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Adult learners are usually responsible for their own living costs, and their budget might be more complicated than those of younger college students. Adult learners may have wider categories of expenses as well. However, the fundamental principles of budgeting are the same for everyone.

How to

To complete a budget, you can use a paper and a pen, a computer program, or a cell phone application. The goal of budgeting is to distribute an amount of income over expected expenditures to strike a balance between assets and liabilities.

When doing so, you follow a simple rule: convert all numbers to be equal in time! For example, if you do a monthly budget, all numbers should be converted to monthly values. If you do a yearly budget, all numbers should be for a full year. Also, don't forget to account for miscellaneous items such as haircuts, car insurance paid every 6 months, out of pocket expenses for vision or dental visits, pets' various expenses, a yearly vacation, etc.

Then let's follow the steps below.

1. Identify income

Let's start by identifying income and other money coming in from all sources. Keep in mind that you should differentiate income from borrowed funds. Income is your hard earned money, borrowed funds are a liability that you have to pay back at a future date plus interest. For example, your paycheck is your net income, student loans are borrowed funds that have to be paid back with interest.

2. Identify expenses

Identify all expenditures and divide them between household and education. Review all items from each category and highlight your NEEDS in green and your WANTS in red. Study each item and make decisions to stop any financial leaks. Using visual coloring aids is a powerful tool that allows you to spot variances.

3. Match money coming in and out from each category

Match "apples to apples." Money coming in for education should be matched against expenses that you are trying to cover such as tuition. Money coming in for household expenses should be matched against expenses for your daily living. It is advisable to have separate headings for each category to make sure your expenditures are covered from the appropriate sources.

4. Compare overall money coming in and out

Compare all money coming in with all money going out. Highlight a positive difference in black and a negative in blue at the grand total number. Step back and take a look at your overall financial picture. This is your moment to decide how to enhance your financial situation.

5. Make a choice: increase income OR trim expenditures

If you find that your expenses exceed your income, you can choose from the two options: Either you increase your income or you decrease your expenditures (trimming).

If you want to learn more about budgeting, please refer to the Budgeting module in our series.

Practice

Now that you know how critical it is for you to separate your household items from your educational needs, think of paying it forward and discuss budgeting fundamentals with a friend or a family member.

Congratulations! You can move on to Chapter 4. Credit cards and debt management

To review the full module on Adult Learners, click here.