally between savings and investments.

Personally, once I hit my 2-month savings mark, I would cut down my savings to 25%, and put 75% towards investments. Remember, at our age, we have many years to sit on investments. Although they may drop significantly sometimes, we have the benefit of having time on our hands. We can weather the storm until our investments become profitable again. It has been proven that on average, the stock market has made a return on investment of 10% annually.

In conclusion, I cannot guarantee the success of this type of budgeting technique, however, I will give it a try and I will report back on my success or unsuccess.